The Fall of Obama

All the indicators are now pointing to President Obama approaching a peak of monumental scale with a massive decline (in the "Obama brand") to follow in the aftermath. The peak appears to be imminent if not already upon us. The DJIA, the S&P 500, and the Wilshire 5000 are also indicating a peak of monumental size is in the making as well as Primary wave [A] up (2009 - 2012) has run its course with a massive wedge collapse in progress.

Obama's approval rating is currently at 54% (and peaking), having rose from 48% just before the 2012 elections, but still forming a lower high relative to the May 2011 peak in which Obama's approval rating reached a high of 61%. The lower high is in play in spite of the markets putting in a higher high relative to May 2011.

A few days ago, President Obama was named "Person of the Year" on Time Magazine and appeared on the magazine cover. The magazine cover picture can be seen here. The Magazine Cover Indicator is a peaking signal --- it is an indication that the "Obama brand" is approaching a peak of massive scale and a multi-year decline is imminent.

Here is a chart of the DJIA with the Magazine Cover Indicator event labelled:

Notice that the event occurred close to the peak of Minute wave [b] up within a larger double zigzag structure. Since the event, the DJIA, S&P 500, and the Wilshire 5000 closed down roughly 2% for the week with the DJIA declining 158 points earlier today.

The primary count still favors the double zigzag structure for the wedge collapse, Intermediate wave (A) of Primary wave [B] down (2012 - 2016), with the double combination (expanded flat - x wave - zigzag) structure being the alternate scenario. The proposed Minute wave [b] within Minor wave W has retraced 90% of the proposed Minute wave [a] in the Wilshire 5000, but still well short of the 90% threshold for the DJIA and the S&P 500.

The implication of a wedge collapse in the stock market is a fast decline in social mood. With social mood going south fast, approval ratings will also take a big hit with Obama's approval rating possibly falling below 30% by June 2013. On the short term, the United States is facing a "fiscal cliff crisis" with President Obama and John Boehner desperately hoping to reach a deal on taxes and spending before the clock expires. The United States is also facing a "debt ceiling crisis" as well with the $16.4 trillion debt limit on the verge of being hit (if not already there) with the Treasury Department using accounting maneuvers to buy time for Congress to act on raising the debt ceiling. A rapid increase in bearish social mood due to a wedge collapse is expected to result in increasing strife and discord between President Obama and John Boehner with a dangerous game of chicken involving the US economy once again in play. The best case scenario is for the can known as the "Bush Tax Cuts" to get kicked down the road once again. The worst case scenario is for the United States to actually go off the fiscal cliff due to strife and discord in the political arena with austerity measures in the form of tax increases and spending cuts to go into effect as soon as we enter the year 2013. It is possible that going off the fiscal cliff (if it were to happen) will lead to another credit rating downgrade on US government debt as we approach the climax of Intermediate wave (A) of Primary wave [B] down on June 2013.

In spite of the fiscal cliff drama and the debt ceiling about to be hit, the American populace is still very optimistic about Obama's accomplishments in the years ahead, with many already comparing Obama to FDR:

1 -- FDR vs Obama -- "Obama invokes FDR in his convention speech".  The American populace already see Obama as a parallel of FDR.

2 -- Politico -- "Obama Channels Teddy Roosevelt". Even centrist Republicans are displaying optimism on Obama's future legacy. This shows that the bullish optimism is broad based and not confined to the liberal factions in the American populace.

3 -- Suite 101 -- "Comparing Barack Obama to Franklin D Roosevelt". Even in early 2009 with the climax of Cycle wave w (2000 - 2009) of Supercycle wave (a) down (2000 - 2042) unfolding, people were still very optimistic that Obama would be the new FDR.

Comparisons to FDR are a product of linear extrapolation. With the 2012 election completed with Obama winning a second term, just about everyone is making large extrapolation leaps with the prediction that Obama will have an FDR type of legacy in 2017. The tendency for large extrapolation leaps is yet another peaking signal, along side the "Magazine Cover Indicator".

The "Obama brand" is expected to collapse in the coming years as Primary wave [B] (2012 - 2016) of Cycle wave x (2009 - 2021) unfolds with the peak about to be reached before the multi-year decline starts. During the wedge collapse, Intermediate wave (A), Obama's approval rating is expected to fall to the 28% to 32% range by June 2013. During Intermediate wave (B) up, which should unfold from June 2013 to June 2014, Obama's approval rating will get a sizable bounce, but put in a lower high (low to mid 40s approval rating) relative to the current approval rating peak of 54%. During Intermediate wave (C) down from June 2014 to June 2016, markets are expected to embark on a massive waterfall decline. With Obama's approval rating falling to the low 20s by 2016, bearish social mood is expected to result in the GOP attempting to get Obama impeached starting in 2015 -- the impeachment is expected to be successful in the House, but expected to fail in the Senate (Democrats will be united in keeping Obama in power). Obama's approval rating could easily fall below 20% by the time the 2016 election takes place.

Hard Times, Not End Times

As we approach the fateful date, December 21, 2012, the doomsday phobia continues to grow. With social mood going south again with the retracement of the 2 year bearish rising wedge in the DJIA, S&P 500, and Wilshire 5000 in progress, the doomsday phobia is likely to grow more and more pervasive as we go through the last few days before reaching December 21, 2012.

Here is an updated chart of the DJIA, showing the retracement of the rising bearish wedge in progress:

The primary count is that the wedge collapse is Intermediate wave (A) down of Primary wave [B] down (2012 - 2016) of Cycle wave x up (2009 - 2021) with the wedge collapse unfolding as a double zigzag. There are other possibilities, of course, on how the wedge collapse could unfold, as it could also unfold as a zigzag, triple zigzag, or even a double combination structure (expanded flat -- x wave -- zigzag). The double combination scenario would involve the markets putting in a marginal new high (the rally off the November 2012 low point is clearly corrective) before commencing lower to complete Minor wave W down as an expanded flat, which would be followed by Minor wave X (any corrective pattern) and then Minor wave Y down unfolding as a zigzag.

Here is a chart showing the wedge collapse in detail:

Markets may be able to find support at the area shown by the red box. The support level is very significant because it is the level associated with the most recent Zweig Breadth Thrust signal. Losing this level as support is considered bearish, so the markets are expected to hold the level (11000 - 11250) as support for at least a short time. However, the larger bear market trend will be in control, so the support level is expected to be lost quickly as Minor wave Y of the double zigzag unfolds, which would then be followed by a full retracement of the 2 year rising bearish wedge a short time later.

As we approach December 21, 2012, the doomsday phobia is already in full swing, of course augmented by social mood going south at Primary degree within a much larger bear market. In spite of NASA debunking the 2012 doomsday scenario, there are still at least 1 out of every 10 people that believe that the world is ending just days from now.

Here is a Google Trends chart from 2004 to present with the search term "2012 apocalypse"

Here is a chart showing the trend in the last 90 days (the trend is up):

Bear markets bring hard times for humanity. But there is a great deal of difference between hard times and end times. The Grand Supercycle degree bear market that started unfolding in 2000 is going to result in hard times for many people, but it certainly won't result in the end of the world or the end of human civilization. People were able to weather through the last bear market of comparable magnitude (Grand Supercycle wave [II] down (1720 - 1784)) and human civilization was never in danger of coming to its end back then. We will still be here in 2013, and for that matter, human civilization will still be around when the bear market ends in 2118.

