This page has been archived and commenting is disabled.

Timberrrrr!... Will Be The Best Performing Asset In Next 7 Years Per Jeremy Grantham; Large Caps To Return 0.0%

Tyler Durden's picture




 

Going forward, when traders yell "Timberrrrrr!" it just may mean the diametrical opposite of what said announcement has traditionally implied. At least according to the latest just released 7 year forecast of various asset class returns as per Jeremy Grantham's GMO. In it, the $100 billion asset manager sees Timber returning an annualized 6.5% over the next 7 years (as of September 2012), outperforming virtually every other asset class tracked by GMO, with Emerging Market stocks (supposedly Africa is envisioned here, as China's debt encumbrance is almost maxed out) second at 6.1%, and International Large stocks in third place. Those who hope to retire with their holdings of US Large Cap firms may want to reconsider, following a 0.0% return in 7 years, underperforming such simple things as cash which GMO sees as returning 0.1% (arguably this implies modest to quite modest deflation in the future). The worst of the worst? US and International bonds, with Inflation Linked bonds underperforming virtually everything with a -2.7% return.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 10/15/2012 - 13:34 | 2891146 BrocilyBeef
BrocilyBeef's picture

But do pensions hold timber?

Mon, 10/15/2012 - 13:48 | 2891357 CPL
CPL's picture

No, timber has real value.  

It can become anything an artist or tradesman chooses.  These jokers though, they turn it into paper worth 0.0%.

 

In real terms though, anyone holding money under this group's "trust" is losing 2.3% per year as per the federal reserve's inflationary rate.  Doesn't sound like a lot on a grand.  Twenty bucks.  But when you are swinging around a juggernaut sized bag of money, every yearly swing is losing hundreds of millions.

 

Guess who is managing all those civil servant pension funds?

Mon, 10/15/2012 - 13:55 | 2891385 Pladizow
Pladizow's picture

Love the + or Minus beneath each - Is that linked to whether you use Gov supplied CPI or Shadow Stats?

Mon, 10/15/2012 - 14:02 | 2891410 DoChenRollingBearing
DoChenRollingBearing's picture

Two caveats before my comment:  1)  I respect Grantham.

2)  Most timber is used in housing, right?  Um...

Look, I am no expert in timber (not even close), but I think I would rather hold gold, or MAYBE timberland instead.  That is one reasona (among many) to hold GOLD instead.

Mon, 10/15/2012 - 14:47 | 2891536 ShrNfr
ShrNfr's picture

Jeremy's Renewable Resources group does timberland. Of course, Jeremy has been flogging that asset class for 12 years now, but what the heck.

Mon, 10/15/2012 - 20:37 | 2892619 jerry_theking_lawler
jerry_theking_lawler's picture

actually, alot goes into paper(pulp) production....if the $ is weak, then export of paper is high thus timber pricing is elevated. if housing makes a modest recovery, then timber will do well. i am not timber expert either, just own about 60 acres of it as a 'real' asset. i used to own gold and silver until a horrible boating accident......

Mon, 10/15/2012 - 14:19 | 2891452 CPL
CPL's picture

Nowaday's I avoid using shadowstats in public, I will only use what the MSM says are the rates.  Tired of picking fights on the subject and 2.3% is still very serious when discussing Trillions of dollars.

 

In a shadowstats universe, aka reality, the loss is around 7% of purchasing power for those earning between 40k-290k.  It becomes even bleaker the lower down on the income scale you go.  Limited options, no transportation trap people into situations that they pay the company store whatever is commanded.  

Which is the reason all governments have conspired to print like there is no tommorrow.  They will, can and are attempting to save whatever they can on pensions.  Notice how nobody ever talks about the 10's of billions in dollars in pensions to political appointments and elected reps.  That would be the first place to offer austerity.

yet here we are, readjustment scheduels on FBI, CIA, NSA, DHS, DoD pensions are what's on the table.  With a banner year of earning 0.0% (hotdamn, how will they spend it all?) in an inflationary time...even the strong arm of the govenrment is going to understand with complete clarity how deep of shit they are in.  Not just the US either...everywhere.  Removing national blinders and absorbing the big picture, this is lining up the shit show to end all shit shows.

