Murder and the Market
Originally published in the July 2009 Socionomist
In October 2004, The Elliott Wave Theorist observed a connection between mood and a type of murder: serial killings. In his landmark report, Prechter noted, “most serial killers begin taking action in bear markets, [and] it appears that generally speaking, rashes of high-profile sprees end a year or two after bottoms in social mood.”
Figure 5 portrays the power of social mood on these killers. From the 1966 peak until two years after the major bottom of 1982, our chart shows 181 serial murders. Ridgeway, who started killing in the bottom year of 1982, racked up the largest toll of victims. From 1984 until two years after the major top of 2000, our chart shows only 37 victims. In other words, in 16 down years plus 2, we chart 181 kills; in 16 up years plus 2, we chart only 37 kills, a 5-to-1 ratio.
Now, socionomist Dr. Ken Olson, professor of psychology at Ft. Hays State University, extends Prechter’s analysis to all murders committed in the United States over the 65 years for which solid data exist.
THERE WILL BE BLOOD
By Ken Olson, Ph.D.
Professor of Psychology
Ft. Hays State University
Murder is an expression of anger and the urge to destroy. From a socionomic perspective, it seems reasonable to expect murder rates to go up during periods of negative social mood.
An analysis of annual murder rate data from 1942 to 20071 corroborates the thesis. In total, the Cycle-degree periods of positive social mood yielded an average annual murder rate of 6.18 per 100,000 inhabitants, versus a rate of 8.08 during the Cycle-degree bearish periods. In other words, when the major trend of social mood has been downward, the murder rate has been higher by nearly a third compared to when mood’s trend has been upward.
The strong Cycle wave III bull market in inflation-adjusted stocks lasted from 1942-1966. This time period saw a murder rate of 4.84, the lowest rate of the data set.
As Figure 6 illustrates, the average murder rate soared to 8.50 during the Cycle wave IV bear market from 1966-1982, a 75 percent jump from the average rate of Cycle wave III.
Cycle wave V went to work on the murder rate right away, but as the chart shows, it was able to whittle it only to a low of 5.5, precisely as the wave topped in 2000. Note further that the average murder rate averaged 8.17 for the entirety of the Cycle wave V bull market. This average rate is both only mildly lower than that experienced during the Cycle wave IV bear market and significantly higher than that of the Cycle wave III bull market. As Frost and Prechter observed in Elliott Wave Principle, fundamentals are often stronger in third waves than in fifth waves. In addition to a host of economic variables, including numerous debt, trade balance and productivity measures, we now can add murder rates to the list of factors that behave this way.
Note, too, that both the murder rate and the inflation-adjusted Dow Jones Industrial Average remained relatively flat from 2000 to 2007. The fact that the average murder rates of Cycle waves a and b are the lowest since Cycle wave III provides more evidence that the social mood through 2007 had more in common with a bull market top than a bear market bottom.
A question arises: With murder rates increasing in bear markets, what can we do about it? Policymakers have attempted to reduce murder rates over the years by putting more police on the streets and implementing harsher mandatory sentences. Despite these well-intentioned efforts to safeguard society, the murder rate tends to follow where mood leads.
You, as an individual, are best equipped to take prudent steps now to ensure that you and your family remain safe. In addition to traditional safeguards, such as traveling in groups when you go out at night and stepping up vigilance in other ways, it is important to gauge the psychology of those around you. Many murders are crimes of passion, and periods of negative social mood increase the risk that people will snap under elevated levels of stress.
Dr. Ken Olson is author of “A Literature Review of Social Mood,” Journal of Behavioral Finance, Vol. 7, No. 3, 2006.