Skyscraper Indicator Signals a Top

For the third time in less than 15 years, the Skyscraper Indicator is issuing a peaking signal. The indicator was pioneered in January 1999 by Andrew Lawrence, research director of Dresdner Klienwort Wasserstein,  showing that the world's tallest buildings have risen on the eve of economic downturns.

In the last 15 years, the skyscraper indicator signaled a top in 1997-1999, 2007, and now. A chart of the DJIA of the last 15 years with the important events labelled puts it in perspective:

As the chart indicates, the Petronus Towers in Malaysia were built in 1997 with a height of 1461 ft (448 meters), indicating that a large degree peak was imminent. The completion of the towers was quickly followed by the Asian Financial Crisis, a small taste of the economic major depression that would follow less than 3 years later. Just 2 years later, an even larger building, the Taipei 101 in Taiwan was built, soaring 1671 ft (512 meters) high. The completion of the Taipei 101 was closely followed by the end of the Grand Supercycle degree advance that started in 1784 and the beginning of the economic major depression, the "Crisis of the Western World".

A long topping process has been in progress since the onset of the Grand Supercycle degree bear market, with exuberant optimism stubbornly holding its ground. After the initial decline following the bursting of the dot com bubble in 2000, the DJIA, the S&P 500, and the Wilshire 5000 rallied to new highs in 2007. Just before the 2007 peak was reached, a skyscraper of unprecedented height started to take shape in Dubai as the Burj Khilifa rose 2717 feet (833 meters) into the sky upon completion. Shortly after the building was completed, the "Panic of 2008" struck the western world. The "Panic of 2008" climaxed in March 2009 at the end of the first phase of "The Great Deflation".

As we entered the second phase of "The Great Deflation" in March 2009, exuberant optimism returned within a year. Three years into the bear market rally, at the top of Primary wave [A] of Cycle wave x up (2009 - 2021), China is planning to build the world's tallest skyscraper in just 90 days (!). The new building, Sky City, is planned to be 220 stories, rise 2749 feet (838 meters) high, and be completed around March 2013.  As with the other two peaks, the construction of the building is expected to herald a multi-year decline in the stock market as well as a multi-year decline in the job market, which will be Primary wave [B] of Cycle wave x.

The second phase of "The Great Deflation" is expected to end in 2021, which would be the end of Primary wave [C] (2016-2021) of Cycle wave x (2009 - 2021) up. The second phase could easily climax with nations, states, cities, and even corporations, endeavoring to build skyscrapers well over 3000 feet (920 meters) tall just before the onset of the third phase of "The Great Deflation", Cycle wave y (2021 - 2042), in which a massive deflationary collapse unfolds in full force.

The Skyscraper Indicator has proven to be a very strong predictor of impending economic downturns, going all the way back to the 1800s. Here is a longer term chart of the DJIA showing the correlation between the building of skyscrapers and stock market peaks:

As shown in the chart above, when the Skyscraper Indicator issues a peaking signal, the peak is Cycle degree or higher, with the accompanying economic downturn being a major recession or larger. Due to the 21 year topping process that has been playing out since the onset of the bear market in 2000, social mood has remained very optimistic. With the construction of a massive skyscraper in China on the table, the indicator is issuing a peaking signal and another down-trend is imminent if not already in progress.

Four More Years of Obama

With all three of the presidential debates completed, the election is looking to be a close contest. The closest parallel to the 2012 presidential election is the 2004 presidential election, in which the incumbent of that time, Bush 43, won a second term by a narrow margin.

From the perspective of social mood, bear markets normally result in incumbents getting thrown out of office by a landslide, as was the case with Herbert Hoover in the 1932 presidential election at the low of Supercycle wave (IV) down and Martin Van Buren in 1840 during Supercycle wave (II) down (1835 - 1859).

The 2012 presidential election, however, is taking place in a mixed mood environment, resulting from a very large bear market rally off the March 2009 low. It was the same way in the 2004 presidential election as well, with a 5 year bear market rally, Primary wave [B] up (2002 - 2007) of Cycle wave w down (2000 - 2009) with a mixed mood environment in play.

In a mixed mood environment, the candidate with the best ground game and the highest level of organizational strength will be the one that wins. George W. Bush (Bush 43) won a second term by a narrow margin in 2004. Bush 43 had a stronger ground game than John Kerry did due in part to the Koch-ALEC cabal and the organization of the religious right. In the current presidential election, President Obama is on course to win a second term by a narrow margin. Unlike the 2008 election in which Obama rode a massive wave of voter anger (from the "Panic of 2008") all the way to the White House, the 2012 election will prove to be much harder and will take a great amount of effort to win. President Obama's superior organizational strength is what will allow him to win a second term in the midst of a mixed mood environment.

The bear market rally off the March 2009 low appears to be incomplete and needs one more five wave rally to complete the structure. The rally should unfold through election day and peak about a third of the way into November 2012, as the chart below illustrates:

The chart above shows Minor wave 5 of the 2 year bearish rising wedge, Intermediate wave (C), that started in June 2010. Minor wave 5 is unfolding as a triple zigzag with the last part of the third zigzag still to come. The upside target is 1484 for the S&P 500 and 13750 for the DJIA.

In the midst of the mixed mood environment are undercurrents of bearish social mood, which is most clearly seen in the DJIA / gold ratio. As the chart below shows, the DJIA in terms of real money is in a very clear down-trend with a series of lower lows and lower highs throughout the Obama Administration Period so far:

The decline in the DJIA / gold ratio also explains why Obama's approval rating displayed a long term down-trend. In addition, the most recent polls are painting a mixed picture, with some polls putting Obama ahead and some putting Romney ahead.

Intrade is currently projecting a 62% chance that Obama will win a second term, although some such as Nate Silver is currently projecting a 73% chance that Obama will win. It will be a close election, with Mitt Romney reaching 250+ electoral votes (it could possibly go as high as 260), but California, Oregon, and Washington will put Obama over the 270 electoral votes needed to win once voting is completed in those three states.

The last two cases of a president winning a second term during a bear market rally was Bush 43 in the 2004 election and Richard Nixon winning a second term in 1972 with the mixed mood environment in play as a result of Primary wave [D] up of a Cycle degree triangle, Cycle wave IV (1966 - 1974). Obama is on course to win a second term on November 6, 2012.

It is perhaps instructive to look back and realize that both Bush 43 and Nixon declined in popularity during their second term. Bush 43 saw his approval rating plunge to 25% in the wake of the "Panic of 2008" and Richard Nixon was pressured out of office less than 2 years later due to scandal. If the forecast for a Primary degree decline from 2012 to 2016 is correct, than Obama will face the same fate as Bush 43 with social mood becoming increasingly bearish, culminating in a wave of voter anger that makes conditions ripe for someone like Michele Bachmann or Paul Ryan to rise to power as the next president of the United States in the 2016 election.

President Obama's approval rating will likely plunge soon after the elections taking place. In the midst of all the talk about a "fiscal cliff" in economic policy that has been dubbed "Taxmageddon" and is set to be reached in January 2013, there is another cliff that we are approaching, and that is the end of a 2 year rising bearish wedge in the DJIA, S&P 500, and the Wilshire 5000. The resolution of the wedge pattern is expected to be relatively swift with the full retracement of the wedge expected to be completed in June 2013.

