From today’s WSJ.com:
Lumber’s jacked. This month, the January Chicago Mercantile Exchange lumber contract has surged 28% in just 12 trading days.
What has fueled such optimism? After all, the contract slipped back Wednesday after Commerce Department data showed a fall in housing starts last month. Home construction accounts for about half U.S. lumber consumption.
The real construction story for lumber lies less in suburbia and more in the financial edifice going up in downtown Washington. The latest breakout in lumber futures began Oct. 28. Details of the extension to the home-buyer tax credit, signed off on Nov. 6, emerged that day.
If that was a spark, loose monetary policy has provided fuel. This looks like a classic momentum trade. Volume in the historically sleepy lumber-futures market has jumped. Almost 2,700 contracts were traded Tuesday, against average daily volume of about 1,550 through the first 10 months of this year and 2008.
As futures prices rise, further fuel is added by short sellers scrambling to cover positions and investors playing the carry trade of buying cheap physical lumber and selling it forward.
The increase in lumber prices is a measure of how cheap money has pushed investment dollars out of cash and into the farthest reaches of the commodities markets. Policy makers might cheer their own genius in that respect. But they shouldn’t forget the inflationary portents. Nor, if housing starts data are anything to go by, should they assume overheated printing presses can fix a fundamentally battered economy.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do � the dignity that comes with profiting from their talent and hard work. � The free-market system also provides the incentives that lead to prosperity — the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.� -President George W. Bush In other words, free-market capitalism is the best path to prosperity.
Replies
Wow, had't seen that.
Tough time to build a house then.
Interesting. Framing lumber here is selling at 20-year lows; I think a 2x4x8 SPF KD is under $2 at the moment, down from over $4 two or three years ago.
Big local sawmill--one of the biggest and most modern in the entire province of Quebec--is shutting down while they look for new investor partners in Europe or Japan where the market is a bit stronger. Right now they can't get enough wood to keep the whole mill running efficiently, and it's costing them more to make a 2x4 than they can sell if for in their own big-box affiliate store.
Maybe this upturn in the States will be strong enough to make it worthwhile for us to sell to you guys again.
Dinosaur
How now, Mighty Sauron, that thou art not brought
low by this? For thine evil pales before that which
foolish men call Justice....
Not to belabor the point, but just a reminder that these are "futures", or the market's best guess(es) about where the prices will be in 6-9 months. And there is no lock in on that, it's just an indication.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
Do you think this is speculation to just make some money, or do you think they know something or suspect something we don't?
Speculation involves both, and always has. In fact, speculation is what makes a market liquid. That's why there is so much risk...and risk ALWAYS involves reward when it pays off.
Unfortunately, we have begun a very serious era when any speculation about anything is deemed to be "greedy", and thus anti-social. We have made pariahs of anyone who has figured something out that is not obvious to 80 % of the population.
In the old days, when I frequented the "tavern", I often made the case that interest rates were a better indication of what was coming than anything else, from a market standpoint. I was criticized and mocked over and over by those who thought they understood that part of the market. They did NOT. The lumber futures I highlighted are in essence doing the same thing as I was discussing. ....Putting their collective funds where their mouths are!!!
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
Unfortunately, we have begun a very serious era when any speculation about anything is deemed to be "greedy", and thus anti-social. We have made pariahs of anyone who has figured something out that is not obvious to 80 % of the population.
There is a pretty significant difference between speculating and manipulating.
Nothing wrong with speculating.
You're right. One implies control, the other one doesn't. Despite what you hear, one only manipulates what one has control over. I made this case a year ago in the tavern, but the "experts" who don't make a living doing this didn't quite grasp the concept. Speculation is throwing you hat in the ring. Manipulation moves the ring. The are not too many forces that can actually manipulate any market right now, for any length of time. The Hunt brothers tried like heck with silver...didnt work. And so on.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
I think it's near impossible to explain the difference to people when they see what they see recently.
I have a relative who works for a Hedge Fund. Paid very well to make sure that what they do doesn't have a bad smell to it.
Even he agrees that when you see an investment house preparing to store oil or gasoline, and you understand that market? That it's just that much harder to convince some people that some speculation is little more than manipulation.
I understand your point and it is indeed well made. The problem lies in the relationship between the houses and the "manipulators". In this case I have done a significant amount of research on what caused our current situation. I am even in touch with a senator who read some of my research as it pertained to AIG and its credit swaps. It is clear to me that we have greedy people on Wall street. But we also have greedy people putting roofs on, and greedy people building houses, etc., etc. The problem is that the ones who have the power, (Senate and House Banking committees) are the ones who have been able to switch attention from their culpability. The ones who were/are in bed with them, are ALSO avoiding being fingered for obvious reasons. That is definitely manipulation. The futures market is generally not subject to that because it is so transparent. Nothing is forever and nothing is sure, but the real fraud lies in our government, not in the bankers.
I need to stop this now as this really belongs in the tavern, and I gave up the tavern a long time ago.But I think you are on the right track.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
There exists a fair amount of blame that should be shared by those who wanted to play with the big boys.................and yet really shouldn't have been playing with them.
And then, when they got burned? It was not a small loss like would hav ebeen for the big players, but rather it was a life savings size loss.
My brother works for Alliance Bernstien and regularly tells family members to stay away from certian investments, as they are really not for their income level.
And yet, few actually listen. But at least they can't blame him when they do lose money.
