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Is Lumber The New Baltic Dry?
Lumber is limit down once again. It has been falling now for two months in a very 'non-housing-recovery'-like manner. Of course, when Lumber prices are rising, everything is bullish and it merely serves to confirm the exuberance and bias to optimism that we should all have. However, just like the Baltic Dry Index, when it's falling it is a bullish sign that the market is over-supplied in anticipation of good things to come. With Lumber's two-month lead over stocks signaling the equity market may well be a little ahead of itself, it seems the supply-demand balance is off in the construction materials business (which one is off - supply or demand) but have no fear, just as with the Baltic Dry, it will come back if we just keep hoping. Or did the actions of a central-bank inspire confidence once again in the 'wrong' industry and spark another mal-investment boom?
The Baltic Dry - now meaningless (if we build it, they will come... at some point, we promise, Bernanke said!!)...
as a leading Lumber futures price is now ignored by 'market' reality too...
Charts: Bloomberg
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Lawn Dart!
"With Lumber's two-month lead over stocks signaling the equity market may well be a little ahead of itself..............."
Said Jay Carney.
Lumber is going TIMMMBEEERRRR!
Guess Equities will be the last man standing before the collapse...Fuck
If lumber is any sort of barometer of the underlying economy then we can't consider the thought of it having an impact on the market.
My market indicators remain as followed
"Have you ever seen the movie my cousin Vinny?" (David Tepper)
"Maria is wearing her green jacket" (Michael Farr responding to Schiff)
Both indicators are bullish, so bullishness shall continue.
I'm no lumber market genius, but I suspect this has a lot more to do with China than what's going on (or not going on) in the US.
Let's do our part, work on gallows and guillotines!!
Actually, I'd love to see an over-lay of the BDI with that [total equity market cap/Fed balance sheet] chart.
I'd like to see BDI, lumber, copper, bricks (is there even a chart for that?) all overlaid with dow, s&p, hang seng, nikkei and focusing on the previous tops in 2000 and 2006-7 all compared to today, actually
lumber is getting trashed cuz of a Youtube video
The bear on a bicycle eating a monkey at the circus?
Come on get with the program people. Ever heard of metal studs. FOWARD.. USA..USA
If it gets cheap enough, burn the timber to for 'energy'!! This is carbon neutral, right?
Call me Mr. Environment.
My wife and I are starting to build a home this month - bullish!
In this current bubble, the houses are being made out of cardboard. Why spend a premium for lumber when no one will actually live in the house?
Three Little Piggies:
Baltic Dry (straw & grains are bulk transport)
Lumber
TSHTF - Masonry
What do you to want to be living in when Big Bad Ben Bernanke's shit storm lands at your front door?
Lumber down means moar profit for builders. Bullish.
The lumber in the yards were bought by retail at a different price point, nobody will see this drop in cost for a long time to come if ever.
Publication of the 10th Irish maritime transport publication where the director states quite openly that they have seen probably the biggest boom and bust in the history of shipping markets.
http://viewer.zmags.com/publication/2d9731e6#/2d9731e6/40
He points to the symmetry of the Irish maritime transport sector and the real Irish domestic economy (not GDP increases which includes high value low weight exports which are generally somewhat outside the domestic economy as it is beyond the tax system)
However dry bulk volumes increased by 7%
As a result of farmers importing extra feed in the wet summer of 2012 (agri is 22% of total dry bulk volumes) and steady demand for steam coal in Moneypoint power station.
We have a crazy Aluminium factory in Shannon which dominates dry bulk imports – Bauxite – its there for purely tax arbitrage reasons as it uses it own Gas turbine in this very high energy operation !!!
There was huge controversy about this in the early 80s with a nearby farmer on the national television politics / debate show claiming his cattle were dropping like flys because of the toxic dust from this site.
Despite its continued operation in such a crazy area (Hydro Iceland is better) it is generally not talked about in polite Irish circles.
Liquid bulk is down maybe 3% in 2012 when you subtract Bantry in the SW (this is a long term oil storage area)
break bulk volumes (eg. timber , machinery) down 3% , decreased for 5th year straight and is at a 10 year low.
Much of this is coastal traffic in the smaller ports such as New Ross (JFK ancestors home town) although the big ports dominate all sectors now.
Lift on lift off experienced a 3% decline in 2012 when it was growing at 7% a year a decade earlier.
passenger traffic declined by 4% and the tourist car market by 7 %……
The depression in Europe continues…………..
All so that the banks can have access to cheap labour arbitrage profits from Asia & Germany.
The west is clearly a bank run fiefdom – all the evidence is in.
