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.

Update on the 2008 Parallel

This is an update to the earlier blog entry "Prelude to 2012" in which a forecast was made that the collapse of MF Global was the prelude to more seismic shocks that will come in 2012. History is indeed repeating itself even though the wave paths have turned out to be different.

Here is a chart of the S&P 500 from 2007 - 2009 with the events labeled:

Notice that the collapse of Bear Stearns took place early in what is now labeled Primary wave [C] down (Oct 2007 - Mar 2009) of Cycle wave w down (2000 - 2009). Six months later, the dam burst open in September and October 2008 with the collapse of Lehman Brothers and Washington Mutual, along with AIG, Freddie Mac and Freddie Mae, and the largest banks all getting a bailout, all as the "Panic of 2008" unfolded.

History is repeating itself again. In November 8, 2011, MF Global collapsed as the bear market rally off the October 4, 2011 low unfolded. The collapse of MF Global was seen as a parallel of the collapse of Bear Stearns. There are a number of recent events that strengthen the case that 2011 - 2016 is a parallel of 2007 - 2009:

1 -- Stockton, CA files for bankruptcy -- Stockton, CA became the largest US city to file for bankruptcy as soaring pensions and contractual obligations became too heavy of a financial burden for the city to carry. The city was unable to reach a deal with creditors to address a $26 million budget shortfall.

2 -- Scranton, PA is bankrupt for all practical purposes -- The city mayor reduced the wage for all city workers, including police and firefighters, to minimum wage as the city's cash reserves rapidly depleted. This move has sparked furor from a number of unions that are now vowing to sue in federal court including a motion to hold the mayor in contempt of court for violating a judge's orders to pay full wages.

3 -- San Bernardino, CA became the third large city in California to file for bankruptcy -- The city is facing a budget shortfall of $45.8 million, has already stopped paying some of its vendors, and is close to being unable to make payroll. The city benefited from the housing boom of the early 2000s, but since suffered as the housing bubble continues to deflate.

4 -- The LIBOR rate fixing scandal has rocked the financial world in the last several days -- At the center of the scandal is the British banking giant Barclays manipulating interest rates on trillions of dollars of credit derivatives. In the aftermath of the scandal, U.K. regulators have launched a criminal investigation into the rate manipulation behavior. A few days later, the scandal expanded in scope with a number of the largest banks including Bank of America, JP Morgan Chase, and Citigroup also involved. A number of cities and states in the US are now in the process of suing the banks over the economic impact of LIBOR manipulation. This is already being described as one of the biggest bank frauds in the history of modern civilization.

Here is an updated chart of the S&P 500 from 2011 - 2016 with all the important events labaled:

We are still in the early part of Primary wave [X] down (2011 - 2016) of Cycle wave x up (2009 - 2021), meaning that the "dam bursting open" event is yet to unfold in the future and it will be associated with a Primary-degree "point of recognition". The next set of shocks should come from Europe with the "Panic of 2012" unfolding later this year as the stock markets in Spain, Greece, and Italy reach the center of Intermediate wave (1) of Primary wave [3] down, which would correspond to the center of Minor wave C down of Intermediate wave (W) down (February 2011 - June 2013) in the DJIA, S&P 500 and the Wilshire 5000.

The dam should burst open in late 2014 after the popping of the education bubble in June 2014. Look for the Obama Administration to launch TARP 2 to bail out the banks in late 2014 -- especially plausible even now as the "too big to fail" banks were never downgraded in 2008 but have been hit with a series of downgrades since late last year, indicating that the banks are in worse shape now than they were in 2008. With the job market also collapsing during that time (10 million workers in the US lose their jobs between now and June 2016), college graduates won't be able to find employment after graduating from college. The issue is in crisis mode even now as over half of recent college graduates are unemployed. Student loan debt is already past the $1 trillion mark and continues to grow as the college bubble continues to inflate at an exponential clip. In 2014, with the next leg of the job market collapse well underway, look for the Obama Administration to do a student loan bailout to the tune of $1.7 trillion in late 2014. There are already a few people that recognize the possibility of a student loan bailout, such as the article on Bloomberg Businessweek.

The most powerful seismic shocks are yet to rock the financial world as the Primary degree decline (Primary wave [X] down) is still in the early stages. The largest shocks that will hit during the Primary degree decline in social mood should take place in late 2014.

