Wednesday, September 2, 2015

9/2/15 NFCI & ANFCI

Everyday I read something that I view as another moving part.  Way too many things to keep track of let alone verify that they have any meaning.

I am going to add the National Financial Conditions Index (NFCI) and the Adjusted National Financial Index (NFCI) to my list of things I monitor.

I don't have the energy right now to explain these indexes but I have been thinking about them for quite awhile.  FLOW vs. LEVEL.  These indexes don't really have the ability to time a negative financial event.  But their trend can alter you to pay attention.

Above zero is bad and below zero is good.  The NFCI is looking pretty good with a bit of a (bad) up movement.

The adjusted index is adjusted for economic conditions.  Again, above zero is bad and this chart is showing that monetary policy is tight for existing economic conditions.  I wonder what this index will do if the Fed raises rates.

There is more than one sub-index.  I like the leverage sub-index as one that while volatile has some meaning for me.  Above zero means deleveraging.  At this time the recent data is volatile but within the historic volatility.  I am not sure I can perceive a short term trend here.

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