Lumber chart

[sdholloway56]

Lumber (Globex) Weekly Commodity Futures Price Chart : CME (tradingcharts.com)

Very much a one-off from exceptional circumstances.

BTW, a bit more than half of the headline CPI number came from 2 things- used cars and energy.

Used car prices popping is a wonderful thing- there is a huge backlog of demand for new cars and plants will be humming for months to catch up.

Oil's bound to be a bit spunky following the biggest weekly refinery gasoline output in history.

Food in there a bit- a horrible, no good, very bad thing?

[sdholloway56]

Record gas demand not a bad thing for ethanol, either.

[sdholloway56]

Thinking about all the dealers who got killed when fertilizer prices collapsed in ‘09.

At least lumber inventory can be hedged.

And I bet some mills sold out as far as the eye can see.

[BA Deere]

This guy says the Home Depot type box stores are probably stuck with high priced inventory and their prices won`t come down much until they get rid of that.  The Mom & Pop lumber yards who were operating hand to mouth can maybe undercut the box stores and for a time sell for half price.

https://www.youtube.com/watch?v=jI1yeRvj43o   

But I bet we`d be surprised how cheap Menards etal buy their lumber and this isn`t their first rodeo, they anticipated the drop and had some sort of adjustable price where if the price dropped, Weyerhaeuser would help them eat the difference.   I haven`t priced a 2x4 stud lately but if it`s $10, it probably won`t drop like "grain prices" do it`ll go to 8 bucks and some idiot will pay it cause the old lady is bugging him to finish her she-shed  and he makes $150,000 salary, he doesn`t know or care what the price of lumber is, all he knows is his wife is nagging him and will pay the price.

Price for a 2x4 stud will probably never go back to the normal $3.50 price again, it`ll go to $4.50 and people will shut up and pay it.

[sdholloway56]

Sometimes even naifs hit on something.

The futures price will continue to come down but everybody in the chain will try to hold onto expanded margins- as anyone would. Only time and a competitive marketplace will drive those back out.

Of course we have many sectors that are no longer classic free markets.

[sdholloway56]

Like you never saw $2 boxes of branded Kelloggs Corn Flakes again after the commodities boom- even when corn went back to $3.

A pure commodity is a bit of a different animal.

[erikjohnson61y]

I am not worried about lumber or oil or even food causing a switch from cyclical (transitory) inflation to systemic inflation. Wage inflation does tend to cause systemic inflation though - wages increase, but cannot easily be decreased again like product or commodity prices can, If wages cause costs to go up enough, then the company raises prices, and then the employees ask for COLA raises, and the company raises product prices, and we're off to the races. 

So far the wage pressure seems to be in the under-$30/hour jobs, so I don't know if that will be enough of an economy-wide impact to encourage systemic inflation. On the other hand, a rather large percentage of the workforce makes $30/hr or less....  We'll see over the next couple of years how it turns out.

[sdholloway56]

Yeah, although I'd tend to view some wage inflation as a positive thing- we aren't going to go back to the 1970s wage/price spiral again in my lifetime.

Elsewhere, automation, super cheap energy etc. doesn't feel inflationary to me.

[sdholloway56]

If folks are freakin' cuz everybody saved some money during the pandemic or got some stimulus and are now bidding up the cost of their vacay, they can just get over it.

[bruce MN]

Who was it that said that the Kudlows of the world “have predicted 10 of the last 2 recessions”?