Next Phase of Housing Collapse Ahead

Even as optimism over a possible housing recovery continues to unfold in the mainstream media, there are signs that the next phase of the housing meltdown is about to come underway with a new wave of foreclosures in the pipeline. In spite of the housing market undergoing a larger decline than the decline that unfolded during the Great Depression, we are still seeing calls for a bottom and a recovery in the housing, such as calls for a recovery as published on the Wall Street Journal. The fact that we are still seeing calls for a recovery is an indication that the housing market is still sliding down the "Slope of Hope" (there is more hope for a recovery than there is fear of a fall even as prices continue to decline).

Ever since the housing bubble burst in 2005, real estate prices have been in a long term decline as the bubble continues to deflate. Just as progression does not unfold in a straight line, bear markets do not unfold in a straight line. With every bounce that has unfolded within the larger decline in the housing market, there have been attempts to call a bottom and a recovery. There has been a bounce in the housing market in the last few months, which economists and journalists have taken as a sign that a recovery is unfolding, but is really yet another dead cat bounce that will soon give way to new post-bubble lows.

The bottom is still a long way down. Before there can be a bottom, there has to be a point of recognition that the housing market is in a long term bear market trend. The point of recognition may not come until around 2025 (the center of Primary wave [A] of Cycle wave y within a W-X-Y structure for Supercycle wave (a)).

The next wave of foreclosures is coming, which is apparent even to the mainstream media as banks pick up the pace of foreclosures after a slowdown last year following the "robo-signing scandal". There is also a large shadow inventory backlog that must be worked through before any real housing recovery is possible. However, the next wave of foreclosures is likely to be much worse than what is being forecast by economists and the mainstream media as the effects of a social mood decline following the business cycle high point in June 2012 will usher in the next decline in the job market as around 10 million people lose their jobs between June 2012 and June 2016, which will greatly increase the number of people losing their homes through foreclosure and accelerate the decline of real estate prices.

At the climax of the meltdown in housing, which is expected to occur around 2042 as "The Great Deflation" comes to its epic conclusion, there will be a historic buying opportunity as people that successfully make it through the deflationary collapse without getting financially wiped out will be able to buy the house of their dreams for pennies on the dollar. At the climax of the deflationary collapse, there is expected to be a lot of disdain for real estate with bearish sentiment pervasive in the mainstream media and the political arena.

Waterfall Decline Ahead

We are very close to the end of Minor wave 2 up, with the top around a week in the future. Expectations for a three month long reprieve period were fulfilled as markets made a rapid bounce off the early October 2011 lows and then stayed elevated for the rest of the year. It was a chance for people to enjoy the holidays while the economic and financial fault lines in the western world were temporarily stabilized.

As we approach the end of the three month reprieve period, the mainstream media has become extremely bullish. Expectations for economists, market analysts, and journalists in the mainstream media to become very bullish on the economy, job market, and stock market by the end of the year have been fulfilled. Since the last write-up in early December 2011 as the last part of Minor wave 2 up started unfolding, people have become even more bullish on the economy, stock market, and job market.

Here are some recent examples of extreme bullishness that has shown up in the mainstream media in the last few days:

1 -- Yahoo news uses the rising consumer confidence as a reason to be bullish on the economy in 2012, even though the long term trend of lower highs and lower lows in consumer confidence since the peak in 2000 is still intact.

2 -- Journalists working for MSNBC are extremely bullish on the US economy, making calls for the economy and job market to grow faster in 2012. This bullishness is also shared by virtually all the mainstream economists as well, who are all calling for increased economic growth.

3 -- Douglas Kass (well known investor) is extremely bullish on the stock market, making bold calls for new all time highs by the end of 2012. The video of the interview on CNBC can be seen here.

4 -- On the Kudlow Report yesterday on CNBC, there was abundant talk about stocks being "ridiculously cheap", which indicates extreme bullishness. Video of the news segment is here.

From a socionomic perspective, extremes in social mood signal a reversal of the current trend. Combined with our current position of being near the end of Minor wave 2 up, there is a strong reason to anticipate an imminent reversal in the stock market.

The DJIA continues to follow the 1930s parallel with the third phase of "The Great Deflation" being a parallel of the Great Depression. Here are some updated charts of the DJIA underscoring the parallel:

DJIA in 1929 - 1930:

DJIA in 2009 - 2012:

Notice that both of the bear market rallies put in a head and shoulders top. In both cases, the head and shoulders top formed with fibonacci relationships in terms of time with a fibonacci convergence at the right shoulder.