Here is a chart of the wedge and the drop-off that follows:

Labelled on the chart is President Obama's approval rating at important junctures. At the May 2011 high, when the DJIA reached 12876, President Obama's approval rating briefly reached 61% in the aftermath of the assassination of Osama bin Laden. Just 5 months later, at the low of Minor wave 2 down within the larger wedge, the United States was downgraded by Standard and Poors from AAA to AA+, and Obama's approval rating reached a low of 38%. As the peak of the bear market rally approaches, Obama's approval rating has only partially rebounded from the October 2011 low and is currently at 48%.

The expectation is for Obama's approval rating to take a massive plunge downward as the retracement of the rising bearish wedge unfolds. The forecast is for Obama's approval rating to fall to a low of 28% to 32% by June 2013. The sudden decline in social mood starting in mid November 2012 points to a scenario where there is no resolution on the "fiscal cliff" at all due to strife and discord between Obama, John Boehner, Harry Reid, and Mitch McConnell, which could result in another downgrade on the credit rating of the United States.

Journey to the (Primary Degree) Peak

There are now a number of compelling signs that a Primary degree top has already put in or will be registered in the very near future. Both the internal market indicators and the social mood indicators are suggesting that a peak has already happened or will shortly. The S&P 500 and the Wilshire 5000 reached new 2012 highs, exceeding the April / May 2012 highs. The DJIA has yet to confirm the S&P 500 and the Wilshire 5000 higher, but given the tendency for the three indexes to have "similar wave paths", it is quite likely that the DJIA will confirm the other two indexes higher.

The longer term outlook for the 2009 - 2021 period is still intact, with Supercycle wave (a) (2000 - 2042) down unfolding as a complex W - X - Y structure and Cycle wave x (2009 - 2021) up in progress.

The most likely wave count for the S&P 500, Wilshire 5000, and most likely the DJIA as well, is a 3 year zigzag with an ending diagonal for Intermediate wave (C), as the previous main count was invalidated with a new 2012 high in the S&P 500 and the Wilshire 5000. Here is a chart showing the revised wave count in the context of the larger Cycle wave x structure in the S&P 500:

The revised wave count still works within the larger Cycle degree structure, with Primary wave [W] up (nearing its end) lasting 3 years, which would then be followed by Primary wave [X] down from 2012 to 2016, lasting 4 years, then Primary wave [Y] up from 2016 to 2021, lasting 5 years. Cycle wave x would then be a complex (zigzag - double zigzag - expanded flat) structure. 4 years is enough time for the DJIA to fall from 13300 to 5500 and for the S&P 500 to fall from 1430+ to 550, and each of the Primary degree sub-waves that compose Cycle wave x are reasonably comparable to each other in price movement and duration, as well as Cycle wave x (2009 - 2021) being reasonably comparable to Cycle wave w (2000 - 2009) in duration.

However, the previous main count is still working very well for the NYSE Composite as well as the DAX and the FTSE 100. Along side the Wilshire 5000, the NYSE Composite is a market index composed of a large cross-section of corporations and businesses and thus is a broad measure of social mood. The NYSE Composite is in a bearish intra-market divergence with the Wilshire 5000 and the S&P 500, indicating a fractured market.

Here is a chart of the NYSE Composite from 2005 to 2021:

Upside momentum is clearly on the decline, not only with bearish intra-market divergences taking place (the 2012 high in the S&P 500 and the Wilshire 5000 is not confirmed by the NYSE Composite, the Transports, the DAX, the CAC-40, or the FTSE 100), but the rally is being carried by fewer stocks. A substantial part of the recent rally in the S&P 500, the Nasdaq, and the Nasdaq 100 can be attributed to the "Apple Bubble" as well as a social media bubble that is now bursting with the decline of Facebook in progress.

There are also a number of social mood indicators that are signalling a significant top in the markets:

1 -- The first "Magazine Cover Indicator" event took place with "Dow 15000" appearing on the February 13, 2012 cover of Barron's magazine. With the rally from the March 2009 lows losing much of its momentum and with bullish sentiment already in the stratosphere, this event is a significant sell signal for the markets.

2 -- In early August 2012, Mitt Romney called for more bull market in the economy and the job market. This is another very strong peaking signal as politicians are always the last people to act on a trend, and for that matter, the last people to extrapolate a trend. This event is in the same league as the Federal Reserve Chairman saying that "rates will remain low through 2014".

3 -- The second "Magazine Cover Indicator" event took place with the bull market portrayed as unstoppable and invincible on the September 3, 2012 cover of Barron's magazine. Now that everyone is convinced that the "bull market" is unstoppable, the uptrend in the markets from the March 2009 lows is fully played out and ripe for a reversal.

4 -- Just three days later, on September 6, 2012, Vice President Joe Biden declared that "America has turned the corner" on the job market and the economy, saying that "America's best days are ahead of us". This is yet another instance of politicians extrapolating a trend and "predicting the present". Unlike Mitt Romney, Joe Biden has virtually no business experience, so this event is even more significant. The job creation trend has played out for a long enough time that it has become intuitive even for politicians to extrapolate the trend.  America's best days are indeed ahead of us, but those days won't come until the Grand Supercycle degree bear market that started unfolding in 2000, and the associated major depression in the economy, is completed.

The journey to the top of the (Primary degree) peak in the markets have been marked by extreme bullishness, as well as magazine cover indicator events and politicians calling for more bull market in the economy and job market, thereby extrapolating a trend by "predicting the present". These events, along with bearish intra-market divergences and declining momentum, all point to a major reversal ahead.

Inclusionism Breaks New Ground

As a testimony of social mood remaining at historically bullish levels in spite of 12 years of bear market (so far), we witnessed inclusionism (characteristic of bullish social mood) break new ground with Russia joining the World Trade Organization (WTO) after 18 years of negotiations.  The significance of the event won't be recognized by most people, but it is a very significant event from a socionomic perspective. This type of event, along with Mitt Romney calling for more bull market in the economy and job market (see this post), could easily be a peaking signal with a large degree reversal just around the corner.

When inclusionism breaks ground in previously unreachable areas, it is a very strong peaking signal. The last event of this type was Bulgaria and Romania joining the European Union in 2007 just before Primary wave [B] of Cycle wave w down (2000 - 2009) ended in October 2007. It is also notable that there was a frenzied eastward expansion of the European Union from 2004 to 2007 with 10 nations added to the union during the period.

Even though there has been a lot of speculation amongst the (euro) bears that the European Union will break up in the future, there is a strong case to be made that the expansion of the EU could continue all the way into 2021, the peak of Cycle wave x (2009 - 2021) up, with the break up (due to nations leaving the EU) to take place during Cycle wave y (2021 - 2042) of Supercycle wave (a) (2000 - 2042) down. The last part of Cycle wave x up (likely to be Primary wave [Y] up (2016 - 2021)) could feature a last frenzied expansion of the European Union before "The Great Deflation" unfolds in full force in 2021. Indeed, the stage is already being set for a last period of frenzied expansion starting with Croatia set to join the European Union in July 2013 and several other nations recognized as potential candidates to join the EU in the future.

