| This morning was just like every other morning. I | | | | of lumber is up 42% in just the last three months. |
| woke up, showered, dressed, and made breakfast. | | | | Clearly the $140 level is a strong point of support. |
| Then I started my commute to the office. The drive | | | | What's really interesting is the jump in prices starting |
| takes anywhere between 20 to 40 minutes - | | | | in May. |
| depending on traffic. Every morning I listen to the | | | | Again, good information, but why is lumber spiking |
| local financial news radio station. It's a great source of | | | | now? One of the biggest users of lumber is the |
| ideas, news, and general market knowledge. But | | | | housing market. Glance at recent housing statistics |
| sometimes it can be really frustrating. | | | | and you'll notice an interesting trend. Single family |
| Let me explain. After the news break, the regular | | | | housing permits were up in March and again in April. |
| hosts came back on. They started their usual | | | | So were single family housing starts. |
| discussion of the market. They just droned on and | | | | What does this tell me? It looks to me like more |
| on. Honestly, it was putting me to sleep. It was | | | | houses are starting to be built. Permits are up, |
| boring talk of what each market, commodity, or | | | | housing starts are up. Now lumber prices are starting |
| stock did. The Dow was up. Lean Hogs were up. | | | | to move higher - caused no doubt by increased |
| Technology stocks are down. The longer these hosts | | | | demand from the homebuilders. The conclusion I'm |
| talked, the more frustrated I became. I wanted to | | | | drawing is a simple one. |
| yell at the radio. | | | | It looks like the housing market is starting to turn |
| See, the hardest problems for people in the financial | | | | around. And that means the homebuilders will |
| industry isn't understanding the market. It's explaining | | | | probably start seeing more activity. Are we going to |
| why the markets are moving like they are. Knowing | | | | rocket higher right away? Probably not. But that's not |
| oil is moving higher is interesting, but not really useful. | | | | what we want anyway. The news on higher lumber |
| Putting information into context is incredibly valuable. | | | | prices is telling me the housing market has hit a |
| Take lumber for instance. Lumber trades on the | | | | bottom. Now is the perfect time to put some money |
| Globex Exchange. It is part of a really interesting | | | | into the home-building and related industries. |
| market subgroup called Forestry Products. It includes | | | | I'm almost out of room for today. Instead of |
| hardwood pulp, softwood pulp, and of course, lumber. | | | | mentioning a homebuilder or two, let me make this |
| Each lumber contract is comprised of 110,000 board | | | | suggestion. Take a look at the SPDR S&P |
| feet. It's priced in dollars per board feet. | | | | Homebuilders (XHB). It's a great way to get |
| So, back to lumber. What good is knowing lumber | | | | exposure to the entire industry - not just |
| prices fell $4 yesterday? Like I said, interesting, but | | | | homebuilders but all the suppliers as well. As building |
| not very useful. Now, what if I told you lumber prices | | | | activity accelerates, this ETF should move significantly |
| are up since the beginning of the year. But here's the | | | | higher. |
| kicker... they're not just up a little bit. Nope. The price | | | | |