Its the plantation owners house.
Good to see your post "Dork of Cork". I like to get some straight information from Europe. Some US financial media has been hyping Ireland as a model of how to deal with a financial crisis and how best to recover from one. Nations of Europe should look to the Irish and Lativian model for the template for recovery.
This is such a joke, the US Banker's Media calling Lativa a model! Half the population under 30 is either gone now or packing their bags to get out. The rest are basically working for nothing or unemployed. But the banks are made whole and the bond holders are sitting pretty. This is WHY US financial media aloves Latvia and Ireland.
@Jack
Ireland is a giant SPV...............
If you scaled up Ireland to Europe size you would have seen a 34 % decline in oil consumption between 2005 and 2012 and its still falling in 2013 !!!
In the meantime we have increased our population by 1 million since 1990 , much of whom were fleeing Latvians in recent years.
Gross national income has declined between 9 - 10,000 euros per person (a euro record) since 2007
Ireland & Latvia are neo - liberal experiments.
Test Tubes.
Irish society essentially no longer exists ................in that sense the bankers have won.
Think of Ireland post 1980 /87 as a large dumping ground for excess oil & labour not burned in the core.
The banks earned income from this oil burning / social capital destruction.........
When the oil was no longer available Ireland became a rich negative energy hinterland for the cold dead heart of the core.
So both the inflation post 1987 & deflation post 2007 was the same event ............a mirror image.
Too much capital and thus power in too few hands
That is the reason empires failed and continue to fail
Unless we redistribute and reallocate capital and thus power, there is no real cultural and societal progress and we are never going to be sustainable
Few are born rich and will die rich, never struggle and never challenged
Many are born poor and will die poor, struggling to make ends meet and trying to get ahead with many obstacles and challenges
We are imperfect in every sense and that is proof that creation or evolution have rendered us to be complete idiots. Albeit idiots with a history to fill many books and educate and entertain us all.
We all know how determined a man market is when he it has wood. Nothing else matters!
NOTHING!!
Lumber? Homes of wood?
3D printing, baby.
Been working on my new manse for 3 days now, and it is half-printed.
You joke, but I've often wondered why no one makes a huge NC printer that can be assembled onsite. It could build the walls, floors, roof, complete with wire chases, etc. you could even fill the walls with expanding foam. Maybe a 3 man crew?
http://news.yahoo.com/blogs/sideshow/3d-printer-could-build-house-20-hours-224156687.html
Megablox!
Yeah. And shouldn't need nails. Parts should just snap together. The use of wood and nails to have built homes will seem so primitive....
They do that in Japan, modules shipped on a truck and assembled on site. All plug in.
Fertighaus (readyhouse)
http://www.youtube.com/watch?v=sv1xPw56UlY
Because it takes more time than you can imagine to print things from tiny specks melted together than to just use bricks, steel, boards, things with good fibres or strong forged durability and much quicker than a printer. It flat out produces a lesser quality and higher cost and even time is a cost when you’re working against budgets, deadlines and the weather. Pre-fab homes and pre-fab sheds can beat this to a limited extent and be shipped to the site for final assembly. OR, the cargo-container modular house idea can be used faster than all building and all printing for a starting base.
On a long enough timeline the survival rate for every index drops to zero...
Good! I could use some lumber. The cheaper the better.
Better buy now because lumber don't grow on trees. :)
I see what you did there
Lots of people in the lumber industry, including big yards, setting on lumber inventory $70-80 more than today's future prices. Ouch. No one I've talked to saw this big dip coming.
I have a number of projects for outbuildings and cabins on hold for now. The prices went up too much and I couldn't pass the higher cost on to the consumer. Wait and see. Nobody is building at these prices. Profits and low margins aren't worth the risk in producing inventory.
That hurts up here in the Northern Boreal forests. We lost mills to Canada back in the early 2000's. They were given the death blow by Canadian imports and by the housing bust. Looks like recovery here is off the cards.
Well, at least we are opening some of the biggest new Copper, Nickle and precious metals mines. They have premits to open the soon to be largest underground mine in the world. The finds here are said to rival Sudbury Ontario. This breath life back into the Northern Minnesota mining industry. Unless of course, China crashes and Japan implodes while Europe stagnates for a decade.
Tough opener, eh?
Ask Vale and Xstrata how Sudbury is working out for them, suckers.
I followed the Sudbury strike for a few years. Have not heard any news out of there for a long time. What's happened.
Our mines are being developed by new companies, and some smaller established ones. I imagine they will develop and then seek to sell the mines to big Multi Nationals after a few years.