In the bear market rally that unfolded in 1930:

1 -- The right shoulder peak formed 1.5 months (3 time units) after the peak of the head.
2 -- The peak of the head formed 2.5 months (5 time units) after the peak of the left shoulder.
3 -- The left shoulder and the right shoulder are 4 months (8 time units) apart.
4 -- The right shoulder peak formed 6.5 months (13 time units) after the start of the bear market rally in November 1929.

Notice the fibonacci sequence  numbers 3 - 5 - 8 - 13 in the head and shoulders top.

In the bear market rally that unfolded in 2009 - 2012:

1 -- The right shoulder peaked 8 months after the head peaked.
2 -- The head peaked 13 months after the left shoulder peaked.
3 -- The left shoulder and the right shoulder are 21 months apart.
4 -- The right shoulder peaked 34 months after the start of the bear market rally.

Notice the fibonacci sequence numbers 8 - 13 - 21 - 34 in the head and shoulders top.

The sentiment in both of the bear market rallies is also identical as well. In both cases, economists, politicians, and the mainstream media were extremely bullish on the economy by the end of the bear market rally, with assurances from politicians and the mainstream media that the worst was over.

Here is a chart of the 1930 bear market rally with our current equivalent position arrowed on the chart:

We are currently at the equivalent of late May 1930. We are close to the end of Minor wave 2 up. After the reprieve period ends, Minor wave 3 down will start and is expected to take the form of a waterfall decline in the stock market with a duration of 4 months. The start of Minor wave 3 down is when the economy and stock market enters the heart of the abyss with "The Great Deflation" unfolding in full force, in the same way that the economy, stock market, and job market entered the heart of the abyss in early June 1930 during the Great Depression.

The downside target for the end of Minor wave 3 down is 7200 on the DJIA and 775 on the S&P 500, both to be reached in May 2012.

Increasing Political Gridlock Ahead

There existed the possibility that the Republicans and Democrats would briefly have a reluctant willingness to compromise during the last part of Minor wave 2 up as positive social mood results in compromise and consensus. We are indeed seeing a last willingness by Republicans and Democrats to compromise on government spending before "The Great Deflation" starts unfolding in full force.

It is significant that President Obama only managed to garner an agreement in Congress for a 2 month stopgap extension in extended unemployment benefits and a payroll tax cut in spite of over a month of hardcore campaigning on the payroll tax extension issue. This is in strong contrast to December 2010 where President Obama managed to hammer out an agreement for extended unemployment benefits and a payroll tax cut to be extended for a full year (all of 2011). The reason for the difference in outcome has to do with the social mood trends -- in December 2010, we were still in Primary wave [2] up, so the social mood at that time made it easier for President Obama to hammer out a deal with the GOP. We are now almost 8 months into Primary wave [3] down, and positive social mood at the peak of Minor wave 2 up (within a much larger Primary degree decline) was never going to achieve the lofty levels that were reached at the peak of Primary wave [2] up.

The difference in outcome between now and December 2010 underscores a fundamental aspect of bear markets -- as bearish social mood increases, so does strife and discord in the political arena, making it progressively harder for politicians to compromise and reach an agreement on various issues.

The next extension will go for a vote in Congress in late February 2012. By then, Minor wave 3 down will be well underway. Here is a chart of the DJIA with the events labelled:

When the next vote takes place, we will be in Minute wave [iii] of Minor wave 3 down with the Intermediate degree point of recognition close at hand. Given the bearish social mood that will be present at that time, there will be too much strife and discord to make any type of agreement possible, effectively putting an end to the payroll tax cuts and extended unemployment benefits on March 1, 2012. With Congress also due to hammer out a federal budget around that time as well, the strife and discord in the political arena due to bearish social mood will make a government shutdown with a duration of several months a virtual certainty as Republicans refuse to budge on protecting the tax cuts for the top 1% and Democrats refuse to budge on raising taxes on the top 1%.

With Minor wave 3 down on the horizon, one of the defining characteristics of 2012 will be increasing political gridlock as the Republicans and the Democrats become increasingly stubborn, ultimately resulting in a federal government shutdown lasting several months.

