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Day 205: Scheduling a Recession #2


The Mother's Little Helper portfolio was UP today +$4,799.48 (+0.64%).

Overall GAIN YTD: +$169,649.54 (+29.05%).

According to CNN Money our benchmark index, the S&P 500 is up +10.5% Year To Date.

The Mother's Little Helper Portfolio continues it's bullish push up closing today just slightly above 29% for a year to date high of +29.05%.

In my previous post (Day 200: Schedule The Next Recession) I discussed working on an article that will help us predict the timing of the next recession; what a learning experience this has been. In my hunt for quality numbers I went straight to the U.S. Bureau of Economic Analysis (BEA). The Federal Government in all it's reporting wisdom has made it difficult to do two things, 1) find numbers that are correlated by the same time frame, and 2) find numbers.

I wanted to start all my data collection from 1929, but the BEA didn't think that was a very good idea as their data sets start on lots of different dates. Did you know that the data for the Federal Funds Rate doesn't start until 1954? This has something to do with when modern Fed policy began (In March 1951, the US Treasury and the Federal Reserve reached an agreement to separate government debt management from monetary policy, laying the foundation for the modern Fed.)

William McChesney Martin Jr. is Sworn in as Chairman of the Federal Reserve Board of Governors

I'm sure that somewhere in the labyrinth of the BEA web site is the data I want. Yesterday I had a grand time entering columns of numbers in a spreadsheet and converting everything into annualized equivalents. For instance, Fed Funds Rates are reported monthly, but for the purpose of this article we only need an average for the year. So far I've managed to collect the following data for every year since 1929; Real GDP, Year-over-Year GDP Growth rate, GDP 5 year averages, every recession and their duration since 1929, and the Fed Fund Rate since 1954 for every month and average for each year. Here's a bit of trivia. The FOMC or the Fed tries to match the Fed Fund rate with the targeted inflation rate. The target inflation rate for a healthy US Economy is between 2% and 4%. The average Fed Funds rate since 1929 is 3.34%. My next goal is to find data for Fed Fund rate increases, when those increases occurred relative to recessions, prices and production data for oil, coal and electricity production since 1929.

I'm intentionally not collecting anecdotal information about what caused a particular recession, or news articles from before and after each recession. Right or wrong those sources will include as much opinion as they do hard data. The causes of recessions have been debated for as long as we have had recessions, cherry picking a few news articles for this project isn't likely to lead anywhere new and may distort my findings. Instead I'm looking strictly at data related to my original hypothesis in the hopes that there is some correlation.

Stay Invested,

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell share withing the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.

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