someone tell Steve & Tom about the Dublin collapse-in-the-making

[Spartacus]

InvestmentU still harping on the "foreign buyers will flood Florida ..." theme

http://www.dailywealth.com/archive/2...007_oct_08.asp

EJ once wrote the same thing (foreign buyers, not wood), in his AlwaysON articles but I've read nary a peep about it from him for years now.

Interesting idea for a futures speculation, though.

[GRG55]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

InvestmentU still harping on the "foreign buyers will flood Florida ..." theme

http://www.dailywealth.com/archive/2...007_oct_08.asp

EJ once wrote the same thing (foreign buyers, not wood), in his AlwaysON articles but I've read nary a peep about it from him for years now.

Interesting idea for a futures speculation, though.

One of my brother-in-laws is a member of the Legislature of British Columbia, Canada, (the westernmost province) which has (had?) major coastal and interior lumber industries. He's telling me that the exchange rate is a "last straw" for the industry, and dimension lumber sawmills in particular are closing all over western Canada.

The one item to be careful about is that the pine beetle problem has covered a lot of the interior of BC, Washington and Idaho, and is now across the continental divide into Montana and Alberta (I drove through Alberta, Montana and Idaho in June and saw quite a bit of damage from the highway). Apparently the dead trees have to be harvested fairly quickly to extract any value. I'm not sure what they plan to do with all this wood - pulp it? or stockpile at the sawmills and hope for a housing recovery? Maybe there's somebody out there in iTulipland that knows this business?

[jk]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

just looked at a chart of plum creek timber. it's not cheap.

[GRG55]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

just looked at a chart of plum creek timber. it's not cheap.

Didn't "timber" as an investment class become rather fashionable as part of the "Let's be just like Harvard and Yale" when it was revealed that they held trees in their endowment funds?

Jeremy Grantham also has been talking about timber for quite some time now, as I recall (although I think his most recent view is that it's now fully valued?)

Maybe the stock prices still benefit from that euphoric phase?

[zoog]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

Didn't "timber" as an investment class become rather fashionable as part of the "Let's be just like Harvard and Yale" when it was revealed that they held trees in their endowment funds?

Jeremy Grantham also has been talking about timber for quite some time now, as I recall (although I think his most recent view is that it's now fully valued?)

Maybe the stock prices still benefit from that euphoric phase?

Plum Creek has been hyped for quite a while, especially at InvestmentU, although I don't think I've seen anything lately (haven't really been looking though). Generally, I believe the main attraction for timber stocks is reliable dividends, but Grantham and others also claim better long-term performance than general stocks, hedging against downturns in the stock market, beating inflation, etc.

InvestmentU from 2004:

According to legendary investor Jeremy Grantham, timber prices have beaten inflation by 3.3% a year over the last century.

Add in 6% a year in income (from cutting trees), and 2.5% a year in inflation, and you've got returns of nearly 12% a year in timber… that beats the return on stocks! Even better, the returns on timber have been less volatile than the stock market.
...
The other way is to buy shares on the stock market in businesses with a ton of timber. The most direct timber play in the stock market is Plum Creek Timber (NYSE: PCL).

Motley Fool from 2004:

Here's why I like Plum Creek Timber: Two years ago, the company was hit with a supply glut and had the choice of taking on debt or mowing down some less mature trees in order to meet its at-the-time dividend. Remember the store-of-value argument above -- where trees grow more valuable as assets, the longer companies wait before cutting them -- and you'll see why I think it's such a positive that management instead cut their dividend instead of acre after acre of immature trees. Even so, the dividend sits at a none-too-shabby 4.7%, while Plum Creek's assets are valued at less than $1,000 per acre.

InvestmentU from 2005:

The timberland consultant I'm out here with worked for Rayonier (RYN) for years, and has been a consultant for Plum Creek Timber (PCL), as well. Rayonier and Plum Creek Timber are, by far, the largest direct timber investment plays you can buy.

They know timber, and they are shrewd managers of their land. Plum Creek is larger and more diversified, but Rayonier is still an excellent timber investment play, with over 2 million acres of quality lands. I like both of them so much, I have both of them as "buys" on my newsletter's fairly short recommended list.

They both traditionally pay dividends in the 4% range. And they're both relatively cheap, with timber assets valued at only $800 to $1,500 per acre (depending on how you crunch your numbers). There are many hidden gems in their properties that are worth many times that - I know because I've stood on them.

[GRG55]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

Plum Creek has been hyped for quite a while, especially at InvestmentU, although I don't think I've seen anything lately (haven't really been looking though). Generally, I believe the main attraction for timber stocks is reliable dividends, but Grantham and others also claim better long-term performance than general stocks, hedging against downturns in the stock market, beating inflation, etc.

InvestmentU from 2004:
Motley Fool from 2004:

InvestmentU from 2005:

Nice historical summary zoog! Of course you're right there in "tree country" aren't you?

Whatever happened to the Weyerhauser "Wall of Wood" that I remember hearing about incessantly about a decade ago? Are all of these forest companies off limits then due to stock valuations and the death of housing?

[zoog]

Re: someone tell Steve & Tom about the Dublin collapse-in-the-making

Nice historical summary zoog! Of course you're right there in "tree country" aren't you?

Whatever happened to the Weyerhauser "Wall of Wood" that I remember hearing about incessantly about a decade ago? Are all of these forest companies off limits then due to stock valuations and the death of housing?

Good question, and I haven't really dug into the details. As with so many things these days, the answer likely lies in what the near/mid-term future demand will be in Asia.

I wasn't here during the heat of the spotted owl timber industry crisis, but of course the local economies were heavily affected by that, especially small towns. Arguably the Northwest economies have diversified more since then, but the slowdown in housing is slowing down our timber and wood products industry again. I don't know if it will be severe enough to put us into a regional tailspin, and how much it will hurt timber giants like Weyerhauser.

[zoog]

Re: Weyerhaeuser and timber industry slowdown

Good question, and I haven't really dug into the details. As with so many things these days, the answer likely lies in what the near/mid-term future demand will be in Asia.

I wasn't here during the heat of the spotted owl timber industry crisis, but of course the local economies were heavily affected by that, especially small towns. Arguably the Northwest economies have diversified more since then, but the slowdown in housing is slowing down our timber and wood products industry again. I don't know if it will be severe enough to put us into a regional tailspin, and how much it will hurt timber giants like Weyerhauser.

From the local/regional news today (October 19, 2007)

Washington Weyerhaeuser To Shut Down Three Plants

PORTLAND - Federal Way-based Weyerhaeuser said Thursday it will indefinitely close three plants before the end of 2007 because of weak customer demand amid a sagging housing market.


The facilities are Canadian oriented strand board plants in Drayton Valley, Alberta, and Wawa, Ontario, as well as a laminated strand lumber plant in Deerwood, Minnesota.


Weyerhaeuser says about 450 people work at the affected plants and they will receive severance pay and job-transition services.


The Wawa and Drayton Valley plants are two of Weyerhaeuser's nine oriented strand board mills and have a combined production capacity of about 885 million board feet.


The Deerwood plant is one of three Weyerhaeuser [laminated strand lumber] plants that has an annual production capacity of about 6 million cubic feet of engineered strand lumber per year.


Once the company fulfills existing orders, the three plants will shut down indefinitely.