The addition of Russia into the WTO is occurring as Primary wave [W] up is nearing a peak (current wave count was invalidated in the S&P 500, but still valid for the DJIA and Wilshire 5000. New charts coming in the very near future), with Primary wave [X] down to shortly follow the peak.

The European Union is expected to come under a lot of stress during Primary wave [X] (~2012 to 2016) down of Cycle wave x (2009 - 2021) up with perhaps a lot of speculation that Greece, Spain, Italy, or Portugal leaving the European Union during that time. When Primary wave [Y] (2016 - 2021) up of Cycle wave x (2009 - 2021) up starts, the European Union is expected to go on a frenzied expansion with inclusionism reaching levels regarded as unreachable today. There are five nations that are even now recognized as candidates for inclusion into the European Union -- Iceland, Macedonia, Montenegro, Serbia, and Turkey. In addition, Albania is in the process of applying for membership into the EU. From the socionomic perspecive, the most likely scenario is for Iceland, Macedonia, Montenegro, Serbia, Turkey, and Albania to gain membership in the European Union during the 2019 - 2021 time frame as the last part of the Cycle degree advance in social mood unfolds.

The Euro, the currency of the European Union, is expected to be a fully functioning currency during the rest of the "extend and pretend" phase (the second phase of "The Great Deflation"), with the fate of the currency expected to face very tough challenges during the third phase of "The Great Deflation" during the 2021 - 2042 time frame.

Life After Obamacare

All eyes are now on the US Supreme Court, which is soon to hand down a decision on the constitutionality of "Obamacare", the health care reform law passed by the Obama Administration back in 2010 after a year. The vast majority of people expect the US Supreme Court to hand down its decision some time in the last days of June 2012, yet the ruling could, in theory, come any time between now and November 2012.

According to Intrade, there is a 77% chance that the mandate will be struck down by the high court. However, the probability that the rest of the law will remain intact will depend heavily on when the ruling is handed down as a couple of charts of the S&P 500 will show:

Scenario 1 -- Health Care ruling handed down in June 2012 (Optimistic scenario)

Bear market rallies end on good news, and a Minor degree bear market rally should end on great news. We are on the verge of completing Minor wave B up (Oct 2011 - June 2012) of Intermediate wave (W) down, so a Minor degree bear market rally is about to wrap up if nor already completed.

A scenario where the mandate gets struck down, but the rest of "Obamacare" is left intact would be seen as great news by the American people, especially those that have already benefited from the new law. A scenario where a ruling in favor of "Obamacare" takes place as Minor wave B up reaches completion would work very well for a Minor degree bear market rally ending on great news.

Scenario 2 -- Health care ruling handed down in October / November 2012 (Pessimistic Scenario)

There has been a lot of debate about what would happen if the US Supreme Court strikes down the entire law. The issue has been debated on CNBC, Yahoo news, and Huffington Post, as well as countless other places. One thing that is certain is that if the entire law is struck down, the fallout would be massive as millions, if not tens of millions of Americans that have already benefited from the law will suddenly have the rug pulled out from under them. Given the bearish social mood that is in play now, this is a recipe for a backlash and even a full blown panic. There are already predictions of a full blown panic if the entire law is struck down as outlined in the KevinMD.com article, making the case that the panic could hit doctors and providers as well.

There are already a number of economists and analysts that see striking down the entire law as bullish for the stock market. If the entire law is struck down, the ruling would most likely be handed down in the October / November 2012 time frame when the center of Minor wave C down is in play with a bearish Intermediate degree "point of recognition" reached shortly afterwards. The result, of course, would be the "Panic of 2012" as a massive backlash unfolds in the aftermath of the ruling.

No one knows when the US Supreme Court will hand down its ruling on the constitutionality of "Obamacare". Although the outcome of the ruling will certainly matter for the millions of Americans that are benefiting from the law in the short term and the intermediate term, the outcome won't matter on the longer term. The health care in the United States is on an unsustainable path with an insurance death spiral currently unfolding. As I demonstrated here and here, it is only a matter of time before the entire health care system collapses with the collapse most likely to take place between 2015 and 2020, and the collapse will happen regardless of which way the US Supreme Court rules on "Obamacare".

Increasing Turmoil in Europe

Social unrest has been on the rise in Europe with hot spots in Greece, Italy, Spain. All eyes are on the June 17, 2012 elections in Greece and their possible implications, but financial hardship has also been increasing in Spain and Italy.

As suggested in the previous blog entry, Spain's banks got a $125 billion (100 billion euros) bailout on Sunday afternoon (June 10, 2012). The bailout news resulted in a short lived euphoria that fizzled out by the end of the next day. The IBEX 35 gapped up by more than 5% only to close the entire gap within a few hours. All the other markets (including the US markets) also gapped up in the hours before trading on Monday (June 11, 2012) only to close their gaps by the end of the trading session.

The IBEX 35 tells the story of increasing social unrest and financial hardship in the peripheral nations of Europe that continue to unfold since the Greek debt crisis started to unfold in April 2010.

Here is a long term chart of the IBEX 35:

The IBEX 35 was created back in 1992. Since inception, the index peaked at around 16000 in April 2007 before starting the bear market trend that is still in force today. The index has fallen to a low of around 6000 last month before starting another bounce.

Here is a closer look at the IBEX 35 from 2009 to today:

Like all the other markets, the IBEX 35 reached a Primary degree low point in March 2009, which would be the end of Primary wave [1] down. The low point was followed by a bear market rally, Primary wave [2] up, that lasted less than a year and took the index from the upper 6000s to just over 12000. The IBEX 35 has breached the March 2009 low and the deflationary downtrend appears to be picking up momentum. The best count for the IBEX 35 is that a series of 1s and 2s is unfolding. A small wave 2 bounce is in progress now, which will quickly give way to new lows. The main count as shown on the intermediate term chart indicates that the center of Intermediate wave (1) of Primary wave [3] down will soon be reached.

The center of Intermediate wave (1) of Primary wave [3] down in Spain, Greece, and Italy is very likely a key event, as it will result in the "Panic of 2012". The coming point of recognition will likely result in Spain and Italy both needing a bailout, yet Spain and Italy are both too big to bail out. Without a bailout, Spain and Italy will default on their debts, resulting in a global ripple effect that rips apart the economies of the Western World, bringing out the next stage of the "Crisis of the Western World".

There are already a lot of precursor events unfolding that are indicating that the "Panic of 2012" will take place in Europe in the near future:

1 -- Nations in Europe have been hit with a barrage of credit downgrades in the last few days. On June 13, 2012, Spain's credit rating was downgraded by Moody's from A-3 to Baa-3. Just one day later, Spanish 10 year bonds hit the key 7% level. On Friday, June 15, 2012, Moody's cut the credit rating of 11 European banks and said that more downgrades will take place of Greece ditches the euro.

2 -- Italy's 10 year bond yield is also on the rise, hitting 6.25% and threatening to make the burden of the $2.5+ trillion debt an even heavier burden to carry as interest payments on the debt continue to rise.

3 -- The June 17, 2012 elections in Greece have been hanging like a dark cloud with many central banks gearing up for another round of intervention with the European Central Bank possibly cutting interest rates and Britain's central bank possibly infusing the markets with more money. Given the strong level of bearish social mood present in Greece, the most likely outcome of the election is a government that is plagued by strife and discord to a degree where a cohesive government is impossible.

