Social events – Part One

Hi All,

I’m publishing a series of “Social” events and the link to stock markets over the next few months for you.  Notice how certain events good and bad occur during the up and down phases of the stock market.

It is clear to see the effects on greater society that negative phases of the stock market have on peoples lives and vice versa.

Therefore the stockmarket can be USED as a barometer of human social mood and can be used to forecast/predict social moods, trends, fashion, laws etc.

This is something different from me of which I hope you like and see the links, causing you to think a little deeper into society and global issues.

All the best

The Hovis Trader

The Coming Collapse of a Modern Prohibition

Download the Complete Issue (748 KB)

History shows that mood governs society’s tolerance

for recreational drugs. A rising social mood produces

prohibition of substances such as alcohol and marijuana;

a falling mood produces tolerance and relaxed regulation.

In the case of alcohol, the path from prohibition to

decriminalization became littered with corruption and

violence as the government waged a failed war on traffickers.

Eventually, as mood continued to sour, the government

finally capitulated to public cries for decriminalization

as a means to end the corruption and bloodshed.

We predict a similar fate for the prohibition of marijuana,

if not the entire War on Drugs. The March 1995 Elliott

Wave Theoristfirst forecasted the Drug War’s repeal

at the end of the bear market, and in 2003, EWT stated

that during the decline, “The drug war will turn more

violent. Eventually, possession and sale of recreational

drugs will be decriminalized.”


Social mood influences people’s actions and

their social judgments. In times of positive mood, people

have the resources to enforce their social desires. They

can afford to express the black and white moral issues

preferred during bull markets, and drug abuse is a favorite


During times of negative mood, on the other hand,

society’s priorities change. People have other, bigger

worries and begin to view recreational drugs as less

dangerous, if not innocuous in offering stress relief,

pain reduction and the ability to cope with the pressures

of negative social mood.

Over the past 100 years, governmental activities have

manifested these changing attitudes. During periods

of rising mood, policymakers stepped up regulation

of cannabis. During periods of falling mood, they eased

those same stances.

Figure 1

As shown in Figure 1, each legislative attempt to

restrict marijuana use followed at least three, and

in most cases four or five, bull-market years. In 1937,

Congress passed the Marijuana Tax Act. The law banned

casual consumption of the drug and limited its use

to specific medical and industrial purposes. Franklin

Roosevelt signed the law at the top of a roaring bull

market, the Dow Jones Industrial Average having quintupled

from its 1932 low. The real crackdown, however, came

over a decade later during the massive wave III bull

move. The Boggs Act, which increased drug use penalties

fourfold, and the Narcotics Control Act, which increased

penalties another eightfold, both came during the most

powerful portion of wave 3 of III of the bull market.

Then in 1958, after four more years of rising mood,

Wisconsin farmers harvested the last legal crop of

U.S.-grown hemp. In 1989, President George H.W. Bush’s

famous “War on Drugs” speech came on the heels of seven

years of net progress in the stock market. In 1999,

a year before the top of the Grand Supercycle bull

market, the DEA banned the importation of hemp products

that contained even a trace of Tetrahydrocannabinol

(THC), marijuana’s psychoactive ingredient.



During bear markets, pot users have enjoyed

liberal social tolerance. Figure 1 illustrates that the

government tends to allow-and in some cases encourage-the

growing of marijuana during bear markets. In 1942, the

year Cycle wave II bottomed, Congress launched its “Hemp

for Victory” campaign to encourage farmers to grow the

crop for industrial purposes related to the war effort.

According to the Wall Street Journal, farmers planted

over 50,000 acres of hemp in 1942 and 240,000 acres in

1943. In 1977, a bear market year, President Carter recommended

that Congress legalize possession of small quantities

of marijuana. An exception occurred in 1996, when, four

years before the top of a historic bull market, California

and Arizona voted to allow the use of marijuana for medical

purposes. But the federal government maintained consistency

with the spirit of the times and stepped up its raids

on marijuana facilities in the states where it was legalized

and wrenched convictions from juries who were denied

the information that the drug dispensaries were legal

in those states, according to the New York Times. But

in 2008, as social mood and the stock market plunged

at its then-fastest rate since the 1930s, Massachusetts

voters took a bigger step in passing an initiative that

decriminalized the possession of small amounts of marijuana.