Prelude to 2012

While the economic fault lines appear to be stabilized (but very fragile), we are already seeing events that foreshadow what is yet to come when we approach the center of Minor wave 3 down in March / April 2012. There has already been a lot of comparisons between 2007-2008 and today as far as the stock market is concerned. The parallel is broader in scope than just the stock market as the same financial and economic implications are poised to play out in 2012 as they did in 2008.

On November 8, 2011, MF Global filed for bankruptcy. The corporation was run by ex-Goldman Sachs chairman Jon Corzine. The company went bankrupt after making bets on European sovereign debt. MF Global was the fifth largest financial-industry public company (with $41 billion in assets and $39.7 billion in debt) before filing for bankruptcy.

On November 9, 2011, Jefferson County, Alabama filed for bankruptcy. This is the largest municipal bankruptcy in US history at $4.1 billion. The bankruptcy resulted from a crumbling infrastructure, a budget shortfall, court rulings, a lagging economy, and public corruption. The debt burden also became too heavy for the county to carry as rising interest rates made the loan payments unaffordable.

The bankruptcy of MF Global and Jefferson County are just precursor events, with larger events poised to unfold as we approach the center of Minor wave 3 down. The bankruptcies are a parallel of the collapse of Bear Stearns in March 2008.

Here are two charts that compare the events of Primary wave [1] down (2007 - 2009) to Intermediate wave (1) of Primary wave [3] down.

Primary wave [1] down:

Minor wave 2 of Intermediate wave (1) of Primary wave [3] down:

The one thing to notice is that the bankruptcy of MF Global / Jefferson County occurred almost at the same position as the collapse of Bear Stearns did -- they both occurred about halfway through the second subwave within the larger downward impulse. Bear Stearns collapsed during Intermediate wave (2) of Primary wave [1] down. The bankruptcy of MF Global and Jefferson County occurred during Minor wave 2 of Intermediate wave (1).

The bankruptcy of MF Global and Jefferson County is a warning of what is yet to come as we approach the center of Minor wave 3 down. The "too big to fail" banks are in worse shape now than they were in 2008 as the banks did not get their credit ratings downgraded in 2008 but three of the "too big to fail" banks were downgraded by Moody's in late September 2011, along with UBS, Goldman Sachs, and JP Morgan Chase facing the threat of a credit downgrade. If the 2008 scenario continues to unfold, then the Obama Administration will be doing a lot of bailouts in March / April 2012 and TARP 2 will be launched to bail out the "too big to fail" banks. The center of Minor wave 3 down will also be characterized by the "Panic of 2012".

All the Same Market

For a number of years, the analysts at Elliott Wave International have been proposing that all the markets are moving together in a deflationary environment. The stock markets of the G-7 nations have been moving in lockstep with each other, with the exception of the Nikkei 225 index. It isn't just stock markets that are moving together, we are even seeing commodities (compare the DJIA to the CRB index) and gas prices at the pump move in the same direction as the stock markets of the G-7 nations. One of the latest articles on the subject is here.

Going with the idea that all the markets are moving together in a deflationary environment, there is a strong case to be made that we have completed just the first part of Minor wave 2 up.  This also strengthens the idea of the name "Crisis of the Western World" for the period associated with Grand Supercycle wave [IV], since the bearish social mood is affecting Western Europe, Canada, and the United States (commonly known as the western world) simultaneously.

Here are the charts of the DAX and the CAC-40.

Notice that both the DAX and the CAC-40 rallied in 5 waves from their lows. In both cases, Minor wave 1 down ended in late September 2011. The significance of the 5 wave rally is that a 5 wave structure is never the entire correction, just a portion of the correction. Therefore, the 5 wave rally from the low is the first part of Minor wave 2 up, which is unfolding as a zigzag.

Here are the charts for the FTSE and the DJIA.

Notice that the FTSE and the DJIA both rallied in 3 waves. In both of the cases here, Minor wave 1 down ended in October 4, 2011. Since the stock markets of the G-7 nations have moved together, the 3 wave rally from the low is the first part of Minor wave 2 up. A 3 wave beginning in a larger correction indicates a flat or a double zigzag for Minor wave 2 up. The Zweig Breadth Thrust signal that was triggered earlier this month in the DJIA has turned out to be a bull trap.

