As investors, we’re firm believers in preparing for the worst case scenario. For us, the definitive worst case scenario is found in the markets from 1921 to 1932, covering the early stages of the “Great” Depression. We believe 1921 to 1932 should be examined and re-examined to understand possible risks and remedies for our current perspective on markets.
In our recent musings, we found that the rent data from 1914 to the present at the Federal Reserve Bank of St. Louis had a minor quirk, some information was missing in the sweet spot that we’re most interested. Below is our take on the data and some minor insights.
Again, looking at the data related to the CPI for All Urban Consumers: Rent of Primary Residence (CUUR0000SEHA) on the St. Louis Federal Reserve website, we can see monthly data ranging from 1914 to the present. However, the data in the period from 1915 to 1940 has many gaps that obscure what happened to rental prices (when attempting to chart).
The chart below is the maximum view of the data from 1914 to 2017. The black boxes show, or rather don’t show, the data that is missing from the period in concern (also from 1944-1947).
Although there is some data interspersed from 1915 to 1940, there isn’t enough to generate a complete graphical representation of the period. Below is the charting of the data for Residential Rents in St. Louis covering the period from 1875 to 1944 in work from Roy Wenzlick’s Real Estate Analyst. We’ve highlighted the period of concern in red.
We wanted to know how accurate Wenzlick’s St. Louis residential rents compared to the national data provided by the Federal Reserve. To do this, we took the 1914 data set and peg the percentage change in Wenzlick’s work to the missing data at the Fed through to 1940. The result of this is displayed below:
In the red are the data points based on what would have happened if the starting point of December 2014 Fed data had the same rate of percentage change as Wenzlick’s graphical representation from 1914 to 1940. In the blue, we have the original data set from the Federal Reserve. We’ve extended the available Fed data from the prior period to fill the gaps.
Interestingly, the percentage change from peak to trough in both data sets are fairly close with Wenzlick’s data declining –34.21% and the Fed data falling –38.43%. The January 1923 and September 1924 peaks are consistent with our previous examination of other commodities. For example, in our “1925 to 1932: A Question for Precious Metal Investors” article, we see a 1925 peak in precious metal stocks with the decline ending in 1932.
As best we can tell, the gaps presented in the Federal Reserve data generally coincides with the data offered by Roy Wenzlick. In addition, the data from both sources on the general direction of rents coincides with other commodity related declines from the period of 1923 to 1932.