 This essay by Mark Galasiewski originally appeared inThe Elliott Wave Theorist in January 2007 |
Natural Sweeteners (Sugars and Syrups)
Commentators perennially ask us, “Could the positive social mood that produced the financial mania since the late 1990s be a product of the popularity of mood-elevating pharmaceutical drugs such as Prozac?” Those familiar with the socionomic hypothesis (that social mood motivates social action) can probably predict our response. As Prechter wrote in the October 2006 issue of Elliott Wave Theorist, “using mood-elevating drugs is a symptom of social mood, not a cause.”
In particular, use of stimulant drugs en masse appears to be a phenomenon of the final, speculative stage of a Supercycle-degree advance in social mood. The September 1996 issue of Elliott Wave Theorist, after noting the large number of coffee shops that had sprung up in Manhattan, identified the significance of the then-burgeoning phenomenon in real time:
Does Elliott Wave Theorist need to ruminate about the possible significance of the popularity of social gathering places for the ingestion of stimulants? Hardly. There is ample historical precedent in fifth waves of Cycle degree and higher. Readers of R.N. Elliott’s biography in R.N. Elliott’s Masterworks recall that the “tea room” was so ubiquitous in the 1920s that Elliott himself wrote an accounting column for a magazine devoted to that one industry. Little, Brown & Co., a major house, published his book on the subject in 1926. Can we go back further? You bet. In the book, The South Sea Bubble, John Carswell reveals that in the years leading up to the great speculative washout of 1720, “There was a new sociability, whose symptom was the coffee-house.” Folks, if you could go back to Roman times at social mood peaks, you would see the same thing … Our goal in studying social history is to identify the parallels that are just different enough in their particulars that people can’t see how obviously social behavior repeats at similar junctures in the social mood. Strictly from the evidence of today’s coffee house popularity, we can write the following formula: 17-teens » 1920s » 1990s. Hm. That’s the same formula indicated by the wave pattern in the stock market!
Eight years later, as the bull market struggled to recover from its 2000-2002 hangover, the September 2004 issue of Elliott Wave Financial Forecast noted the consequences for companies that had participated in the boom for stimulants and sweets:
Another sign of slipping brand power is the recent fall-off in sales for a wide range of sugary products and caffeine-laced drinks that were refreshment mainstays during the long bull market. In August, Coke’s largest bottler saw a 22 percent profit decline and warned of a “difficult” third quarter. Unilever, which sells Breyer’s ice cream and Lipton tea, reported an unusual drop in ice cream and iced tea sales in Europe over the summer. Sunny Delight, an orange-flavored soft drink that is loaded with sweeteners, became a “phenomenon” after its [United Kingdom] launch in 1998. Since 2000, however, sales have fallen sharply as consumers have become “increasingly wary.” Krispy Kreme, once a “sweet deal for investors” and doughnut [and coffee] lovers alike, has lost almost 75 percent of its value over the last year. In August, Krispy Kreme reported a 56 percent drop in quarterly profits. In a similar reversal, Starbucks shares fell sharply when sales came in way under expectations. The socionomic implications of this flight are clear: the sugar rush and caffeine buzz that kept consumers tuned in to the high-energy and social imagery of bull market are subsiding because they are incompatible with bear market psychology. Bear markets are anti-fitness, so this is not a health kick. People just don’t want to feel jazzed up as much as they used to.
Figure 1
A plot of the per capita consumption of sweeteners and the S&P 500 over the period supports our hypothesis that social mood influences society’s demand for quick energy foods during bull and bear markets. The correlation (R) of the raw sweetener data to the log of annual closes in the DJIA is 96%, with a p-value of 10-22. When using detrended data, we obtain R = 70% and p = 10-6. These results are highly statistically significant. The consumption binge that attended the 1974 to 2000 bull market in the U.S. expressed itself not only in burgeoning trade deficits, declining savings rates and speculative financial investments but also in a craving for sweets.
The positive mood of the bull market engendered a “need for speed” and inspired people to more active lifestyles (sports, fitness, travel, parties, etc.), which tempered the effects of the increased intake of sugars. But as society slows down during bear markets, such high rates of consumption are not sustainable. In the 1973-1974 and 2000-2002 bear markets, the most severe of the past 40 years, natural sweetener consumption decreased considerably. When the data for 2005 and 2006 are released, we expect they will show that sweetener consumption rebounded somewhat along with the stock market. But after that, as the major bear market that began in 2000 resumes a downward trend, we expect to see the decline in sweetener consumption continue.■
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