Mon, 10/15/2012 - 14:25 | 2891471 Northeaster
Northeaster's picture

"In a shadowstats universe, aka reality, the loss is around 7% of purchasing power for those earning between 40k-290k."

You don't need "shadowstats" to visually see your comment, courtesy of FRED:

http://research.stlouisfed.org/fred2/series/CUUR0000SA0R

Complete destruction, but who reads this stuff anyways?

Mon, 10/15/2012 - 17:23 | 2891944 CPL
CPL's picture

+1 can't seem to upvote you.

Mon, 10/15/2012 - 14:31 | 2891492 Silver Bug
Silver Bug's picture

Wow good luck to those trying to retire.

 

http://jamesturkblog.blogspot.ca/

Mon, 10/15/2012 - 13:34 | 2891147 fonzannoon
fonzannoon's picture

Wow a flat return as we head into the event horizon or great reset or whatever the hell it will be called. Sign me up.

Mon, 10/15/2012 - 13:35 | 2891159 Dr. Engali
Dr. Engali's picture

I'll take gold for 10,000 Alex

Mon, 10/15/2012 - 13:37 | 2891290 BrocilyBeef
BrocilyBeef's picture

What is Money?

Mon, 10/15/2012 - 15:10 | 2891619 SanOvaBeach
SanOvaBeach's picture

I asked this ? just this weekend to a low-key, down to earth finance professor.  He said $ is most of us going to work every morning.  Of course he meant the currently employed.

Mon, 10/15/2012 - 13:40 | 2891325 soopy
soopy's picture

Long Sino-For... oh wait...

Mon, 10/15/2012 - 13:44 | 2891337 ekm
ekm's picture

In Pyramid Scheme, the holders are FORCED to use up their cash if no newcomers appear.

That's the case. Primary Dealers are buying and buying and buying what mutual funds are selling and selling and selling due to withdrawals, thus jumping the price without return.

 

Forget about 2008. I'ts 1987 that's going to happen in a blink of an eye.

 

Mon, 10/15/2012 - 14:57 | 2891581 NotApplicable
NotApplicable's picture

I really can't imagine PD's ever running out of fresh Bennie Bux. They're fucking infinite, after all.

Who needs newcomers when you've got continuouscomers?

Mon, 10/15/2012 - 15:58 | 2891743 ekm
ekm's picture

Money is infinite, but not stocks. Stocks are finite.

 

Tue, 10/16/2012 - 00:11 | 2893122 azusgm
azusgm's picture

Ever heard of the Madoff exemption? It is part of a reverse conversion.

Stocks are not as finite as you think.

Mon, 10/15/2012 - 13:44 | 2891345 Robslob
Robslob's picture

 

Cotton and Linen are by far the best asset classes as all "FIAT" is ultimately created from them!


I recommend "ink toner" companies as a second tier investment over this time period as well!

Mon, 10/15/2012 - 13:52 | 2891370 Bindar Dundat
Bindar Dundat's picture

I like the thinking.  What is your opinion/advice on buying up all ( cornering ) the zeros needed by the Fed?

Mon, 10/15/2012 - 14:58 | 2891587 NotApplicable
NotApplicable's picture

You're gonna need a bigger bit-bucket!

Mon, 10/15/2012 - 13:49 | 2891358 I am a Man I am...
I am a Man I am Forty's picture

like he knows, and i own a timber farm and i don't see this catalyst, trees grow slow, 18 years to first  thinning on longleaf pine, got a bunch of loblolly i need to cut down in this time frame though so hope he is right

Sun, 10/21/2012 - 12:57 | 2907863 goldfish1
goldfish1's picture

certainly in NC logging trucks are on the move...timber prices are up.

I have a similar situation...need to thin or clear cut the stands of loblolly. What about uneven aged pine management for the loblolly stand?