A 3-3-5 flat scenario for the DJIA calls for a sharp decline in November 2011 in which the markets fall as fast as it went up from the October 4, 2011 low, followed by a moderately sharp rally in December 2011. After the holidays are over, Minor wave 3 down is poised to start in early January 2012.

Second Phase of Reprieve Period Ahead

The first part of Minor wave 2 up unfolded almost three times faster than expected. This may be due to the high level of volatility that is still present in all of the markets with the VIX still at elevated levels.The larger picture has not changed, however, as the peak of Minor wave 2 up is poised to form the right shoulder of a large head and shoulders pattern in which the April 2010 high is the left shoulder, the May 2011 high is the head, and the right shoulder that is still to come should be completed in January 2012, a Fibonacci 8 months after the peak of the Head in the H&S pattern.

Here is a chart showing that the volume has been declining as the markets moved higher. Declining volume during a rally is a crucial characteristic of a right shoulder in a head and shoulders pattern. I had been proposing a head and shoulders top for many months, well before the markets peaked for the year.

Next, we will compare the form of Minute wave [a] of Minor wave 2 up (Oct 2011 - Jan 2012) to the form of Intermediate wave (C) of Primary wave [2] up (2009 - 2011).

Minute wave [a] of Minor wave 2 up:

Intermediate wave (C) of Primary wave [2] up:

Notice that the two fractals are virtually identical. The same sequence of events unfolded in both of the rallies:

1 -- Initial rally from the bottom.
2 -- Initial retracement of the rally and a successful retest of the previous low.
3 -- The first kickoff in which the markets spiked.
4 -- The markets rally in a narrow band (the trend channels are close together).
5 -- The markets spike to the first local peak.
6 -- Markets pull back after the spike.
7 -- The second kickoff in which the markets spike upwards.
8 -- The markets rally in a narrow band.
9 -- The markets pull back (running flat appearance both times) then a final push to the peak.

The two fractals are also identical in their tendency for the first wave to be the extended wave as well. Combined with the trend of falling volume that occurred in both cases, this is a confirming indication that the rally from the low on October 4, 2011 is a bear market rally.

Minute wave [a] should be completed sometime on October 17, 2011 with a target of 11750 on the DJIA. Notice that Minute wave [a] will have lasted a fibonacci 13 days. This should be followed by Minute wave [b], which is very likely to be a complex fractal that will consume a substantial amount of time to make up for the breakneck speed of Minute wave [a]. After a long period of consolidation, Minute wave [c] should commence around early December 2011 and push the DJIA up to 11930 and the S&P 500 up to around 1260 to complete Minor wave 2 up in early January 2012. Minute wave [c] should unfold much more slowly than Minute wave [a] as complacency is expected to make a comeback with the VIX in the upper teens to low 20s by the end of the year.

Here is a possible scenario for how the rest of Minor wave 2 up might unfold:

We should enter the second phase of the 3 month long reprieve period some time on October 17, 2011. The economic and political fault lines should be temporarily stabilized during that time, and we may even see the European debt crisis go into remission for a short time.

Occupy Wall Street Gains Momentum

With the low point of Minor wave 1 down in sight, bearish social mood continues to increase at all levels. One of the protests that continues to gain steam is the movement that carries the name "Occupy Wall Street". Not only is the protest continuing to gain steam, but it has also spread to a number of cities such as Boston, Los Angeles, and even Washington DC. The protests started on September 17, 2011 and continue to grow in extent and numbers.

There has been a number of significant developments since "Occupy Wall Street" started:

1 -- On September 24, 2011, a group of protesters were maced by police officers. This event provoked a response from the hacker group Anonymous with the ultimatum that subsequent acts of brutality will result in the police department getting cut off from the Internet.

2 -- On September 26, 2011, Michael Moore showed up at the protests, giving a speech at Liberty Plaza.

3 -- On September 28, 2011, actress Susan Sarandon appeared at the protests, denouncing the wealth gap between the wealthy and the working class. On that same day, Transport Union Workers of America (TWU Local-100) throws their backing with the protests.

4 -- On September 29, 2011, the protests spread to San Fransisco as a group of protesters attempt to occupy Citibank, Chase, and enter a Charles Schwab financial institution.

5 -- On September 30, 2011, AFL-CIO president Charles Trumka speaks out on the protests, recognizing the need for balance between the real economy and the financial economy. Unions started to become increasingly involved in the "Occupy Wall Street" protests.