I think we are better off that most of the pulbic doesn't understand the AIG situation, how it happened, why they were bailed out and where the money went.
Around here small dimension lumber has been 40 cents a BF and 1/2 OSB has been $5.60 a sheet. These prices are right where they were 25 years ago. When prices are at their rock bottom - whether you're talking stocks, sheet rock, or pork bellies - where do you think the next move might be? Further down? Well that would be nice but I wouldn't bet on it.
Look for prices to go up 25-30% which will only bring them to the mean average of the past several decades. Gonna be a lot of howling & moaning though...
My perspective on lumber prices is radicaly differant than most. Instead of going through a lot of middlemen which is what happens when you buy from a lumberyard or big box store like HD or Lowes. I buy wood directly from the sawmill.
I can buy hardwood cheaper at sawmill than you can buy sheetrock.
For example.. 1 inch thick ash is $6.40 cents for 32 sq.ft. (the amount of wood in a 4x8 sheet)
If I take thins I can buy it for as little as $1.60. Thins are boards less than 1 inch thick and can be any wood such as cherry, black walnut, oak, maple etc..
There is an extremely limited market for thins yet every single tree tends to yield some since Mother nature doesn't make square trees of even inches. Or if you really don't mind you can take slab wood and find lots of odd sized pieces that are worthy. Slab wood sells for $25.00 for a pickup load that will have you dragging your bumper all the way home.
A 8Ft long 2x4 at a lumberyard will be around $2.00 at a lumberyard..
The same size hardwood direct from a sawmill will cost $.70
Very well said. Please say much more around here. stinky
you're very kind. I used to be a regular contributor in the tavern, which deals more with philosophical and political discussions. However, I grew bored and tired with the dogma thrown around; especially by those who did not grasp the REAL issues, and by those who could not/would not have a real discussion. So I asked to have my access withdrawn. I can assure you I am not sorry I did, to be sure.
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
One economist has speculated that there are so many things happening that don't make sense, we must be undergoing a major change to the way our world operates; his term was 'sea change,' and he was not able to say what the change was.
How about this for a theory: The 'powers that be' know full well exactly what they are doing, and it is their deliberate intent to destroy our economy, to restore world leadership to the likes of 'traditional' empires such as Pharoh's Egypt and Babylon.
That is, our elected officials, enthusiastically aided by the civil service, is busily boring holes in the hull of our ship of state.
Well first the elected officals are simply pupits of the real ruling class. I mean if you have massive wealth why on earth would you put up with all the grief in being a president when you can get the president (whatever party) to do your bidding?
They say the White House is the crown jewel of the penial instutution. Another words as president your every move is controlled and limited.. Almost to the same degree as every other politician..
If you need to spend upwards of 50 million dollars to run for the senate, you won't take that out of your pocket. Rather you will take it from those who can afford to give it..
They really don't care which party wins.. they will back both candiates.
All they want is that so called access. Another words influance every Bill that affects them.. Some times one or two sentences is all they want changed..
Civil service by and large simply want a paycheck. Only a tiny handful of appointed positions have any real power to influeance things..
"civil service simple want a paycheck"... Yes this is true but this is really a serious problem.Large numbers of federal and state workers droning along just pulling a salary with out creating wealth. GM floor sweepers and many state employees will be destroyed by foreign wages and competition. They better treat that goose very well because she is getting very tired. stinky
My wife works one of those drone jobs. (she's a civil servant) the standards they have for productivity prevent her from being anything more than a machine. If she spends the time to completely check out problems her supervisor gets on her case about thru put.
There are so many redundant checks and safety checks because tax payers whine about costs all of the time. The cost of administering any program is expanded many times, due to the required checks and safety checks..
In welfare 10% of every tax payer dollar goes to fraud prevention. with another 5 % in duplicate administration costs because tax payers don't trust anybody.
Are there screw ups? yes! Most often caused by applicants who fail to properly fill out forms. Thinking that if they answer a question like that it will reduce or eliminate eligibility. Occasionally by a human machine skipping a cog or something else that happens when humans are turned into machines.
Before you get all up in arms about the size of civil service I might remind you that we have mre than 300 million people in this country who have to interact with the government countless ways. Someday you should go down to the library of congrss and just look at all the laws which affect things that are on the books..
Or heck just go to your own public library and try to get into the stacks where the law books are kept. Row upon row of local and state ordinances. All based on preventing someone from getting away with something..
All the evidence I see supports your theory!! I'm not use to seeing someone else agree with me!!
At its most basic level, capitalism offers people the freedom to choose where they work and what they do … the dignity that comes with profiting from their talent and hard work. … The free-market system also provides the incentives that lead to prosperity -- the incentive to work, to innovate, to save and invest wisely, and to create jobs for others.” -President George W. Bush
In other words, free-market capitalism is the best path to prosperity.
Funny,
The Cloward-Piven strategy has been the talk in some circles as of late.
Of course further conversation on that front will get this booted to the Tavern.
economist... are much better in trying to explain what has happened than what will happen...I happen to believe there are forces at work to "level" the world standard of living... which works much like the social programs of the united states... lower the bar and standards... redistribute wealth... and enlarge the dependent class... once you remove hope that people can have a higher standard of living than their parents... they have won...p
http://www.youtube.com/watch?v=VebOTc-7shU
(2 hours, 25 minutes.)
Edited 11/28/2009 9:55 pm ET by HootOwl
should be an interesting 2010 election cycle... this should be in the tavern so I'll stop :)p