Mon, 10/15/2012 - 13:51 | 2891367 Kreditanstalt
Kreditanstalt's picture

I don't have seven years...

Mon, 10/15/2012 - 14:46 | 2891537 seek
seek's picture

Bingo. In seven years, we'll be less than three months away from 2020. The nominal returns will be massively higher from the fiat collapse that happens 2016-2018.

It's possible the real returns will be what he's predicting, but good luck with contract enforcability -- the timber will be nationalized or burning, either in the forests or as processed product in government administation buildings.

Mon, 10/15/2012 - 13:54 | 2891378 Lord Koos
Lord Koos's picture

Cash with a positve return of .1%?  That's some pretty strong crack they're smoking.

Mon, 10/15/2012 - 13:58 | 2891396 wcvarones
wcvarones's picture

That's real returns, meaning you get 2%-3% more than that nominally.  So with negative real rates, that means it makes sense to suck out all your home equity at 3% and gamble it all in the stock market.

Thank you Zimbabwe Ben.

Mon, 10/15/2012 - 14:03 | 2891409 Squid Vicious
Squid Vicious's picture

Just hitting the tape, Topeka Capital and Gene Munster upgrading AAPL to Super-Duper Strong Buy from Strong Buy, price targets remain at 1111 and 1000.01....

Mon, 10/15/2012 - 14:03 | 2891413 Piranhanoia
Piranhanoia's picture

The way forward will require the destruction of a future.

Mon, 10/15/2012 - 14:29 | 2891468 Quinvarius
Quinvarius's picture

My thesis on US large cap stocks is bullish.  I don't know crap about timber/lumber/wood.  All I see is INTC breaking out of a 10 year range, coming back and doing the retest of the breakout, and massive money printing.  I see this pattern in a lot of places.  You can print enough money to make asset prices rise on inflation effected earnings.  The volume level on the bearish screaming since QE3 is all the confirmation I need.  It don't phase me, bro!

Mon, 10/15/2012 - 14:46 | 2891535 Pairadimes
Pairadimes's picture

Perhaps because in the years to come, Americans will once again be burning it for heating and cooking.

Mon, 10/15/2012 - 16:01 | 2891751 CPL
CPL's picture

Chronic cooking fuel shortage

http://www.kuenselonline.com/2011/?p=38129

 

2 or 3 of these everyday now from every corner of the planet.  Even the USA.

Mon, 10/15/2012 - 14:55 | 2891573 BandGap
BandGap's picture

Ah, I own a number of acres with maple and cherry......I thought it would be down for them, too......maybe I will retire after all.......

Mon, 10/15/2012 - 15:11 | 2891621 WhiteNight123129
WhiteNight123129's picture

How about Rice, Sugar, Germanium, Indium, Gallium?

 

Mon, 10/15/2012 - 15:18 | 2891641 TIMBEEER
TIMBEEER's picture

Timbeeer ?! Yeah, so, what, Tyler? You summoned me?

Mon, 10/15/2012 - 15:30 | 2891675 gabeh73
gabeh73's picture

HA! You can't eat wood. buy stocks and bonds!!

Mon, 10/15/2012 - 16:52 | 2891876 Fiat Currency
Fiat Currency's picture

Chances are very high - you're already eating wood ...

 

http://www.care2.com/greenliving/15-companies-that-use-wood-in-food.html

Mon, 10/15/2012 - 15:42 | 2891705 ThisIsBob
ThisIsBob's picture

Timber for what?

Mon, 10/15/2012 - 15:57 | 2891741 geekgrrl
geekgrrl's picture

I hope Grantham is wrong. I'm a bit tired of seeing massive clearcuts and then after the land is wreaked, the state swaps second or third growth timberland to behemoths like Weyerhouser for pennies on the dollar. In both Washington and Oregon, the brilliant politicians decided that timber sales was a good way to pay for public education, and again, they swap timberland for clearcut disasters. The Pacific Northwest forests look like a checkerboard because of all this stupidity, and it is absolutely not being managed in a way that could even marginally be considered "sustainable." I've known some private land-owners that have managed their timberlands far more responsibly (thinning instead of clearcuts), while at the same time making more than enough from sales. It's just when a piece of land becomes nothing more than a means to extract wealth that things go awry. I can't see any way in which the big timber corps have "earned" what they have been given by the states.