6 -- On October 1, 2011, The "Occupy Wall Street" protest continued to gain support from more unions as two national unions, National Nurses United and Laborers' International Union of America, cast their full support for the protests. Protests spread to a number of cities as Boston, Washington DC, Seattle, Portland, Chicago, and many others are affected. A large group of protesters shut down half of Brooklyn Bridge for several hours. The occupation of the bridge is followed by mass arrests with over 700 protesters arrested by the end of the day.

7 -- In spite of the mass arrests, protesters remained defiant with many people determined to remain at the scene for the long haul.

Another aspect of bearish social mood that is evident is authoritarianism. The NYPD wasted no time arresting protesters when "Occupy Wall Street" commenced in an effort to stop the protest from picking up momentum. So far, almost 750 protesters have been arrested since the protests started, yet the protests continue to pick up momentum.

In the short term, expect "Occupy Wall Street" to continue picking up momentum with more people showing up. Expect the NYPD to step up the mass arrests in an effort to put an end to the protests. Once Minor wave 1 down in social mood is complete around October 10, 2011, expect the protests to slowly abate (but not completely) over time as Minor wave 2 up unfolds through the rest of the year.

If "Occupy Wall Street" persists into February 2012, increasingly bearish social mood associated with Minor wave 3 down will act to re-ignite the protests with a much larger number of people (possibly rising to 20000 or more by April 2012) taking part in the demonstrations. Tensions between the demonstrators and the NYPD could turn very ugly in the aftermath of reaching the center of Intermediate wave (1) (of Primary wave [3] (2011 - 2016)) down around March / April 2012 with the possibility of the NYPD resorting to the use of deadly force to end the protests.

Shredding the Safety Net

Back in June 2011, upon recognition that Primary wave [3] down is in progress, I had made a number of forecasts concerning social events that are expected to unfold from 2011 - 2016. One of them is the fate of unemployment benefits, which I bring up here.

Extended unemployment benefits will not continue beyond the end of 2011.

Turns out the forecast is going to be fulfilled. The increasing desire for more austerity is not just in the realm of the GOP, even President Obama is participating in the austerity trend as well. The new jobs bill proposes to link unemployment benefits to job training with potential employers. While it appears to be relatively harmless at a first glance, the legislation will have a cataclysmic effect on the unemployed once the effect of "The Great Deflation" is factored in, namely, the fact that major depressions result in the destruction of 90% of corporations and businesses through a cascade of debt defaults.

Another consideration is that in bull markets, people focus on progress and production, while in bear markets, people focus on limits and conservation. This is also true for employers and consumers as well. An increasingly bearish social mood results in consumers cutting back on spending and employers laying off workers. When an increasingly bearish social mood is unfolding, employers won't hire more workers even with tax credit incentives and incentives to hire workers for free. It takes an increasingly bullish (positive) social mood for employers to have the willingness to hire more workers.

President Obama's proposals on unemployment benefits will amount to ending unemployment benefits altogether for all practical purposes. This development is very shocking. Talk about turning the clock all the way back to 1932. I had been predicting that unemployment benefits would be completely purged in 2017, during the Bachmann Administration Period. This move is comparable to Rep. Paul Ryan's "kill Medicare" plan in the sense that in both cases, safety nets end up getting shredded.

The unemployment rate (U6) is expected to hit 60% by the end of "The Great Deflation" in 2021. It's hard to imagine the impact that purging unemployment benefits will have on such a large portion of the United States population. Many of these people will end up being unemployable during the "Green Technology Age" as job creation is expected to be very sluggish (about 80,000 a month for 21 years). We will be reaping the consequences of shredding safety nets in ways that are very hard to imagine.

The austerity trend is relentlessly in force. If the job creation bill does not pass, extended unemployment benefits stop at the end of the year. If the jobs bill passes, say kiss goodbye to unemployment benefits -- even before Michele Bachmann wins the presidency in the 2016 presidential election.

Labor Strike Barrage

There has been a steady barrage of labor strikes since the Minor degree "point of recognition" was reached a month ago. One of the events that occurred in the aftermath of the "point of recognition" was the massive Verizon strike in which 45,000 workers went on strike to fight in defense of a living wage and continued health care benefits.

The Verizon strike has since ended, but as I predicted, the barrage of labor strikes continued. Here's the excerpt from the August 15, 2011 blog entry:

"As Primary wave [3] down continues unfolding, expect more and more standoffs like the Verizon strike that is unfolding now, with some of the standoffs having the potential of crippling corporations and businesses."