Michigan’s voters also passed a loosening law, this one

permitting the use of medical marijuana. On June 29,

Oregon’s House of Representatives passed a bill in favor

of licensing hemp farming. Barring a veto, Oregon will

be the sixth state this year to pass pro-hemp legislation.

So far, in keeping with the bear market trend, the feds

have chosen not to interfere in these recent initiatives.

In February, U.S. Attorney General Eric Holder announced

his view that states should make their own rules on

medical marijuana use and that federal raids on pot

dispensaries should cease. Then in June, Congressman

Barney Frank introduced two pieces of marijuana-related

legislation: the first allowing states to pass medical

cannabis laws without interference from the federal

government; the second eliminating federal penalties

for possessing 100 grams of pot or less (but adding

a fine of $100 for public consumption). According to

CBS, Frank filed a similar bill last year that failed.

We expect the current legislation to fail too, as it

is too early in the bear market for Congress to take

such contrary measures. But bills similar to Frank’s

will gain traction when mood resumes its drop. Cash-strapped

states will surely argue that they desperately need

tax revenues from pot and that they can also save money

by releasing non-violent drug offenders from prison.

Non-legislative groups are already proposing tolerance.

In 2008, the prestigious American College of Physicians,

the largest medical specialty organization and second

largest physician group in the U.S., released a position

paper urging the government to remove marijuana from

its Schedule 1 classification. The drug has held the

S1 designation for 38 years. It is a classification

reserved for drugs, including heroin, that the government

considers to have no medical uses and to possess a

“very high potential for abuse.” The recent cry for

reclassification from such a recognized body is a prime

example of how changes in social mood modify attitudes

toward the drug.

Finally, a number of critics of the War on Drugs have

emerged in the media. CNN’s Jack Cafferty posted an

article in late March of this year titled, “War on

Drugs is Insane.” The same month, The Economist declared,

“Prohibition has failed; legalization is the least

bad solution.” And in June, CNN aired an Anderson Cooper

special report titled, “America’s High: The Case for

and Against Pot.” As mood becomes even more negative,

specials such as CNN’s will drop the “and Against”

from their titles.

Media reports like these will gain sympathetic readers

and viewers across America, but none of their arguments

will be as compelling as the point that decriminalization

will end the bloodshed.



As the saying goes, “History doesn’t repeat

itself, but it does rhyme.” The Wave Principle explains

why. Each of the eight Elliott waves within a typical

impulse and correction pattern has its own personality,

as Frost and Prechter initially described in Chapter

2 of Elliott Wave Principle. Figure 2 provides an example

of how these personalities express themselves similarly

at all degrees of scale, with the magnitude of the expression

often reflecting the magnitude of the trend.

Figure 2

Today’s wave position is similar to that of the early

1930s, during Congress’ experiment with the prohibition

of alcohol, an attempt that we believe is a useful

analog for the current criminalization of marijuana.

Prohibition began in 1920 and was maintained throughout

the period that the stock market was rising. Then came

the famous 1929-1932 collapse and the resulting economic

depression, which bottomed in 1933. Three years of

collapsing social mood prompted the repeal of Prohibition

one year after the 1932 Cycle-degree low. Nine years

after the top of 2000, the Drug War persists. This

speaks to the larger (Grand Supercycle) degree of the

decline and its longer duration. Governments typically

respond to social-mood trends very late. So our ideal

socionomic scenario is for the Drug War’s ultimate

end to occur just after the Supercycle-degree low,

as approximated in Figure 2.

When we zoom in on Cycle waves V, from 1921-1929 and

1974-2000, we see many similarities. See Figure 3.

Figure 3

The Players and The Game

Today, in the deserts and border towns of Mexico,

the west-based Sinaloa cartel and east-based Gulf cartel

are fighting modern versions of the 1920s North Side–

South Side Chicago gang wars. The Sinaloa cartel’s leader,

Joaquin “El Chapo” Guzman, is practically the reincarnation

of his Chicago mob boss predecessor, Al Capone. Guzman

exhibits many of Capone’s brazen, violent and charismatic

traits. Both men are famed for their “hands on” management

style and lionized for their sense of communal responsibility.