4 -- The IMF (International Monetary Fund) has been urging Spain to raise its VAT, reduce salaries of employees, and reduce pensions and housing deductions as a solution to its debt crisis.

5 -- The Greek election has also resulted in substantial involvement of the EU as German officials continue to make a push in Greece for voters to keep the conservatives in power with all the usual fear-mongering -- a vote for the left would imperil the euro.

The larger Grand Supercycle degree bear market is already having an effect in Greece, and will soon have the same effects in the rest of the Western World. So far, Greece has proven to be a good leading indicator of what will unfold in the rest of the Western World as "The Great Deflation" continues to unfold. Greece's power grid is already starting to come under pressure and stress, in addition to the barter markets that started to come up last year. Also under pressure in Greece as a result of the bear market is the nation's health care system in which the debt crisis threatens to bring about the collapse of the nation's health care system as hospitals and clinics face possible closures as the financial crisis worsens. The events in Greece all point to a scenario where economic and living conditions in the Western World will decline to the level of the 1930s, some nations reaching that point sooner than others.

Final Thrust In Progress

The wait was longer than expected but the final thrust that has been in the forecast is finally materializing. The last leg of a Minor degree triple zigzag, Minor wave B up (October 2011 - June 2012) is finally unfolding. The DJIA fell over 1000 points during May 2012 in what would be the last phase of a Minute degree x wave. The thrust is expected to unfold in a very sharp and rapid advance that ultimately unfolds in three waves. The final thrust should be completed on around June 24, 2012.

Here is an updated intermediate term chart of the DJIA:

The triangle count for Minute wave [x] (the second x wave) is still technically valid for the DJIA, but no longer fulfills the "right look" guideline. The preferred pattern for the second x wave is a complex structure (expanded flat - double zigzag - zigzag) that started on March 18, 2012 and ended on June 5, 2012. This count works very well in achieving reconciliation between the S&P 500 and the Wilshire 5000 going down in 5 waves from the peak, but the DJIA going down in just 3 waves from the peak.

The S&P 500, the Wilshire 5000, and the DJIA all fell below the lower trend channel line (the lowest blue line on the chart) on June 1, 2012 on a 90% down day after struggling to hold the trend channel line as support. Several days later, the indexes all reclaimed the lower trend channel line on an 87% up day and then managed to hold the trend channel line as support on Friday (June 8, 2012), which made the case for a final thrust up stronger.

The upside target for the final thrust is 13340 - 13625 for the DJIA and 1415 - 1452 for the S&P 500. An additional indication for the upside target is an inverse head and shoulders pattern that is forming, which is potentially pointing to 13350 as the upside target for the final thrust in the DJIA and 1375 for the S&P 500. The final thrust should be completed on around June 24, 2012 with Minor wave C down (June 2012 - June 2013) to commence afterwards.

Here is an updated longer term chart of the DJIA:

Notice that the triple zigzag, Minor wave B up, is well contained within the trend channel lines with the exception of the brief throw-under that occurred a short time ago. The longer term chart shows the "five waves down" that is expected to follow once the last zigzag is completed.

The small complex structure that unfolded as Minute wave [x] (the second x wave within the triple zigzag) is a smaller version of what appears to be unfolding on a much larger scale.  The current larger structure that is unfolding, Primary wave [X] (2011 - 2016) of Cycle wave x (2009 - 2021) of Supercycle wave (a) (2000 - 2042), appears to be taking a similar wave path, as shown on the chart:

Our equivalent position in the fractal is arrowed on the chart, along with the projected times for the most important high points and low points in the fractal.

As the final thrust unfolds, exuberant optimism is expected to take center stage (see the previous blog entry). The underlying social mood proved to be too elevated for Gov. Scott Walker of Wisconsin to be thrown out by voters on the June 6, 2012 recall election in spite of a criminal investigation involving one of his closest aides that is now in progress. The fact that Gov. Scott Walker won the recall by essentially the same margin that he did in November 2010 is indicative that the bullish social mood now in play is currently conferring the governor a "teflon coat".

Even as exuberant optimism takes center stage, undercurrents of bearish social mood associated with the decline of the stock market during Primary wave [X] (2011 - 2016) down is brimming under the surface:

1 -- Greece is on the verge of running out of cash. The rapid depletion of cash is due to tax revenue drying up as banks stop lending, the government runs into tough challenges collecting back taxes, and declining wages across the board means less tax revenue. There is also speculation that Greece will leave the European Union.

2 -- The Spanish debt crisis takes another turn for the worse when its credit rating was downgraded by three notches, from "A" to "BBB". A number of Spanish banks are also in serious financial trouble and a bailout of the banks appears to be on the horizon.

3 -- There is also speculation about a "Fiscal Cliff" (a term coined by Fed chairman Bernanke) that is set to take effect in January 2013 as a result of a half of a trillion of dollars worth of tax cuts and spending boosts expire at the end of the year. Considering that social mood will have gone south to a considerable degree (look for the DJIA to fall below 10000 by the Nov 2012 election), strife and discord is the most likely outcome as both the GOP and the Democrats stubbornly hold their ground and refuse to come to a compromise on the issue.

4 -- The Federal Reserve is prodding Congress to spend more money to prop up the economy. This is a potential game changer development as far as perceptions of the Federal Reserve's ability to keep deflation at bay is concerned. There is still a widespread belief (particularly among those that are bullish) that the Federal Reserve has the ability to prop up the stock market indefinitely through quantitative easing.

As the final thrust unfolds to its peak in around June 24, 2012, exuberant optimism continues to have dominance. Once the thrust is completed, markets will decline for the rest of the year. As markets decline, the economy and job market will follow the markets lower.

Exuberant Optimism Takes Center Stage

Even as the markets struggle to muster a rally off the short term lows of May 23, 2012, optimism continues to rise to new heights. The DJIA narrowly held above the May 23, 2012 low point today at the session lows before moving off the lows.

Here is an updated chart of the DJIA. In the short term, the short term decline lasted longer than expected, but the larger picture has not changed -- the rally off the October 2011 low is a triple zigzag in the making with the final z wave in play, part of a larger expanded flat, Intermediate wave (W) of Primary wave [X] (2011 - 2016) down.

The markets are at a crucial juncture. All the major markets -- the DJIA, the S&P 500, the FTSE, and the DAX, are all testing the lower trend channel line. The DJIA and the S&P 500 have already touched that line three times since May 23, 2012, so the trend line is considered important. Any decisive break below the lower trend line (shown as the lowest blue line on the chart) is bearish and a very strong indication of a trend change -- that is, Minor wave C down of the larger expanded flat, Intermediate wave (W) is in progress.

Even as the markets struggle to hold the lower trend channel line as support, optimism continues to rise into the stratosphere in the mainstream media.

1 -- We continue to see calls for more recovery in the housing market as people in the mainstream media continue fishing for a bottom. A number of people went on CNBC in the last few days, including Robert Schiller, S&P's David Blitzer, and Carl Case, all calling a bottom and a recovery. All three cite the local housing markets in Las Vegas (construction) and Phoenix (home prices) as evidence that the housing market is at a bottom with a recovery on the horizon.  There is no recovery in the housing market, only a dead cat bounce that will soon give way to new post-bubble lows. The housing market is sliding down the "slope of hope" and the bottom is very far down.

