Before we get started, my hats off to Ted M. who suggested a rebound in the real estate market as we enjoyed a dinner he bought. I argued the case that there is a huge shadow inventory of homes (3.1 million) that could keep prices down (2-3% a year) for several years.
Much to my surprise, the cover story in this weeks Barron's was all about the sustainable BOOM (7% growth in the RE market starting now.)
Mike Ameel just got all excited, perhaps giggly.
The article is careful to pint out that a few of the explosive markets like Minot ND and Midland TX are petro driven, the Case Shiller surveys are generally quite positive in many markets. Quite positive values must be taken with a grain of salt. The example the article gave was Phoenix which was down 55.9% and after a great six months of climbing 14%, the market is still down 49%.
But things look promising, so Ted, I am sorry for arguing my point sot strongly while you were being such a nice host the other night.
Other articles included a bullish story about home builders (obviously linked to the positive housing news.) which by the way has me thinking about an opportunity we all might want to watch. A Stansberry report about Canada, their currency and the timber market paints the following picture.
The Loon (Canadian Dollar) is up 65% over the last three years. That makes Canadian Timber extremely expensive creating a competitive advantage for American timber companies especially along the Canadian border. As the market for homes continues to improve, we could see some nice values in the timber lumber sector. We are doing homework on LPX and POPE.
LPX Louisiana-Pacific Corporation, together with its subsidiaries, engages in manufacturing and distributing building products for new home construction, repair and remodeling, manufactured housing, and light industrial and commercial construction. The company's Oriented Strand Board segment provides structural panel products, such as plywood, including roof decking, sidewall sheathing, and floor underlayment. Its Siding segment offers SmartSide siding products and related accessories, including wood-based sidings, trim, soffit, and fascia; and Canexel siding and accessory products comprising pre-finished lap, panel, and trim products. The company's Engineered Wood Products segment offers I-joists, laminated veneer lumber, laminated strand lumber, and other related products for residential and commercial flooring and roofing systems, headers and beams, and other structural applications. In addition, it provides decorative molding, cellulose insulation, and timber and timberlands. The company offers its products to retail home centers, manufactured housing and shed producers, distributors, wholesalers, and building materials dealers in North America, South America, Asia, Australia, and Europe. Louisiana-Pacific Corporation was founded in 1972 and is headquartered in Nashville, Tennessee.
POPE
Pope Resources, A Delaware Limited Partnership engages in managing timber resources in the United States. It operates in three segments: Fee Timber, Timberland Management & Consulting, and Real Estate. The Fee Timber segment involves in growing, harvesting, and marketing timber to export brokers and domestic manufacturers from its 175,000 acres of tree farms. The Timberland Management & Consulting segment provides investment and timberland management services to the funds and to other third-party timberland owners. This segment engages in raising investment capital for the funds, as well as building and managing diversified timberland portfolios for third-party investors and the company. The Real Estate segment is involved in securing entitlements and/or infrastructure for the development; selling the entitled property to a party who will construct improvements; negotiating conservation easements; and leasing residential and commercial properties in the Port Gamble townsite, as well as commercial office building in Poulsbo. Pope Resources sells its logs to lumber mills and other wood fiber processors located in western Washington and northwest Oregon, as well as to export intermediaries located at the ports of Longview, Tacoma, Port Angeles, and Olympia, Washington; and Astoria, Oregon. As of December 31, 2011, it owned 114,000 acres of timberland in western Washington, as well as 61,000 acres of timberland for the funds in Washington and Oregon; and managed a portfolio of 2,800 acres of real estate properties in Washington. The company also engages in cell tower, brush, and mineral leasing operations. Pope MGP, Inc. and Pope EGP, Inc. operate as the general partners of Pope Resources, A Delaware Limited Partnership. The company was founded in 1985 and is headquartered in Poulsbo, Washington.
Both have sad looking fundamentals, but after the beating they have taken over the last 5 years, it is not surprising. We will look at both close and see how Bad they are.
For those of you who are dividend hounds, there is a great piece about Nuveen SB Div Gro;A (NSBAX). Interesting approach to dividend prospecting, but the top ten holdings reflect many in our core holdings such as KO, CVX, ABT to name a few. It's a good article.