Capone is rumored to have insisted on top-dollar medical

treatment for a mother and son injured in the crossfire

of a gangland firefight. Guzman purchases meals for fellow

diners when he eats in restaurants. Both men became extraordinarily

wealthy. At his peak, Capone earned $100 million a year,

controlled all 10,000 speakeasies in Chicago and ran

bootlegging operations from Illinois to Florida. In March

2009, Forbes named Guzman the 701st wealthiest man in

the world, with assets over $1 billion, and described

how he practically runs the Mexican states of Sinaloa

and Chihuahua. Capone and Guzman also exhibit an alarming

propensity for violence: hundreds of gangsters died nationwide

during Capone’s reign in Chicago; hundreds die every

month in Guzman’s conflicts-the difference is another

reflection of this bear market’s larger degree.

Much as in Chicago in the 1930s, most of today’s clashes

in Mexico are fights to control territory, product

availability and distribution. Chicago’s gangsters

fought over docks to receive shipments from Canada

and to keep their speakeasies as safe as possible.

Mexico’s cartels have developed advanced tunnel systems,

mobile landing strips and even have attempted smuggling

via submarine. Vast distribution networks crisscross

the U.S., from Atlanta to Los Angeles to Seattle to

New York. According to a March 2009 USA Today report:

Rival drug cartels, the same violent groups warring

in Mexico for control of routes to lucrative U.S.

markets, have established Atlanta as the principal

distribution center for the entire eastern U.S.,

according to the Justice Department’s National Drug

Intelligence Center. The same folks who are rolling

heads in the streets of Ciudad Juárez… are operating

in Atlanta. Here, they are just better behaved.

Drug runners’ behavior will worsen as the bear market

deepens. Drug-related hostility is already beginning

to plague Phoenix, where kidnapping and murder are

on the rise. So far, most of the attackers have targeted

Mexican immigrants, but this, too, is likely to change.


Organized crime uses many tools to stay active, and

corruption is a favorite. Pablo Escobar famously

described his options as “Silver or Lead.” Al Capone

bribed city officials and threatened witnesses in

order to evade trial for his violent crimes. It is

alleged that Sinaloa cartel leader Joaquin Guzman

corrupted the officials of his prison so completely

that even the warden was aware of his plans to escape

in 2001 and did nothing to interfere. Interpol arrested

their own chief agent in Mexico in late 2008 on suspicions

of ties to the drug cartels; the Mexican government

arrested its anti-organized-crime chief, as well

as Mexico City’s police commissioner. In the waning

days of Prohibition, corruption amongst the Chicago

police force was so ubiquitous that the FBI formed

The Untouchables to fight the gangsters and the corrupt

cops. The Untouchables were an elite squad of eleven

men who refused to be bought or intimidated. We doubt

that the current war will bring a new version to

life, but if it does, its life will be as brief as

The Untouchables.

Murders and Mayhem

Corruption is but one half of Escobar’s “Silver

or Lead” options for dealing with authorities; murder

works too. The Center for International Policy reports

that the two largest Mexican drug cartels boast a combined

100,000 foot soldiers. Deaths from the fighting on both

sides of the border reached 6,800 last year. More than

1,000 are already dead from drug violence in the city

of Juárez alone this year.

Figure 4 shows the correlation between weekly Drug

War deaths in 2008 and social mood as reflected by

Mexico’s Bolsa Index. As mood declined over the year,

the number of drug-related murders increased. Reuters

reports that January of this year was the bloodiest

month since December 2006, the month in which Mexican

president Felipe Calderón mirrored FBI Director J.

Edgar Hoover’s (failed) 1931 declaration of war on

crime by declaring war on the cartels.

Figure 4

Since the market’s low in March, the violence has

ebbed somewhat, reflecting the optimism behind the

rebound in the Bolsa. When the mood and market resume

their fall, violence will re-escalate.