Oh, and to top it off, after they do a clearcut they douse it with herbicides dispensed from a helicopter to kill all the vegetation. There's been a big brouhaha nearby in Triangle Lake, Oregon, where residents were all found to have 2-4D in their urine. There was a hearing with a number of different government agencies: OR dept of health, EPA, ATSDR, the head of Forestry in the state, and the residents. The head of forestry came off literally looking a huckster, like a con man trying to sell a bullshit story to the residents, but they were having none of it.

All that being said, seven years is like a lifetime away with the current rate of changes in the environment, economy, and energy. FFS, some days I wake up and wonder if WWIII is going to start today. I really don't see us getting through the next seven years without some really major calamities, so I'm a bit skeptical of economic predictions years out. It seems to me that if there ever was a time when past performance is not a guarantee of future returns, this is it.

Mon, 10/15/2012 - 18:06 | 2892307 CapitalistRock
CapitalistRock's picture

I do not understand people that get upset over tree farming but are fine with planting corn for the purpose of mowing down. If people can't cut them for economic gain then they won't plant and manage them in the first place. There is tremendous expense associated with properly managing timberland. And the land owner pays that out of his pocket. Fairies don't make trees grow healthy.

Mon, 10/15/2012 - 19:13 | 2892459 Jake88
Jake88's picture

Is that all you don't understand about people.

Mon, 10/15/2012 - 20:47 | 2892641 geekgrrl
geekgrrl's picture

Well, I'm a tree-hugger and I make no apologies for it.

Gifford Pinchot had a vision of the national forests as some kind of reservoir, wealth to be tapped when the time came (presumably to give away to oligarchs, since that's what actually happened). His vision led to the creation of the National Forest Service and National Parks. Now that almost all of the first growth forests are gone (outside a few national parks), and so many acres are planted with monoculture Douglass fir, this is a monumental disaster waiting to happen.

And for the record, I'm not against logging at all, but I know devastation when I see it, and the clearcuts where I live are like moon-scapes. Nothing lives there, and this is not some theoretical proposition I am positing. This is what I've seen with my own eyes.

In my opinion, the only people who can legitimately cut down trees are people who live there. We cut down weak trees all the time, and use it for firewood. It's the major timber corps that are ruining the land and then poisoning it that are the problem here. Fairies don't have anything to do with it, and it's actually pretty ridiculous for you to even make that statement.

I do notice that you neglected to address the issue of pesticides in the urine of nearby residents, people who derive no benefit, yet bear all of the costs of these pesticide applications. I forgot to mention that the timber company also polluted the well that feeds the local school.

If this is your idea of capitalism, then we are not on the same side.

Mon, 10/15/2012 - 23:04 | 2893005 CapitalistRock
CapitalistRock's picture

Obviously I don't want timber companies polluting wells that children drink from. Grow up. Fraud exists everywhere. It's not a natural result of farming. Trees or corn.

Wed, 10/17/2012 - 03:33 | 2897436 geekgrrl
geekgrrl's picture

This is not fraud. This is normal forestry practice in this state, and if you would only look at the links I gave in my earlier posts, you'd see that all the government agencies involved in the Triangle Lake investigation are fully supportive of these sprays right next to schools. It's the law, they proclaim, and it's perfectly safe!

Well golly, it's a damn shame the elementary school well is polluted for decades if not centuries, but hey, it's all good, Mr. CapitalistRock says fraud just happens and it's bad and we should just learn to deal with it. (Here's the part where I give you the finger.)

I actually watched the hearing, so I think I have a better idea of what happened than you do, but if you would take the time to watch the hearing, I might be more interested in hearing what you have to say.

