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April 20, 2021 | Lumber in La La Land Too

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Parabolic lumber prices are not due to a lack of trees. Consolidation in mills over the past couple of decades is part of the story.  But most of all, the familiar forces of cheap credit, rampant financial speculation and stockpiling are all at work here.  Once again, we will find that financial bubbles are neither sustainable nor productive for the real economy.

Demand for lumber has skyrocketed during the pandemic, sending prices to all-time highs. This video explains what’s driving the lumber boom, who’s profiting, and why those growing the trees aren’t reaping the benefits. Here is a direct video link.

This chart shows the price move in lumber futures year to date. Jack’s beanstalk had to be cut down. This one is destined to collapse of its own weight.  Meanwhile, the related spike paid for home construction and other products in this period will end up as sunk costs.

 

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April 20th, 2021

Posted In: Juggling Dynamite

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