Near the end of Prohibition, the wave of violence

in America jumped beyond the alcohol trade. Bands of

gangsters and bank robbers spread across the country

in the Public Enemy Era. Police were killed pursuing

gangsters even as the gangsters killed each other.

In the 1933 Kansas City Massacre, gangsters killed

four FBI agents suspected of interfering with the mob’s

business. The same year, gangsters killed a jailor

in a successful attempt to spring bank robber John

Dillinger from the slammer. Bonnie and Clyde’s gang

killed nine police officers from 1932 to 1934.

Killing law enforcement officials is rampant among

cartel members in Mexico. In December 2008, Sinaloa

members kidnapped, tortured, and decapitated eight

off-duty police officers, including a commander. Two

months later, cartel members led a prison riot that

left twenty people dead. And in April 2009, allies

of the Gulf cartel killed eight police officers in

an attack on a prison convoy carrying Gulf leaders.

As cartels become increasingly emboldened by falling

social mood, this behavior will intensify. In the coming

years, we expect drug runners to target non-corrupt

American police officers, commanders, judges, and public

officials for kidnapping and outright murder. Guzman

has sown the seeds of bloodier conflict in the U.S.

already. The Los Angeles Times reports that he has

ordered his drug runners to use deadly force to defend

his shipments “north of the border…at all costs.” This

threatens brutality against both rival traffickers

and law enforcement.

During the Public Enemy Era, the nation became fascinated

with the exploits of John Dillinger, Pretty Boy Floyd,

Bonnie and Clyde, Baby Face Nelson and Ma Barker. Appropriately,

the just-released film Public Enemies portrays Dillinger

as an iconic antihero and revels in his outlaw status.

This is further evidence of the current negative trend

of social mood. We could very well see modern-day Dillingers

and Clydes who embark on their own brand of personal

enrichment and violence.


The story of Prohibition after the 1929 stock

market peak is a model for how the current crisis in

Mexico and the U.S. is likely to play out. In the late

1920s and early 1930s, Chicago streets ran red with the

blood of victims connected to the alcohol industry. In

a quest for territorial control, gangs expanded bootlegging

operations beyond Chicago, with Capone’s reach eventually

extending into Florida. As bootlegging routes grew, so

did associated violence. A few defenders of Prohibition

steadfastly supported The Untouchables, but in time,

the majority of the public simply grew fed up with the

criminal warring and the corruption, violence, and death

associated with law enforcement efforts. In the end,

public mood demanded change and Prohibition was repealed.

It appears inevitable, then, that drug-related carnage

-and public disgust with it-will spread as well. As

the violence increasingly affects the U.S., the American

government will counter public anxiety with assurances

that everything is under control and that the situation

is contained to a few small areas. Southern regions

of California, Arizona, New Mexico and Texas will likely

see the same violence that is now plaguing Mexican

states. Some will argue to step up the Drug War and

start mass executions. But as mood falls and the death

toll among Americans rises, the public will become

open to what now may seem like radical ideas about

how best to deal with marijuana use in society. The

dialogue about marijuana decriminalization will cease

to center on morality and instead will shift to stopping

the kidnapping, murder, brutality and bloodshed. Finally,

the people and their government will end the Drug War.

Prohibition also provides perspective on what society

will look like after marijuana is decriminalized. Following

the repeal of the 18th Amendment, organized crime and

the violence that came with it almost completely disappeared

as black market vendors lost the one tool that enabled

them to maintain their monopoly and get unimaginably

rich: illegality.

Interested in learningmore? Read these related articles from the Socionomics


:TheWar Over Drugs: Is There Any End In Sight?

DrugWar Burns Unevenly


The Deadliest Drug War Year in Mexico So Far

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1 Comment

  1. UPDATE: 10th June 2012

    In The Times newspaper an article has been run on the French cabinet minister Cecile Duflot who has called for the Legalisation of Cannabis to be treated as cigarettes and Alcohol are!!!!!!

    Just as the above article suggests, this is only one of numerous examples you could find on this subject – as stated the purpose of this blog is NOT to report events, just the facts and ideas for you to expand on yourself with you own research.


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