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Wednesday, January 2, 2013

Right or Wrong, We Versus They, Markets Don't Care

Bob,

It's not about right or wrong, or we versus they for me.  There's only the message of the markets and my pursuit to better understand them.

Can lumber prices rally into 2013 behind a sea of liquidity provided by the Fed?  Yes.  Currency devaluation, however, is one of an array of factors that influence price over the long-term.  Demographics, economic trends which includes cycles as also influence price.  Lumber is extremely sensitive to employment and economic growth.  If either falters, demand for lumber falls over the short to intermediate term. 

As for timing these short-term setbacks, I watch the following:

  • Bullish or bearish concentrations by the invisible hand.  Forced retreats from concentrated positions, while possible, tend to be low probability events.  As long as lumber rallies against the concentrated positions without forcing a liquidation of those positions, the late bulls risk becoming the bag holders.
  • Real estate demand.  Don't follow words of headline experts, follow the numbers nobody watches.  A lumber rally without real estate loan participation usually has no legs.
  • A repeat of 2005-2007 real estate experience in 2013-2015 with a similar 2008 debacle in late 2015 wouldn't be a surprise.

Eric
Eric,
Apparently He doesn't visit your site.

Lumber Prices Hit 8-year high

Bob


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