Since then, we have seen a barrage of labor strikes. Here is a list of some of the more significant labor strikes that have unfolded since the Verizon strike:

1 -- Teachers Union in the midst of an 8 day strike over drug testing in central Illinois.  A random drug testing proposal angered many teachers, motivating the teachers union to initiate a labor strike. The start of the school year in the affected district has been delayed as a result of the strike.  The state government stepped into the fray as well with State Sen. Dave Koeler (D-Peoria) siding with the teachers and calling the district's drug testing proposal a "power move that avoids the main issues."

2 -- Butte, Montana teachers strike over salary, classes canceled.  A labor strike started to unfold after a failure to reach an agreement on a contract over wages and health benefits. The labor strike has resulted in the cancellation of classes in all of its elementary, junior high, and high schools.

3 -- International Longshore and Warehouse Union (ILWU) Local 23 in Tacoma is in the midst of a long standoff with the company EGT after the company reneged on its promise to create well-paying jobs at the new terminal. The standoff has resulted in protests and aggressive behavior by union activists, prompting a US district judge to issue an injunction limiting union activity.

As I write this, a large labor strike just started to unfold involving Hyatt hotel workers in four locations. Thousands of hotel workers in Chicago, San Fransisco, Los Angeles, and Honolulu are currently on strike against Hyatt, protesting against low wages, dangerous workloads, and abusive employers that are destroying living wage jobs. Hyatt workers have also called for boycotts at 17 Hyatt properties. This strike is something to keep an eye on -- if the standoff between the workers and the company persists into early 2012, this could ignite a much larger labor strike in which as many as 250,000 workers are involved.

There is another possible labor strike involving Ford workers that is brewing. United Auto Workers (UAW) members at Ford have overwhelmingly voted to initiate a large labor strike after the current contract ends on September 14, 2011. UAW workers are already contending that they have a right to share in the profits of all three of the automakers. This is a development to keep an eye on. There is a very high probability that a labor strike will unfold.

We are seeing a barrage of labor strikes unfold. The developments are a preview of what will unfold in 2012 when Minor wave 3 of Intermediate wave (1) down starts unfolding. In terms of social mood, third waves are broad, resulting in a much larger cross-section of the populace taking part in a social trend. In terms of labor strikes, this translates into a much larger cross-section of the worker populace taking part in labor strikes in which workers fight for a living wage, better working conditions, and better health benefits, compared to what we are seeing today. 2012 is going to going to be a lot like 1934 -- we will see a labor strike barrage of epic magnitude during the first half of 2012.

Education Bubble Going Critical

This post is an update to a post on the education bubble that was put up several months ago, when only a small number of people and groups had awareness of the bubble. We are now seeing evidence that the education bubble is going critical -- either the bubble has burst or it is on the verge of doing so.

Exactly as I predicted several months ago, the collapsing job market played a central role in causing the education bubble to burst. With a collapsing job market, it was only a matter of time before a sufficiently large constituent of people start rethinking whether it is actually worth taking on a large amount of student loan debt.

Given that the collapse of the job market has barely started, it is very likely that the education bubble will unravel in the same way that credit bubble has -- slowly at first, then unraveling with increasing momentum over time. We are likely to see massive damage inflicted on the education system by 2016 as a direct result of the bursting of the education bubble. The nation's education system may not be recognizable in 2021 as most colleges and universities are expected to close their doors forever. Many universities and colleges will be abandoned in 2021, looking a lot like the city scenes from the movie I Am Legend.

The education bubble is falling apart from the top down, as Ivy League and law schools are getting hit the hardest early on, with attendance falling in law schools.

It isn't just the bursting of the education bubble that is significant. We are also seeing an epidemic of scandals associated with the education system. The most significant of the scandals is the Atlanta Public School cheating scandal that broke out in July 2011. Bear markets are when the skeletons come out of the closet as the mainstream media is more likely to look for scandals during that time. It isn't just public schools that have been involved in scandals, but a large number of charter schools have been involved in scandals as well. There is a large list of charter school scandals titled "Charter School Scandals".

The collapsing job market has also created "buyer's remorse" as some college and university graduates have been turning to litigation against their alma maters. Many of such people are those who graduated with a massive amount of student loan debt and unable to land a job.

