Normally in late autumn lumber prices are falling like the leaves, but it’s 2020, and lumber price activity is just as crazy as everything else. Instead of dropping, prices for lumber are climbing. Ryan Dezember reports for The Wall Street Journal:
Lumber futures have shot up 24% so far in November, closing Thursday at $616.90 per thousand board feet. That’s a lot lower than the record $1,000 hit this summer during America’s pandemic-induced lumber binge. But it is nearly 90% more than the typical price for boards delivered in January.
“By any historical standards, this is just incredibly strong pricing,” said Devin Stockfish, chief executive of Weyerhaeuser Co. , which owns mills and is the country’s largest private timberland owner.
Wood inventories are thin throughout the lumber supply chain, while demand from builders and home remodelers remains strong, Mr. Stockfish said during an online real-estate investing conference this week.
”We’re going to see some seasonal slowdown,” he said, “but our expectation is that the builders are going to continue to build as much as possible until winter weather really starts restricting building activity.”
Autumn has proven especially accommodative for builders in the South, where demand from job sites—and from restocking lumber dealers and distributors—has buoyed prices for southern yellow pine, according to pricing service Random Lengths.
Single-family housing starts, a measure of home construction, climbed in October to its highest level since 2007, rising 6.4% over September to a seasonally adjusted annual rate of 1.179 million, the U.S. Census Bureau said this week.
The boom in single-family homes has offset a decline in apartment construction and been fueled by a flight to the suburbs, where home offices and outdoor space have become work-from-home must-haves. Historically low mortgage rates are attracting buyers, while investors are building thousands of suburban houses expressly to rent.
The National Association of Home Builders said this week that builder confidence hit its highest level since its monthly surveys began in 1985. The National Association of Home Builders/Wells Fargo Housing Market Index combines current sales, traffic from prospective buyers and sentiment toward the next six months. The November index hit 90 on a scale of 0 to 100, in which 50 represents neutral sentiment. A year ago it was 72.
Apparently, when a big-city apartment door closes, a window in the suburbs opens.
In October, U.S. home sales rose to a 14-year high. Nicole Friedman reports for The Wall Street Journal that “Sales of previously owned homes climb 4.3%, fueled by low-interest rates, desire for pricier houses.” She continues:
October’s gains marked the fifth straight monthly increase and one of the best stretches for the housing market in several years. While home sales showed some signs of life before the coronavirus outbreak, they are running much hotter now.
“In the pandemic, nothing has been more surprising—positively surprising—than single-family housing,” said Mark Zandi, chief economist at Moody’s Analytics. As more Americans are working remotely, he said, “this is a fundamental shift in underlying housing preferences.”
Some families are leaving large cities or other crowded living circumstances in response to Covid-19. They have been willing to splurge on single-family homes despite a troubled job market and soaring home prices. Buyers have been aided by mortgage rates now at their lowest level since Freddie Mac began tracking them in 1971, the agency said on Thursday, which could drive sales momentum into next year.
A severe shortage of homes for sale is boosting demand for newly built housing, which could spur more hiring and spending by home builders. Increased home sales can also lead to consumer spending on appliances, furniture and other home goods.
Has there been a company better positioned for the pandemic than the Home Depot? If your fire pit is more like your new outdoor living room, you know exactly what I’m saying. It’s almost impossible to find those neat outdoor heaters. The same goes for pressure-treated wood. We’re all trying to make our involuntary staycation one worth remembering.
During a talk with Dick Young yesterday, he recalled graduating from Babson in 1963. Home Depot co-founder Arthur Blank also graduated from Babson that year. Their class has, as a whole, been most active in giving back to the school.
Mr. Blank recently announced a $50 million gift to Babson. It will go towards entrepreneurship. For as long as I can remember, Babson has been ranked #1 by U.S. News & World Report for entrepreneurship. I expect that to continue now for 50 million more reasons.
No one can predict the future of the Home Depot, but when it comes to companies well-positioned for America’s current conditions, it’s hard to think of a better one.
Below read more from Dick Young on why now, more than ever, you should be looking at individual stocks.
UPDATE 9.28.2020: I have outlined further my current strategy for investing in individual stocks here.
Originally posted March 27, 2020.
I subscribe to both Value Line and VL’s conclusion on stocks.
Two weeks ago I began a formula-based buying program that I plan to continue throughout 2020.
My formula is devoted 100% to stocks. I continue to build my counter-weighting fixed-income portfolio and continue to add to three fund positions.
I first started buying the funds in the early 1970s. (about 50% fixed income).
Today, I avoid most funds and all index funds.
THE CASE FOR INDIVIDUAL STOCKS HAS NEVER BEEN STRONGER
The battle with the coronavirus is having an incredible impact on daily life, the global economy, and on the stock market. In regard to the latter specifically, volatility has been off the charts, punctuated by the near-3,000 point drop on The Dow Jones Industrial Average on Monday, March 16th and the 2,112 point (12%) spike up on March 24th. The other major U.S. stock indexes have also experienced exaggerated volatility and large net losses of late. This has hurt a huge percentage of the investment community, which has trillions of dollars in assets allocated to broad index mutual funds and ETFs. This asset class has exploded in popularity over the past couple of decades. However, when the overall market falls so far so fast, these securities incur the full brunt of the downturn.
Value Line, on the other hand, with more than 87 years of experience in both bull and bear markets, has long preached the benefits of owning a collection of good-quality individual stocks, rather than the ordinary index fund. In our flagship service, The Value Line Investment Survey®, and its digital counterparts, we track approximately 1,700 stocks across more than 95 industries. Our independent, expert analysis, which includes a research staff of more than 70 professionals and a number of battle-tested proprietary ranks & ratings, has helped investors get the most out of the decade-long bull market, and will aid investors in navigating this troubling time, and the eventual market recovery that will follow.
Action Line: Like owning a single-family home, owning individual stocks gives investors the maximum freedom and transparency in their portfolio. Ask your advisor about the individual stocks in your portfolio today. If he tells you there aren’t any, ask him “Why not?”
E.J. Smith - Your Survival Guy
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