We have been mining and making profit here for over a century. Iron Ore.
But now these huge new finds are pushing companies to get permits and begin to develop.
What happened?..they are writing down assets for which they dearly overpaid.
The oversea multinationals came in and bought the resouce companies in Sudbury and chose to downsize and even board-up some operations so they could reduce the supply and increase prices. It was buy the competitor and close their operations down so our native/original mines/plants will do better by eliminating the competition.
Same story as the the US steel guys who bought/closed the Hamilton ON steel mills around 10-15yrs. ago, most of the lumber mills went untouched in the recent run-up, but methinks they will be next targetted.
Story I heard was. When Vale exec's visited Sudbury after buying Inco they asked who all the big trucks (jacked north american half and 3/4 tons) in the parking lot belonged too. They were told that the trucks belonged to the employees to which the Vale exec's lost it. I was told entry level jobs paid over 100K with the nickle bonus and Vale scraped the nickle bonus which precipitated the strike.
Very interesting.
Yup, damn fools. If you’re making money don’t question what your employees spend their pay on. If you paid them too much it should show in the balance sheets not the parking lot.
words of wisdom to you and Ontario : stop extracting raw resources for export, start producing things you know people want or leave it in the ground for when the economy's ready.
After many years in the markets, one learns that all leading indicators (trading models) work great - until they don't work anymore
Funny how everything seems to return to its baseline once the animal spirits have run their course.
<Markets don't move. Markets are moved. The real question is...who is the lead dog in this pack?>
For sure! Even my own gold prediction charts worked solidly for 2 years of trend but it did bend and I haven't found an adjustment to match. Only the barest of approximations from the 2006 and 2008 smack-downs. Still takes a lot of assumptions based on a lot of re-scaling to even come up with plausible date/price combinations.
Macro = Reality
Wackro = Markets
Whackro = Outcomes
Gold, silver, copper, lumber all screaming for a stock market crash that will make the Great Depression look like a walk in the park.
Oh, that's right, its different this time.
But it's different this time - all that's needed for "economic growth" (asset levitation) is a bald headed Fed chairman and his merry band of minnion traders. All we need manufacture any longer are bubbles...equal parts liquidity, hope, and propaganda.
It's always different this time!
S&P --> http://www.youtube.com/watch?v=y8EiiHR_igY
yup, probably end 2014 or start 2015, based on the 1999 to 2009 activity. I have an image to upload but it's not at this computer showing the curvatures and a re-scaled one for the ramp-up to 1999 and how it shows a giant hump upward then slam down ... much like that flight. It's the "confidence booster" - the final meth injection for the markets to convince Cap'n S&P he's superman and can jump off the Empire State building and live (and he won't)
Interesting UK short sea international passenger data published.
The key findings for 2012 include:
? In 2012 there were 19.7 million passengers on international
short sea routes, a fall of 7 per cent from 2011.
? In 2012 the Channel Tunnel carried 20 million passengers.
This was the first time since the Channel Tunnel opened in
1994 that Channel Tunnel passengers exceeded
international short sea passengers.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/88207/sea-pass-2012.pdf
The above illustrates a collapse of mainly Irish sea traffic because of the Irish economic implosion (down 30%) & the decline of inter British - French traffic becuase of competition from the Channel tunnel.
Steel framed apartment complexes and PEX plumbing = Bad for lumber and copper demand.
interesting thought... with all that PEX out there, wishing I could go long some Serv-Pro as they are going to have a good amount of business the next 20 years from pipes that sprang a leak.
not for the hot water, and lumber can still efficiently be used for furniture. Presumably furniture is still used...
anyone know what they're making engine blocks out of anymore ? I see aluminum at 08 deflationary collapse lows and was just wondering.
The Baltic Dry Index was really helpful in the past, but ever since the crisis started it isn't a great gage of business activity anymore.
Why not?
Because between 2008 and 2011 was funny enough when a ton of cargo ships were completed, so obviously the price per shipment had to come down as supply of container ships increased. That effect was further compounded by a general decrease in business activity during the ciris.
Having said that, I totally agree that the S&P500 is hopelessly overvalued...but I have no clue how lumber sales prices are connected to this and to what extent. There might well be another explanation, just like for the Baltic Dry Index.
I don't know what economic gauge is "helpful" when looking at this ridiculous situation we find ourselves in.
Certainly not the UE and CPI data either...and most people have no idea what the BDI is anyway.
I honestly don't have an answer...I trade mostly currencies, oil, gold and a few other commodities. All my trades are purely based on price action on charts. I read financial news and economic analysis on ZH and other sites, and while I often agree, it has zero influence on my trades. I sometimes go days/weeks without even reading the news...doesn't hurt my trades in the least.