The education bubble is going critical. Over the next 10 years, the education bubble will implode with increasing momentum, with devastating consequences for those whose livelihoods are tied to the education industry. The education bubble is falling apart from the top down. Ivy league and law schools are being affected now. Expect the implosion of the education bubble to affect public universities and colleges by 2013. By the time the implosion of the education bubble is completed in 2021, even K - 12 schools will have been dramatically affected. Many schools, colleges, and universities will close their doors forever.

Job Market Collapse Sparks Protests

The collapse of the job market is in progress, and there is increasing awareness of the issue. Even though we are yet to see a monthly job report that indicates that layoffs have resumed, layoffs continue to accelerate as more and more companies and businesses throw people out of work.

We are now seeing an outbreak of protests over the job market issue. A large number of protests have erupted in the last two weeks as outlined in the Daily Kos article on the many instances of constituents displaying their frustration at GOP town halls.

Here is a partial list of articles showing the large number of job market related protests that have erupted throughout the United States:

1 -- Ordinary Americans Continue to Deliver Progressive Messages at Republican Town Hall Meetings.

2 -- Members of Congress face job protests.

3 -- Invisible Town Hall Revolution Continues to Roll, with real impact on GOP.

4 -- Republicans at home face protests from liberal, labor groups.

5 -- Unemployed protest outside Fitzpatrick's office.

It isn't just Republicans that are getting the blame for the collapsing job market. People are blaming Obama as well, as evidenced by the latest gallop poll that indicates that Obama's approval rating on the economy dropped to a new low of 26%. Obama's overall approval rating is down to 39%, another new low. Even now, Obama is facing a great deal of criticism from unions and labor groups on the jobs issue as well as the debt ceiling deal.

It doesn't help that President Obama's proposals for creating jobs involves a substantial amount of magical thinking, as the proposal mostly revolves around creating more free trade agreements and extending tax credits to businesses and corporations.

The Obama Administration will attempt to pass a "jobs bill" after Labor Day. People in the mainstream media are optimistic that a jobs bill can be passed, but the optimism is mostly a product of optimistic social mood associated with a big wave 2 in a bear market. There is no chance of any type of jobs bill getting passed as polarization in politics will continue to increase with the GOP accelerating farther to the right over time, making compromise impossible.

As Primary wave [3] down (2011 - 2016) continues to unfold, expect protests to increase in size, extent, duration, and assertiveness. The protests at town halls are numbering from dozens to a few hundred now, but as social mood continues to become more and more bearish, the protests will increase in size, reaching 20,000 or more by early 2016 as more and more people take to the streets.

The Rise of Farmers Markets

One of the implications of "The Great Deflation" in the coming years is an economy that becomes increasingly local. With Primary wave [3] down (2011 - 2016) in progress and picking up momentum, a massive cascade of debt defaults will reverberate through the economy, which means corporations and businesses close their doors forever.

The bear market will bring back family and community farms while wiping out all the corporate owned factory farms (they too are leveraged to the hilt with credit and debt, which means they shatter like glass when their debt burdens become too heavy to bear). We have been trending in that direction since the Grand Supercycle degree bear market started, as the number of farmers markets in the United States has increased from 2863 in 2000 to 7175 today.

The final blow to corporate owned factory farms will likely come from a deflationary collapse in Crude Oil, in which both OPEC and Big Oil dramatically cut back oil production to protect their profits. An oil supply crash (most likely to take place in 2017, the first year of the Bachmann Administration Period) will make it virtually impossible for corporate farms to transport food long distances, which will cause their revenue to crash and eventually result in defaulting on their debt.

It's not just corporate factory farms that will close their doors forever. Corporate food manufacturers (such as Sara Lee), large grocery store chains (such as Safeway), and even fast food chains (such as Burger King and McDonald's) will also shatter like glass due to a massive cascade of debt defaults. The bear market will effectively purge all of them off the map within the next 5 - 7 years.

This is all part of the larger picture in which major depressions result in 90% of corporations and businesses to implode and close their doors forever due to a debt default, all during the A wave of the bear market.

Expect the growth of farmers markets to accelerate in the coming years. As the oil supply crash unfolds, it will no longer be possible to transport food long distances. The result is that farms become increasingly local. Being able to buy and sell food local is going to be crucial for survival through the worst part of "The Great Deflation".