2 -- As testimony to the exuberant optimism that is pervasive in society, there is now talk of a "second industrial revolution" from advanced manufacturing. It is way too soon to talk about a coming "industrial revolution". No "industrial revolution" will start until "The Great Deflation" is completed. The next "revolution" will be the "Green Technology Revolution", which will unfold during Supercycle wave (b) up, and span from 2042 to 2076. Calls for a "second industrial revolution" by people in the mainstream media are based on linear extrapolation of a trend that started in 1932, and it has become intuitive for people to take the long term trend and extend it into the future -- in other words, predicting the present.

3 -- Another instance of exuberant optimism is projections of a high tech worker shortage -- a very strong indication that exuberant optimism has taken hold in the job market. It's one thing to call for more job creation, it's another matter altogether to call for job creation to unfold at a fast enough clip that businesses can't find workers to fill all the job positions. The job creation trend has unfolded long enough (since January 2011) that it has become intuitive for people to take the trend and extrapolate the trend into the future, and we are now at a point where people are making large extrapolation leaps, which is a sign that a large degree trend reversal is imminent. Considering that we are very close to a business cycle high point, job creation will come to an end and the economy is very likely to wipe out 10 million (or more) jobs in the United States between now and June 2016, the next business cycle low point. The job market, like the housing market, is sliding down the slope of hope.  There is no high tech worker shortage -- the technological revolution started in 1932 with the advent of Supercycle wave (V) of Grand Supercycle wave [III] -- and ended in 2000 with the bursting of the tech bubble in 2000. There was no talk of a tech worker shortage until the late 1990s, when the tech bubble was in its late stages and ready to pop. The high tech worker shortage hoax has been circulated by colleges since the late 1990s as the higher education bubble started to pick up momentum and has taken center stage now as the higher education bubble appears ready to burst if it has not already done so.


As we approach the business cycle high point next month, exuberant optimism has taken center stage as the mainstream media, analysts, and economists have all become bullish. There is every reason to believe that a large degree reversal is imminent with a five wave decline set to start in June 2012 and last for around a year.

The Fall of Facebook

Facebook has reached the top of the mountain and is now on the other side of the mountain. The IPO was hyped into the stratosphere before debuting on May 20, 2012. The company's stock opened at $38 a share, whipsawed throughout the day before ending the first day up just 0.6%. In the days following the unveiling of the IPO, Facebook has seen its stock plunge in a waterfall decline and is now at $33 a share. It's too early to come up with a wave count for Facebook's stock, but being part of the Nasdaq and being part of the social media bubble that has either popped or will do so soon, the Nasdaq can be used as a reasonably good proxy for where Facebook will be heading down the road in the months and years ahead.

Facebook's mountain top experience was evident back in early February 2012 as rumors about an IPO began to circulate throughout the financial world. Facebook's population had reached 700 million at that time and has allegedly reached 900 million today. There was an insane amount of anticipation for the IPO back then as exuberant optimism went into overdrive. Several days ago, as the IPO was about to debut, it had become evident that Facebook was at the top of the mountain, yet the other side of the mountain was clearly visible. With Facebook changing its policies and terms of use on a frequent basis, the seeds of destruction have already been sown, evidenced by an AP-CNBC poll showing that 59% of Facebook users do not trust Facebook to keep their personal information private. With social mood poised to go south for several years, mistrust can easily turn into a scenario where people rush for the exits by the tens of millions as they pull the plug on their Facebook accounts out of anger and self preservation of their privacy, especially as we approach the year 2015, when Intermediate wave (Y) (the sharp zigzag down) of Primary wave [X] (2011 - 2016) down is in progress.

The Nasdaq is a reasonably good proxy for where Facebook is heading in the future as all the social media companies are part of the index. Here is an intermediate term chart of the Nasdaq with the Facebook IPO arrowed on the chart:

As the chart shows, the Nasdaq is already on the way down again, completing Primary wave [B] (2002 - 2012) of the zigzag Cycle wave w (2000 - 2016) with Primary wave [C] (2012 - 2016) now in progress. The Facebook IPO was unveiled during Minuette wave (iv) of Minute wave [iii] of Minor wave 1 down from the March 2012 peak in the Nasdaq. The future wave path of the Nasdaq also supports the idea of Facebook having peaked a few days ago with a long term decline on the horizon.

We are indeed seeing the beginning of the end of Facebook. In the immediate aftermath of the IPO, Facebook has run into hard times on many fronts:

1 -- Shareholders are now suing Facebook and its banking partners as a trading firm revealed massive losses on its shares and are seeking remedies. The sudden change in sentiment from hype to anger is a strong indication that social mood is going south on a large scale.

2 -- The Feds are probing a deal over Wall Street investment banks warning its top clients about Facebook's future financial prospects in the days leading up to the IPO as well as revelations involving Facebook's underwriters gave favored clients an unfair advantage over other investors. This is the first time that the Feds have gotten involved in an IPO debacle. Other social media companies, such as Pandora, had unveiled their IPOs and seen their stocks decline without drawing attention from the government. The involvement of the Feds also signals a major trend change in social mood.

3 -- The chairman of the Senate Banking Committee, Sen. Tim Johnson (D-SD), has indicated that his panel is looking into the Facebook IPO. The banking committee seeks briefings with Facebook's representatives, regulatory agencies, and possibly the banking underwriters, with the possibility of a hearing taking place in the short term future.

4 -- Facebook's top executives are exploiting loopholes to avoid paying taxes to the US government, as well as Facebook issuing stock options to avoid corporate taxes. This move was immediately denounced by Sen. Carl Levin (D-MI), highlighting the destructive effects of the exploits on the taxpayers and on US tax revenue.

5 -- Citadel Investment Group took massive losses from Facebook trades on the behalf of clients, again underscoring the hype surrounding the IPO which did not materialize into gains for investors.

In spite of the massive decline in Facebook's stock following the IPO debut, as well as the hard times that have now started to come to the company, analysts and economists are still stubbornly optimistic on the prospects of Facebook's stock going higher in the future. Setting the scene is analyst Laura Martin of Needham & Co, who went on CNBC comparing the idea of shorting Facebook stock to "getting in front of a freight train" and issued a "buy" rating for Facebook stock.

Facebook's hard times are just beginning. We are seeing the initial series of shocks now. As social mood goes south in the months and years to come, Facebook's decline will continue unabated, eventually resulting in tens of millions of people rushing for the exits as mistrust morphs into anger and self preservation in the area of protecting their privacy and personal information. Facebook is expected to be much smaller in 2016 than it is now with a population decline of 50% of more from today's levels.

The Final Thrust

We are on the verge of embarking on the final thrust and put in the final high for 2012 before the markets head lower in earnest in the second half of the year and beyond. Many markets in the Western World (with the exception of France) have been tracing out a complex structure from the October 2011 low. We are approaching the business cycle high point, on course to be reached on June 24, 2012.

Here is an updated intermediate term chart of the DJIA:

The 3 month triangle, Minute wave [x] of Minor wave B, is complete with Minute wave [z] poised to start. Notice that the DJIA found support on the middle blue trend line, which is the inner trend channel line associated with Minor wave B. The triple zigzag should be completed on June 24, 2012 with an upside target of 13625.