As a trader you have to differentiate between fundamentals and how traders react to it. I couldn't care less if the S&P is overvalued...as long as traders are buying so will I. Once they start selling, I'll sell. Fundamentals are completely irrelevant for me because I don't trade weekly/monthly charts at all ;)
Still interesting to read fundamental analysis though ;)
And therein lies the rub. Total disconnect, denial and cognitive dissonance in the markets. So why pay attention to any of these indicators anymore? I don't, because they are all bullshit and make believe.
"Price action makes market commentary"
Chris Powell, GATA
Dark pool & private equity don't make the charts - maybe you should consider that.
My take is that traditional analysis and "indicators" are not as useful as in the past. Lumber, shipping, copper, even oil, are a bit less valid in a world in which more and more commerce happens in virtual space, over the net. All of those kid programmers making money writing software do not need to "ship" anything or "build" anything physical, in order to conduct their trade and sometimes become fabulously wealthy.
Do I think stocks are over-vlaued? Yes. Commodity indicators are still valid to some degree. Are paper/fiat markets divorced from reality? Yes. But there is some new economic activity around the world that does not rely on "traditional" indicators.
I think you're forgetting a lot of software is free open-source, traded for other code by proxy that people learn from each other's public code without an explicit contract. I think you're also forgetting that in what makes money in the real economy is still tangible goods (raw or produced goods) and debt. To this extent the traditional indicators are most valid & the divergence from markets simply indicates the amount of fraud in those markets. One can argue credit / pull-forward but the counter-argument is that we are already measuring / tracking credit / debt in this regard.
BDI in 07= 12000
BDI in 11 = 86.2
This can be explained due to over capacity?
really?
ANIMAL fucking spiritz, bitchez. Since it's shipping capacity we should clarify the animals involved are kraken and vampire squids.
by this logic, since lumber tracked the S&P for most of the last few years, there must have been some significant demand, therefore verifying the recovery. Furthermore, if you used the baltic dry as your basis for positioning yourself in the stock market over the last 4 years, you'd be broke now. I wouldn't put much thought into lumber selling off as a precurser for a market crash. Add qualifying statement: as long as fed policy remains unchanged.
all this chart says is that lumber will now be as equally irrelevant as the baltic dry index.
Plenty of divergences with the US indexes out there.
The CRB is sliding, but the indexes are heading higher. This is typically a healthy thing.
But the CRB and US Indexes were moving together (very unhealthy) before the divergence.
The falling price was predicted months ago.
http://www.bloomberg.com/news/2012-12-31/lumber-prices-may-tumble-25-aft...
tyty. was trying to find that article. not sure lumber saying as much as the BDI.
"China, the consumer of 10 percent of the world’s softwood lumber, reduced imports of logs and lumber by 19 percent in the eight months ended Aug. 31 from a year earlier."
Agree, BDI bottomed at end of '11 and has not moved. There are virtually no raw materials in the pipeline for production. It sometimes seems that these days no actual product need be sold in order for manufacturers to post record profits.
Suspension of reality.
who gives a shit about lumber.....stocks are up....even with rumors of tapering......nothing else matters.............
Yup, that’s all I’m hearing!! “No inflation, stocks at all time highs reflect a strengthening economy, and job numbers are strong!”
2 economists 1 cup
Fuckin A Wood.
SF area commercial real estate leasing is "slowing" and spec. builders might have nuts in tightening vice. Hard to believe all the vacant retail space around here.
http://www.bloomberg.com/news/2013-05-14/san-francisco-leasing-slows-ami...
Consumers empty Home depot look like social clubs,they should provide maps for those who don't want to interrupt an employee's conversation.
Somebody tell Bernanke to stop printing so much lumber.
....but Warren bought USG...isn't that bullish for housing????? Lumber and wallboard go together....along with nails, paint, and carpet.
Just another chart that "proves" ZH'ers need to go out and buy more silver! Some day....it may go to 16 to 1 ratio. Sprott promised right!
PS: I love f#&king with the silverbugs.
Hey, I loaded up on silver at $42.00. What could go wrong...
Well if you hedged with GLD puts or slv puts… not much in short-term cash. In long-term need for silver any price under 100 is a good price, lower still being better of course, but it’s work-hours that matter, not fiat, however that worked out for you
I tried buying a few straight planks at Home Depot. The price of $7.85 for a 2x4 was insane, made even more insane by the fact I moved an entire stack of at least 200 without finding a single piece of wood I would buy.