For you bond diggers, Cynthia Lynn lays out the possible impact of QE III on bond values. Honestly some of the logic went over my head, but it is still an interesting read.
Ok let's get down to it. I will be gone Thursday through the following Tuesday and internet receptions will be spotty or even non-existence, so we hope we can set things up for you to survive until our return.
(If you were wondering, the FishWhisperers sans Mr. John K-we'll be thinking of ya- will be fishing the north part of Yellowstone National Park on a trip put on by The Yellowstone Association chosen guides. It should be very special and I believe we might be going to some very special fishing holes?)
Monday 10 September
France will announce industrial production numbers which will be down, but not a major market mover as everyone is still high on the Draghi comments from last week.
GDP figures will come in from Japan and should please though they are off some really low numbers from last year.
The big one is the merchandise trade balance number out of China. While they have a huge push for some infrastructure project for the next 24 months (24 subways, 15 major highways, two ports etc.), and when China says they are doing something, they actually spend the money and do it. (Congress Senate did you hear that), it is to early to see that impact the current trade imbalance. Look for a bad news story to open the market.
In the US we do not have much to read about,. We have a consumer credit report due out later in the day, and it should see a nice bump to almost 10 billion. I am guessing that due to the great auto numbers we had last month. Not verybody wins cars, some people have to buy them and finance them. This bump should be considered a good thing in a logical world.
My guess for the day, If China does not scare us too bad, llok for a low volume flat day.
Tuesday 11 September
The Merchandise Trade balance numbers come out of the UK. Look for imports to be down as domestic consumption is slow. I was amazed at all the second had shops pooping up in the name of every conceivable registered charity. This has to be cannibalizing normal retail sales or at least making margins dismal.
Canada will announce its balance of trade numbers and their exports should be contracting because of the rise in the Loon. Manufacturing numbers however should remain healthy for another month or two.
The US releases its international trade numbers and the negative imbalance dropped last month from 48 billion to 42.9 billion. (Mostly due to lower oil prices.) Well oil has been creeping up and some sectors of the economy are slowly picking up so we thing the increase in our deficit will exceed the consensus of 44.3 billion. Look for 45 billion and the market will take it in stride.
Another low volume flat day.
Wednesday 12 September
We have a slew of numbers out of Europe such as Eurozone industrial production, Italy industrial production, UK labor market numbers, and Eurozone consumer prices. I am thinking all but the consumer pricing info will disappoint.
Japan will have machine order numbers, corporate goods pricing, and tertiary activity numbers and they should all look pretty good over the lousy numbers from last year. This should not impact our market.
Here in the states, not much attention will be paid to either the mortgage apps numbers, import export prices, or wholesale trade prices, but everyone will be looking for leaks to see if we are going to get QE III.
If something is leaked to the positive look for a 2% gain, if something is leaked to the negative look for a 1% drop. If there are now leaks, look for another low volume flat day.
Oh yeah the new iPhone gets released on Wednesday. AAPL usually drops after the release of a new product for a few days to a few weeks as the products, even as good as they are never seem to meet the expectations of the hype.
Thursday 13 September
Jobless claim numbers will look again to say 360,000 down from 365 last week. We will see a jump in the PPI to say 1.5 on the month to month number. There is also a lot of fed banter today. Look for a 1 percent gain on the day.
Friday 14 September
New Zealand will announce fiscal policy z z z z z z z .
In the US look for CPI numbers to creep up and we will hear some inflation talk and gold will raise a bit. Retails sales will look healthy as back to school promotions seem to be working. (We will hear about the poor margins later.) Consumer sentiment will drop as we have to parties telling all of their constituents how bad things are and that they have the silver bullet to fix it all.
Another point down in the market.
So if I had to guess, (which I don't. I could just leave it there and since I am now down to two readers still hangin' in here with me what is the point of putting it out there?) the market will be down 2.5% on the week.
Let me leave you with this sobering thought. 173,000 people, for the first time, applied for food stamps in August. The current economy only created 96 thousand jobs.
Salve Lucrum
Since 7/26/2012