Here is a chart showing the 3 month triangle in the context of the larger term picture in the DJIA:

The advance from the October 2011 low is Minor wave B of a larger expanded flat, Intermediate wave (W). At the upside target of 13625, Minor wave B will be 1.618 times the length of Minor wave A. After the final thrust is completed, then Minor wave C of Intermediate wave (W) will unfold and last for around a year with a downside target of 8500 on June 2013.

Many other markets in the Western World are also tracing the same pattern in which Primary wave [W] of Cycle wave x ended in February 2011 with Primary wave [X] now in progress and on course to continue until June 2016.

Here is an updated chart of the DAX:

Unlike other markets, Minor wave B in the DAX traced a simple zigzag and retraced just enough of Minor wave A for Intermediate wave (W) to be a regular flat. Minor wave C of the larger flat is in progress now. The DAX should put in a Minute wave [ii] bounce while the final thrust unfolds in the DJIA before heading lower in a larger third wave sell-off. The downside target for the DAX at the end of Intermediate wave (W) is 3625 to be reached in June 2013.

Here is an updated chart of the FTSE, which is following the wave path of the DJIA quite closely:

As with the DJIA, the FTSE is also tracing a triple zigzag from the October 2011 low. The FTSE is yet to fulfill the requirements for a flat. The minimum upside target for Minor wave B is 5966, the level in which Minor wave B retraces 90% of Minor wave A. Notice that the FTSE found support at the bottom blue trend line, which is part of the outer trend channel associated with Minor wave B. A final thrust should propel the FTSE to at least 5966 to complete the triple zigzag. A five wave decline, Minor wave C, is in the forecast once the final thrust is completed. The downside target for Minor wave C is around 4100, the price level that would make Minor wave C 1.618 times the length of Minor wave A.

There is already a lot of extreme optimism and bullishness. As I suggested in the previous blog entry, economists and analysts will be making large extrapolation leaps for both the stock market and the economy:

1 -- An analyst from BNP Paribas Fortis is forecasting that the DJIA will hit 100,000 (!) within the next 10 years. The analyst is basing the forecast on central banks pumping enormous amounts of money into the markets.

2 -- Federal Reserve worship has reached unprecedented levels with most analysts believing that the Federal Reserve can keep the markets propped up indefinitely.

3 -- Some analysts are even seeing the economic cataclysm in Greece as bullish for the United States economy under the rationale that the economic cataclysm will lead to investors seeking a safe haven in US treasury securities.

4 --  All eyes are on the Facebook IPO, soon to be unveiled. There is almost universal optimism that the IPO will be bullish for the economy and the job market. Facebook's mountain top experience is nearing an end, as suggested in an earlier blog entry. The other side of the mountain is already visible with a long term decline in the future. The seeds of the decline have already been sown as 59% of Facebook users do not trust Facebook to keep their information private. A big social mood decline associated with Primary wave [X] (2011 - 2016) down can easily turn public mistrust into a scenario where people pull the plug on their Facebook accounts by the tens of millions.

In spite of a pervasive atmosphere of exuberant optimism, we are already seeing hints of the next stage of the Crisis of the Western World:

1 -- There is evidence of a bank run in progress in Greece as $894 million were withdrawn from banks in the country in one day. This could easily be a precursor to bank runs in Spain, Portugal, Ireland, and Italy within the next 12 to 36 months as the debt crisis in Europe continues to spread.

2 -- Hollande has been sworn in as the new president of France after an election on May 6, 2012 in which Sarkozy was thrown out of office by angry voters. In spite of talks between Hollande and Merkel in the aftermath of the election aimed at keeping the EU together, Hollande ran on a platform of spending to stimulate economic growth. With social mood poised to go south in the coming months and years, there will be strife and discord between Hollande and Merkel, much like the strife and discord that has been unfolding between President Obama and House Speaker Boehner, and the result will be the same -- large scale political gridlock -- effectively shutting down any attempt to fight the economic cataclysm that is unfolding.

3 -- The United States is dealing with its own version of the PIIGS -- namely Illinios, California, Texas, New Jersey, and Florida. California's budget deficit problems have been making the news again with the deficit expanding to $16 billion with even more budget cuts on the horizon. Keep in mind that California is over three times the size of Greece, so the implications of California going under will certainly result in a deflationary vortex that will drag down the rest of the United States within a matter of months, if not weeks.


The second half of 2012 will go to the bears. Once the final thrust is completed on June 2012, the markets will head lower in earnest for the rest of the year and continuing to decline until the next business cycle low point is reached in June 2016.

A Runoff Election in France

As a preview to the main attraction in the United States in November 2012, a runoff election is scheduled to take place in France on May 6, 2012 in which Sarkozy (the incumbent) will square off against Hollande (the challenger) for the position of President. Sarkozy has been president of France since 2007.

The reason why the runoff election in France is important is that it provides potential clues (from a socionomic perspective) to how the November 2012 election in the United States will play out. On May 6, 2012, we will be approaching a business cycle high point -- which means that the intermediate term trend in social mood is still bullish, while social mood is expected to become increasingly bearish in the second half of 2012.

Here is an updated chart of the CAC-40, which reflects the social mood in France:

As the updated chart shows, the CAC-40 is tracing out an regular flat for Supercycle wave (a) as per the main wave count with Cycle waves a and b complete and the first two subwaves of Cycle wave c completed with Primary wave [3] down in progress. While the DJIA took out the May 2011 high, the CAC-40 is still well short of doing so, indicating that the rally from the October 2011 low is a bear market rally, namely Minor wave 2 of Intermediate wave (1) of Primary wave [3] down, in which there was a standard 61.8% retracement of Minor wave 1 down. In addition, Minor wave 2 unfolded as a 5-3-5 zigzag. From the peak of Minor wave 2 up, the CAC-40 has given back a substantial portion of the gains in a five wave decline (Minuette wave (i) down) that is close to completion. The CAC-40 should get a bounce (Minuette wave (ii) up) with a rally up to around 3500 in June 2012 before resuming the larger downtrend (Minor wave 3 down).

The top election issues in France are the same as in the United States: the economy and jobs. While Sarkozy finished the first round in second place with 25% of the vote behind Hollande (28% of the vote), there are still a lot of votes up for grabs in the runoff election on May 6, 2012. It will be a very close election -- the CAC-40 is still early enough in Primary wave [3] down that Sarkozy should still be able to win re-election --- but it will be a very tough fight to the finish.

So far, social mood has held up better in the United States (as indicated by the DJIA) than it has in France (as indicated by the CAC-40). A Sarkozy win in France would therefore bode well for Obama winning re-election in November 2012 from the perspective of the socionomic perspective. How the runoff election on May 6, 2012 is therefore a very important indication of social mood in the western world.

Update on the Road to Plutocracy

This is an update to the earlier blog entry in which there is a case to be made that there is a full-scale plutocracy in the forecast for the United States. More developments in the last several months strengthen the case for a coming plutocracy. The Unites States has clearly become more plutocratic over time on President Obama's watch, continuing the multi-decade trend that goes all the way back to the Reagan Administration Period. The case for a plutocracy is also compatible with the Elliott Wave Principle, as plutocracies fit the character of a large degree wave B in the economy, within a bear market of at least Supercycle degree.

