Chicago Fed National Index Negative Again – Stocks Headed For Downside Shock

The Chicago Fed National Activity Index (CFNAI) edged lower to –0.11 in February
from –0.10 in January. Two of the four broad categories of indicators that make
up the index decreased from January, and two of the four categories made negative contributions to the index in FebruaryChicago Fed National Activity Index

The Chicago Fed National Activity Index  is a weighted index of 85 monthly indicators of national activity index.  It measures 1) production and income;  2) employment, unemployment and hours;  3) personal consumption and housing;  and 4)  sales, orders and inventories.   As you can see, it is comprehensive nothwithstanding the fact that it is subject to data sampling and statistical modelling error.

The CFNAI declined to -.11 in February from -.1 in January.   What is significant about this is that January was originally reported to be +.13 and the expectation for February was +.10.   It was the third miss of expectations in a row.   It was the 3rd month in a row of below trend “growth,” which is the worst run since mid-2011.

Perhaps the biggest indicator of economic weakness gripping our system is the fact that the personal consumption and housing category decreased to -.17 in February from -.07 in January.  Given that consumption is close to 70% of the GDP, this metric would indicate a far weaker economy than the political/business leaders would have us want to believe.

Furthermore, in what is an indication of far greater overall weakness in the consumption/housing, some of the other component indices were slightly positive.  Because this is a weighted index, it would suggest that consumption/housing is far weaker than is measured by the Chicago Fed.

The stock market is headed for a serious downside “adjustment.”  It seems that as the economic and geopolitical news grows worse by the day, the Fed/Government works even harder to pump up the stock market.

In a sense, the Fed has no choice.  Every single public and private pension fund – on a true mark to market basis – is hopelessly underfunded.   The stock allocation component of most of them is now over 40%.   If Fed/Treasury (Exchange Stabilization Fund) were to step away and the let the market trade freely, the U.S. pension system would collapse.

6 thoughts on “Chicago Fed National Index Negative Again – Stocks Headed For Downside Shock

  1. You can see that there is someone behind the curtain trying all they can to pump up the stocks.
    It seems like they have hit the ceiling with the Nasdaq stocks and are having problem pushing them higher.
    I wonder how long this madness can go on propping up stocks like this.
    I know the FED is big but it´s hardly bigger than the market.
    The british hedgefund manager Crispin Odey got out of the market in the end of last year and he said he was shocked about how illiquid the market was when he was trying to close his positions.
    Wait until all investors runs for the exit at the same time!

    1. “I know the FED is big but it´s hardly bigger than the market.”

      The FED is the market!

      The doors to the casino will be chained shut just before they burn it down to the ground, with all the gamblers and fools left inside. Then the Phoenix will rise from the ashes.

  2. Crude prices seem to be been trading inversely when bad news breaks, like there is an invisible hand keeping prices from plummeting into the $43.00 range and falling off a cliff from there. The PPT/ESF have been busy little bees keeping the prices of paper assets
    climbing and PM’s from going parabolic. Sooner than later, I believe there will be something that overcomes these artificial manipulations, and the whole system will collapse within 3 trading days and 99.5% of our population will not know what hit them or how bleak their futures have become…

  3. Two things that confuse me is housing and debt. If the Dollar is doomed to inflation , hyperinflation. Doesn’t it make sense to load up on housing debt, Gold, and Silver? When the Dollar devaules sometime over the next decade won’t your gold / silver hedge pay off your house and leave the bank as the bagholder of fixed debt that is losing value? I’ve seen this exact scenario play out in several nations within SouthAmerica. Debt incurred several years before hyper inflation destroys the currency and debt. The U.S. Government seems to be playing that game now. Shouldnt we be levering up on housing to be paid with monopoly money?

    1. Load up on housing debt and then just default on it. The house is going down in value. Money inflation won’t help housing values. Housing values have been driven by DEBT inflation. When debt collapses, home values collapse. Most people have very little to negative real equity in their house.

    2. The central conundrum in real estate pricing is that the price of a house doesn’t represent what someone is able to pay, it represents what someone can pay with help from a bank. That last part ends up tremendously skewing the way housing is priced. In the end, their perception is they think they bought a home, but all they did was buy a very expensive mortgage from a bank.

      It has been in the best interest of the banks, gov., and Wallstreet, at least until now, for the following reasons:

      1. US mortgages are largely owned by banks, so they represent an asset on the bank balance sheet. Their values are derived by an appraisal system that is apparently a bank-sponsored racket to garner artificially high prices.

      2. The finance industry uses houses as something to gamble on, i.e. mortgage-backed securities.

      3. The finance industry uses housing prices as an indicator to speculate with, so that the price of housing informs various trades and decisions – algos include – based on where the market appears to be heading

      5. Subsequently, the public is propagandized to believe things about the real estate market like, “it always keeps going up”, ever forgetful of warnings from past years like 2008-ish. Their perceptions are heavily managed on these things through financial group think emanating from Wall St. and elsewhere.

      Thus, all remains well in the imaginary land of unicorns and lollipops/real estate.

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