However, there is one eye-opening concern that does not support Chairman Bernanke’s position about a housing recovery and unfortunately points to less demand in the immediate future. While many investors do not track lumber prices, the chart below demonstrates the sheer bear market that has befallen lumber futures prices.
As can be seen above, random length lumber futures have gotten crushed to the downside over the past two months. In early March, lumber futures were trading up around the 410 price point. At the close on Wednesday, random length lumber futures closed at 305.20, a more than 25% drop in price in roughly 2 months.
How is housing rebounding with lumber prices falling? While Home Depot sells many products, most major remodeling projects and even smaller upgrades require the purchase of lumber. Have logging companies discovered an untapped lumber resource?
I will let readers decide whether to believe the price of lumber and mortgage application data or a Federal Reserve Chairman that declared on January 10, 2008 that “The Federal Reserve is not currently forecasting a recession.”
For those paying attention, the macroeconomic data is crumbling in the United States and Europe. The printing press and monstrous liquidity can only fuel markets for so long. Can Chairman Bernanke and the Federal Reserve print Cap-EX spending increases and rising profitability? I think we all know the answer. In the end, when the Federal Reserve is printing $85 billion dollars per month to buy U.S. government debt perhaps fundamentals are largely irrelevant.