Wed, 10/17/2012 - 03:28 | 2897449 Cathartes Aura
Cathartes Aura's picture

"Grow up" eh?

maybe you'd like to take a look at how long it takes a tree to "grow up" and what role they play in the eco-system/environment.

versus fucking cornfields, the majority of which in amrka are toxic GMO used to poison the food supply.

talk about fraud. . .

Tue, 10/16/2012 - 09:26 | 2894055 riphowardkatz
riphowardkatz's picture

Gifford Pinchot probably was the cause of more timberland destruction than any other human. Get the FEDERAL government OFF our land. Sell it to private parties who win it at auction. Limit the amount of contiguous plots one person can own. 

Nope federal governmet gets to "protect" it by not managing it, not removing dead wood, not maintaning a healthy forest.

You environmentalists need to pull your heads out and realize that federal government is the destroyer of the environment., What do you think pulling forward demand is? 

Wed, 10/17/2012 - 03:29 | 2897441 geekgrrl
geekgrrl's picture

Let's get one thing straight, I am not "you environmentalists." I think you might want to address people in a way that doesn't quite so expose your personal prejudice and proclivity for projection.

I was not advocating for Pinchot's position. His position is a completely instrumental and utilitarian one: nature is only there FOR US, just as in Genesis. It has no inherent rights, but this is where law and tradition departs from basic ecological fact. And those facts are that if you cut the trees faster than they can grow, then you end up with no trees, and very likely a desert. You think the middle east is full of sand by accident? 

Tue, 10/16/2012 - 09:27 | 2894060 riphowardkatz
riphowardkatz's picture

there are man strategies for tree farming. what is happens when the fed gets involved is not farming it is rape. the forcible extraction of a value with no consent.

Tue, 10/16/2012 - 09:22 | 2894040 riphowardkatz
riphowardkatz's picture

you do know the federal government own 60% of land in Oregon? You also know that a lot of that land is timber?

" I've known some private land-owners that have managed their timberlands far more responsibly (thinning instead of clearcuts) "

 

Auction it off give it to the people and let them manage it OR keep having decisions come from 2000 miles away based on political pull. 

Wed, 10/17/2012 - 03:55 | 2897459 geekgrrl
geekgrrl's picture

Ah, so now we get to it.

The vultures have arrived.

Wed, 10/17/2012 - 05:38 | 2897469 geekgrrl
geekgrrl's picture

.

Fri, 11/02/2012 - 22:12 | 2943460 geekgrrl
geekgrrl's picture

I've been thinking about your argument, and I do tend to agree that it would be better in private hands. With two caveats: 1) many owners, not a handfull of corps, and 2) the requirement that if you are going to buy forestland for development, it will also be your primary residence. If you don't live there, then you can't spray pesticides. It's a better system than what we have now, and it would cost far less.

Mon, 10/15/2012 - 16:07 | 2891765 philosophers bone
philosophers bone's picture

Timberrrr!!!    Long paper?

Mon, 10/15/2012 - 19:02 | 2892441 Michigan
Michigan's picture

Wont all commodities rise in an inflationairy environment?

I think traditional not-too-cool purchases like farmland and timberland may be a good option bros.

Mon, 10/15/2012 - 20:54 | 2892655 slightlyskeptical
slightlyskeptical's picture

His chart shows it is in the realm of possiblility for US stocks to vastly outperform all other asset classes. It also shows that fixed income is basically off limits, unless you want to roll the dice on emerging debt.

I'll take my chances that the + scenarios are the ones that will pan out.  QE3 will simply erase itself as the mortgage bonds get paid off so it's not even real debt in the long run, Inflation is not a real fear.

The way out of our issues is to make the Fed the nat. mortgage bank once QE3 has gathered enough mortgages. Refinance with the homeowner at lower rates and principal and the economy and housing markets get fixed and the fed gets all their money back over time.  Such a program would be an economic windfall for our country.

Tue, 10/16/2012 - 09:11 | 2893998 riphowardkatz
riphowardkatz's picture

.

Do NOT follow this link or you will be banned from the site!