The Price Of Lumber Is Plunging

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:

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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…

14 thoughts on “The Price Of Lumber Is Plunging

  1. Dave, why are you still bullish on silver when all commodities are tanking? There seems a strong correlation between silver and oil. In my opinion oil will go down even further when the inventory hat to hit the market when there will be much lower demand. On the other hand at prices that low most of the silver miners can’t make a profit and probably have to shut down their business. So silver has to go up in this scenario.

    I’m still long silver and have been for a long time but forgot why. 😉

    1. Silver is the most manipulated market in history. It is even more manipulated than gold. It is a much smaller market than gold – easier to manipulate. Don’t make the mistake of putting it in the same category as depletable commodity. It’s not a commodity. I can’t prove it, but I believe the manipulators have a bigger problem with silver than with gold in terms of the amount of silver that is available to deliver in relation to the paper silver promises issued against that silver. If the fractional gold ratio is 100:1, the fractional silver ratio is much higher.

    1. Not really. I implemented a plugin which helps it format better for mobile devices. It should look the same on a desktop

  2. Gold gets smashed for 30 bucks, silver for 30 cents, yet the USD gets pumped for 1.40!

    The tail wagging the dog again. And oh yah, the unemployment falls!

    Up is down, down is up, slavery means freedom and bad is good?

    Welcome to the “new normal”! Where everything is turned on it’s ear and there is no truth to be had anywhere in the markets. As the saying goes, there are no markets any more, just intervention and manipulation. Lies piled on top of more lies.

    1. USDX is against a basket of currencies belonging to six ‘developed countries’, with euro the largest percentage, so the sharp rising of USDX is primarily due to the fact that euro is collapsing.

      However, when against the Chinese Yuan, USD has been weak over the years.

    2. OL , don’t be surprised , after all , what we have are a bunch of Yale and Harvard grads at the controls running this great country !
      And after all if their supposed to have been groomed to know how it all works , by God they’ll make sure that it works out that way !!

  3. Dave,
    What is your take on the news that HSBC is closing all 7 London gold vaults in two months? My understanding is that they are the custodian for GLD. It’s on King World News by Andrew McGuire and Gerald Celente.

    Thank you.

    1. When I get a chance, I’m going to write a blog post on it. I think it’s another signal that we’re getting close to endgame for fractional paper bullion

  4. I have been in the recycling industry since 1993. When lumber collapses so does wastepaper; mainly OCC (Old Corrugated Cartons). When wastepaper collapses it is a big sign of a slow economy. China is the biggest buyer of wastepaper and is the #1 or #2 export out of the USA. With the Port slowdown it is exasperating the situation even more. Also low wastepaper prices hurt the recycling and trash industry; think Waste Management, Rock Tenn, Republic Services, etc. Lumber, wastepaper, port problems, China slowing are all signs of a slowing economy. These are omnipotent signs and worthy of watching closely. Generally in the past when these price drops in wastepaper and lumber happen they do bounce back. My opinion is we are basing at the lows and commodities like wastepaper and lumber will rise once the port situation clears up and China starts buying. It may be years though.

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