First the Baltic Dry Index, then oil – now lumber. The price of lumber has dropped 13% since the end of January (source: Finviz.com, edits are mine) – click to enlarge:
All three of those indicators are telling us the economy is collapsing.
What will be Wall Street’s excuse for this? If the price of lumber is dropping like this, it means new homebuilders have significantly reduced their purchase of lumber to build new homes. If they are building less new homes, it means the demand for their new homes is falling quickly, especially in relation to their overbloated inventories.
It could not be a worse predicament for the people running our system. Zero percent interest rates, near-record low mortgage rates – and in many cases zero-percent mortgages are now available for qualified buyers – significantly easier credit standards, and supposedly rapid jobs “growth.” That should be a recipe for soaring home sales and a soaring price of lumber.
The homebuilder stocks represent the best short-sale opportunity since the peak of the housing bubble. The only other time there’s been a more obvious short opportunity was with the internet stocks in early 2000….HOMEBUILDER REPORTS. I detail directly from SEC filings how and why these homebuilders are sitting on more inventory and more debt than they had at the bubble peak in 2005/2006. It sounds crazy but it’s true.
What’s even better is that – based on watching SEC 13-G/A filings, all of the big mutual fund complexes (Blackrock, Fidelity, Putnam, Vanguard) and many hedge funds have already placed their long side bets in the sector. In other words, there’s no one left to sell to when the real selling begins…