Might want to try a real lumber yard for straight lumber. We have a small one here that sells little but Number One lumber and often at lower prices than the big boxes.
what length do they offer at that price?
you're right about the shitty quality
You're in the wrong aisle. That's the price for redwood. Doug fir is closer to $3.00.
Then there is the relentless whoring by the EIA of the US oil supply boom? This follows the IMF warnings out of Saudi deficits. Petrodollar survival...
The U.S. shale boom will send “shockwaves” through the global oil trade.....
GCC governments should aim to curb government spending to prevent the six-member bloc sinking into a combined fiscal deficit by 2017, the IMF warns in a new report.
The stories about US oil independence and shale boom are propaganda designed to hide the fact that the US is simply not using as much oil as it did because of an ongoing depression. Pretty clever of them to try and tell us that the US will swamp the markets with oil when in fact, there's some increased domestic production but a hell of a lot of lesser demand since 2008.
Airlines have trimmed schedules drastically. Ships aren't moving. People aren't commuting. Military is reducing its spending which means their consumption is down. Industrial application is decreasing as well.
The real economy is in contraction since 2008. Blips on the radar screen due to easy money policy don't count.
From "Chemicals and the Economy"
Q1 data from Global Trade Information Services provides further evidence of the slowdown underway in China. As the chart shows, the dramatic drop in net PVC imports suggests the new leadership are determined to burst the house price bubble they inherited:
• Imports (red column) were down a startling 98% versus Q1 2011 (blue)
• NEA imports were down 29%, NAFTA down 24% and Europe down 63%
• SEA saw its net export position replaced by imports
• The FSU also saw imports from China up 97%
Similarly US exports dropped 31% versus 2012, reversing the previous trend of volume gains due to shale gas cost advantage.
PVC is thus reinforcing the message given by the head of China's central bank, Zhou Xiaochuan, who emphasised last month that:
"China is undergoing economic restructuring, which sometimes is not in lockstep with growth. We need to sacrifice short-term growth for the purposes of reforms and structural adjustments."
It is giving a clear warning that China's economy may well be following the pattern of 1993, as its leaders crack down on corruption and housing markets.
"The IEA is working on new oil market report site which will include interactive charts (and much more). In the meantime we have stopped production of the PDF format charts................"
http://omrpublic.iea.org/demandsearch.asp
In my opinion this was to cover up a massive implosion of euro oil demand in Italy and elsewhere.
I imagine the new data sets will be hard to compare to the old despite the new flashy "AND MUCH MORE" colour pictures.
This is a China story Tyler. It goes in the "evidence China is slowing" column.
China years ago eclipsed the US market as the principal consumer of US (and Canadian) lumber.
looks like a disconnect in 11/08 and then the S&P500 and the BDI seperate or detatch, but what unhooked?
lumber still tracked S&P I would assume tied to housing (rumors) and that's just not happening much.
Nat Gas is being played by the big boys after they dropped lumber futures. NG will crash back to $2.50 soon enough. LNG pipes are a pipe dream.
other countries are making it work, why would it fail now? LNG cars would be cheaper than gasoline too. Much cheaper. Again, already working just not used in North America.
Norboard is said to be putting several million dollars into bringing one of their nearby OSB plants back online.
The drought and the fires of the past couple of years have caused plenty of damage to trees in this area. There seems to be some type of disease that is killing the red oak too. Timberland owners may wish to sell out of some of the sickness. Lots of corporate ownership of timberland around here (NE Texas).
Is Lumber The New Baltic Dry? No but dry baltic wood is good.....good wood...Norwegien wood...sing it baby
Around here termites eat the lumber as fast as the stuff is slapped up. That's bullish for lumber.
Construction costs in the USA are plunging...cheap materials and extremely cheap labor (try $5.00/hour). Just like retail clothing, you're gonna see house prices, etc reflect this 30-40% drop in costs.
Materials aren't cheap. Unless you're talking salvaging scrap from collapsing structures in Detroit?
Labor may be cheaper than before but who do you get to do any heavy lifting for $5 an hour? Not in the Northwest where I'm at. Can't even get pickers for apple or berry crops to show up last year.
Is Lumber The New Baltic Dry? Or is the New Balic Dry, … well just the Baltic Dry at 900? http://investmenttools.com/futures/bdi_baltic_dry_index.htm
German Ghost Port Shows Container Cargo Slowdown Enduring http://www.bloomberg.com/news/2013-05-07/german-ghost-port-shows-container-slowdown-enduring-freight.html
So how much wood could a woodchuck chuck?
(did he say "wood"?)