4 ms·

I'm curious how people try to estimate where bottom is -- especially if it is a non dogmatic and non institutional analysis. There was an analysis a month ago

I'm curious how people try to estimate where bottom is -- especially if it is a non dogmatic and non institutional analysis. There was an analysis a month ago where someone had the idea to look at total US energy consumption as a proxy variable for total economic productivity. To me that makes a lot of sense. Energy is the capacity for work. https://www.eia.gov/energyexplained/us-energy-facts/ https://www.eia.gov/energyexplained/us-energy-facts/ It appears we peaked in energy consumption in 2007 before the great recession at which point energy usage has been in slow decline. We decided that in response to the recession that the best way to handle it was to completely deregulate wall-street and tell them they are above the law because they are so big, that creating consequences for their actions that hurt Americans is too costly to do. They promised severe punishment for regulation, and reward for letting wall street continue to be consequence free. Citizens united was ruled on in 2010 to cement the authority of those with money over the US government in an act that should be considered a proper coup against the constitution, and was by some. If you take energy consumption as a proxy for real actual productivity, that implies a bottom of 22,000 for DOW (inflation adjusted value of dow ~2007), and that's not including damage done to ability to import or America not looking appealing for investment because we are almost certainly heading towards civil unrest and there is a very real threat of trade not being conducted in USD. It's easy to imagine a company that owns property, an asset that has no meaningful economic output, increasing in value which could be seen as economic growth, but is very much not that. I'd certainly love to hear why this is absolutely ignorant because I am not an economist, nor am I in finance.

maxerickson 2y ago
One thing is that you ignore technology change. New technology may produce more with less energy. Using energy consumption as a momentum indicator still works when accounting for that, but it potentially breaks comparisons across longer spans of time.
Aurornis 2y ago
Analyzing the fundamentals doesn’t matter much because this isn’t driven by fundamentals. This crash was caused by this administration demonstrating that not only do they have no understanding of economic policy, but they’re determined to make extreme and brash decisions. I don’t think many people expect the current tariff absurdity to hold as-is. The problem is that nobody knows if he’s going to wake up and roll it back one day or if he’ll decide to make the tariffs higher to try to prove a point. Or he could launch a real war as a distraction. It wasn’t a secret that Trump didn’t understand economic policy, but the assumption was that he wasn’t going to actually do anything different than his first term. Instead he came out with the most unbelievably bad tariff gambit beyond what anyone could have imagined, and now everyone is resetting assumptions.
- hayst4ck 2y ago
  Only so much delusion can be supported. I know the market will stay irrational longer than I can stay solvent, but if a war to break out, which seems more and more likely every day, fundamentals represent how many bullets you can actually produce, and that kind of thing does matter, especially for making policy decisions. Knowing that there is potentially no basis for half of the country's retirement wealth is important because it means it could disappear over night.
Marsymars 2y ago
“Energy as work” is a very rough proxy if you’re not taking efficiency into account. e.g. Half of the energy spent by homes is an heating/cooling, and with technology that exists today (heat pumps, better insulation, smarter home design and ventilation, etc.) you could probably reduce the total energy used there by close to an order of magnitude if it was applied everywhere.
- bitmasher9 2y ago
  We’ve seen pretty significant improvements in energy efficiency over the last two decades. Light bulbs, monitors, computers, heat pumps, hybrid/EV vehicles, WFH, building standards…

maxerickson 2y ago

One thing is that you ignore technology change. New technology may produce more with less energy. Using energy consumption as a momentum indicator still works when accounting for that, but it potentially breaks comparisons across longer spans of time.

Aurornis 2y ago

Analyzing the fundamentals doesn’t matter much because this isn’t driven by fundamentals. This crash was caused by this administration demonstrating that not only do they have no understanding of economic policy, but they’re determined to make extreme and brash decisions. I don’t think many people expect the current tariff absurdity to hold as-is. The problem is that nobody knows if he’s going to wake up and roll it back one day or if he’ll decide to make the tariffs higher to try to prove a point. Or he could launch a real war as a distraction. It wasn’t a secret that Trump didn’t understand economic policy, but the assumption was that he wasn’t going to actually do anything different than his first term. Instead he came out with the most unbelievably bad tariff gambit beyond what anyone could have imagined, and now everyone is resetting assumptions.

hayst4ck 2y ago
Only so much delusion can be supported. I know the market will stay irrational longer than I can stay solvent, but if a war to break out, which seems more and more likely every day, fundamentals represent how many bullets you can actually produce, and that kind of thing does matter, especially for making policy decisions. Knowing that there is potentially no basis for half of the country's retirement wealth is important because it means it could disappear over night.

Marsymars 2y ago

“Energy as work” is a very rough proxy if you’re not taking efficiency into account. e.g. Half of the energy spent by homes is an heating/cooling, and with technology that exists today (heat pumps, better insulation, smarter home design and ventilation, etc.) you could probably reduce the total energy used there by close to an order of magnitude if it was applied everywhere.

bitmasher9 2y ago
We’ve seen pretty significant improvements in energy efficiency over the last two decades. Light bulbs, monitors, computers, heat pumps, hybrid/EV vehicles, WFH, building standards…