Here are some of the latest developments that bear evidence of a coming plutocracy:

1 -- The wealth gap between the rich and the working class in the United States continued to widen during the Obama Administration Period, continuing the trend that also played out during the Bush 43 Administration Period. The gap between the rich and the working class in the Unites States is now comparable to places such as Serbia, China, and Rwanda. Even now, people on the low end of the top 1% make over 10 times as much ($250,000 a year) as a typical worker ($25,000 a year).

2 -- The top 1% have captured 93% of nominal GDP growth during the Obama Administration Period, compared to 65% during the Bush 43 Administration Period and 45% during the Clinton Administration Period. Working class wages accounted for 20% of the nominal GDP growth under Clinton, falling to 6% under Bush 43 and then dropping below zero (1% in 2010, dropping below zero in late 2011) under Obama. We are now seeing the effects of President Obama's economic policies, and the result is a larger chasm between the top 1% and the bottom 99%.

3 -- There is more evidence that President Obama has cast his lot with the top 1% -- in February 2012, he put up a proposal to cut the corporate tax rate from 35% to 28%. This is the same type of voodoo economics that was implemented by Reagan and Bush 43. Indeed, the advent of voodoo economics (also known as trickle-down economics) corresponds to the start of Cycle wave V (1974 - 2000).

4 -- The poverty rate continues its relentless rise with extreme poverty hitting record highs. This trend underscores the extreme weakness of economic fundamentals. The actual poverty rate in the United States is likely closer to 30% as the official poverty rate thresholds are not indexed to the actual inflation rate. This also reflects persistent weakness in the job market -- while the economy has created 2.7 million jobs from the low on December 2010, virtually all the jobs created have been part-time jobs that pay minimum wage with no benefits.

5 -- Another effect of the coming plutocracy is food hardship -- over a third of US households have had difficulty putting enough food on the table at some point in the last 12 months due to food prices rising relative to wages. This scenario is not surprising since commodities have been rising faster than stocks (It's all the same market in a deflationary environment and a robust bear market rally is unfolding now) and will continue to do so until the "Extend and Pretend" phase (Cycle wave x) ends. Couple this with persistent wage deflation and its no surprise that food is getting more expensive for the typical household.

6 -- Homelessness is on the rise with people that were previously successful ending up on the streets after losing their jobs and the subsequent long-term unemployment that followed. This trend is a precursor to what will come in the future -- every major city in the United States surrounded by "Obamavilles" in the suburbs as "The Great Deflation" continues to unfold, a parallel of the "Hoovervilles" that appeared during the Great Depression.

7 -- President Obama is also pushing for a "super-NAFTA" in which more free trade agreements are implemented extending all the way to South America. The effect of a super-NAFTA is quite predictable. Back in the 1992 election when Bill Clinton proposed NAFTA, Ross Perot warned about a "giant sucking sound" that would take place is NAFTA were to be implemented. Ross Perot's prediction was since fulfilled in the aftermath of NAFTA going into effect in 1994 -- slowly at first, but now a deafening roar as millions of living wage and family wage jobs continue to be outsourced every year. The effect of a super-NAFTA would therefore be the loss of all remaining living wage and family wage jobs as corporations find new places for cheap manufacturing and labor. The advent of a super-NAFTA would play a strong role in purging the last of the family wage jobs on Main Street by 2015 with the last of the living wage jobs on Main Street purged by 2020.


It is very clear that the United States is on the road to becoming a full-blown plutocracy. The trend has accelerated during the Obama Administration Period. Some people already characterize the United States as a plutocracy, but there is a case to be made that the country is currently in a transitional period where there exists a hybrid of democracy and plutocracy. The transitional period started in 2000, corresponding to the start of Grand Supercycle wave [IV] and the start of "The Great Deflation". The US economy stopped creating family wage jobs in 2000 and stopped creating living wage jobs in 2007. The transitional period will continue for the duration of Supercycle wave (a) until the nadir of "The Great Deflation" is reached in 2042. During Supercycle wave (a), everyone will take a massive hit from the deflationary collapse in the economy. The deflationary collapse will unfold in full force with the start of Cycle wave y in 2021 in which 90% of corporations and businesses implode by the time the bottom is reached. However, the bottom 99% will lose ground faster then the top 1% will, so the wealth gap will continue to widen.

Given the road that the United States is currently on, it does not matter whether Mitt Romney or Barack Obama wins the November 2012 election -- whoever wins, we (the 99%) lose. Both Romney and Obama have cast their lot with the top 1%, ensuring that the inevitable road to plutocracy will continue.

Every plutocracy has an engine, and the one that is coming in the United States is no exception. The driving force of the future plutocracy has already been identified -- Koch Industries and its extension, the American Legislative Exchange Council (ALEC). The structure for the coming plutocracy is already being built and the stage is already being set. ALEC was founded in 1975, just a short time after the start of Cycle wave V (1974 - 2000). Koch Industries was founded in 1940, but its political activism started in 1977 with the founding of Cato Institute, also a short time after Cycle wave V (1974 - 2000) started. The socionomic model explains why ALEC and the political activism of Koch Industries appeared when they did -- that was when the social mood of the United States population became favorable for the organizations to carry out their political agenda.

Big Oil will certainly survive through "The Great Deflation" intact. With the advent of Supercycle wave (b) in 2042, alternative energy will drive the "Green Technology Revolution" in Canada, Western Europe, Japan, South Korea,  Australia, and Brazil. However, alternative energy will never take root in the United States -- the Koch-ALEC cabal will have a strong enough stronghold on the government (both state and federal level with many lawmakers being members of ALEC) and the country to shut down all forms of alternative energy in the country through unprecedented lobbying power. At the beginning of Supercycle wave (b) in 2042, all the oil companies will be folded into Koch Industries and all the corporations and large businesses that managed to make it through the deflationary collapse of the economy will be folded into ALEC. With the merging of corporate power into the Koch-ALEC cabal in 2042, a full-blown plutocracy is born. The top 1% will pull away from the working class at a greatly accelerated clip with living and economic conditions on Main Street comparable to the 1930s.

The appearance of a plutocracy from 2042 to 2076 fits the character of Supercycle wave (b) as B waves are technically weak with weak breadth (only a small cross section of stocks take part in the advance in the stock market, only a small cross section of the populace will take part in the return to prosperity in the United States). Just as fifth waves are weaker than third waves, B waves are weaker than fifth waves by every measure. The nominal GDP of the United States is likely to hit new highs by 2076, but virtually all of the increase will go to the top 1%.

The Koch-ALEC cabal will be unstoppable until the plutocracy peaks in 2076, corresponding to the beginning of Supercycle wave (c). It is very likely that the Koch-ALEC cabal will start overplaying their hand in 2074, thereby sowing the seeds of their own destruction, as we approach the peak of Supercycle wave (b). Once Supercycle wave (c) -- "The Great Tribulation" --- starts, the Koch-ALEC cabal will suffer damage from their own seeds of destruction, exposing more and more cracks in the formerly impenetrable armor. A combination of the plutocracy taking damage from their own seeds of destruction and bearish social mood associated with Supercycle wave (c) motivating the 99% to take their country back will eventually bring about the downfall of the plutocracy in 2118 as the Grand Supercycle degree bear market reaches its epic climax.