Over the past few years, the strength in lumber proved to be a leading indicator for the bullish action we had seen in the homebuilders and, frankly, all housing related stocks.I have no comment on housing stocks, but I suspect this decline is either just "noise" following a large price increase, or more supply coming back on the market (remember many mills closed during the housing bust, and I suspect some are coming back online). Back in 2010, after the end of the housing tax credit, I noted that lumber prices collapsed. But the dynamics were different (that was obviously tax credit related and not a real recovery).
This week, though, lumber has sold “limit down” ...
![Lumcber Prices](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjM4Zx3IaEFeU4j6bwthHxmdcviWrhtqU23NXQqmwNkcgID4coojsBG6gB9bRDPoGyVw-FN_a-hFyJg2G-bLqWkrfgSfMBvAWo07AytArIVz3UkglxzgKrxc6JAFYcqiuu0B7y0A/s320/LumberFeb2013.jpg)
This graph puts the recent decline in context. This graph shows two measures of lumber prices: 1) from Random Lengths through last week (via NAHB), and 2) CME futures (through today).
The recent decline in CME futures hardly shows up.
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