Timber for the long haul

[aiywqexr47]

Given that the second word in the title of these forums is Traders as opposed to Investors it is not surprising much of what is posted here are short run ideas including day trades, swing trades, and momentum plays.

For those of you with a longer-term investment horizon you may want to consider adding exposure to timber to your portfolio for inflation protection and real growth at about the long-run pace of the global economy. Some of the greatest investors in the business are the former and current managers of Harvard & Yale's endowments - Meyer and Swenson respectively. Here is an excerpt from Yale's 2006 report. Note the endowment has over a quarter of its investments in real assets and one of the largest allocations to timberland in the industry (and the top annual performance over the last 20 years to boot).

http://www.yale.edu/investments/Yale_Endowment_06.pdf
Yale Endowment report said:
Real Assets- Real estate, oil and gas, and timberland share common characteristics:
sensitivity to inflationary forces, high and visible current cash flow, and opportunity to exploit ine?ciencies. Real assets investments provide attractive return prospects, excellent portfolio diversification, and a hedge against unanticipated inflation. Yale’s 27.0 percent long-term policy allocation significantly exceeds the average endowment’s commitment of 8.4 percent. Expected real returns are 6.0 percent with risk of 15.0 percent.


http://www.nytimes.com/2011/09/29/business/yale-endowment-posts-return-of-21-9.html?_r=1

Now granted Harvard and Yale are likely making direct investments in timberland as Harvard Mgmt Company bought 10,000,000 acres in New Zealand under Meyer. In my view this does not preclude smaller investors from gaining access to this asset class. Below are a few options if one was so inclined to obtain exposure to timber for the long haul.

[adolume]

Timber is pulling back after becoming extremely overbought in the short run. Look for retracements that coincide with an RSI(14) that bounces off the 40 to 45 level for an entry if you're considering this asset class. Outside of gold timberland may be the best inflation hedge available. It also has the benefit of spinning off cash flow which is not a characteristic gold can claim.

---------------

If you prefer the diversification/spreading of risk of the two ETFs mentioned above over the selection of individual stocks note that iShares WOOD is the cheaper of the two with an annual expense ratio of 0.48% while Guggenheim's CUT comes in at 0.70%. Neither are particularly liquid with three month trailing volume averaging ~15,000 shares traded daily for WOOD and 50,000 shares traded daily for CUT. It appears whatever extra expense paid annually to CUT could theoretically be made up in narrower bid-ask spreads but again I'm not suggesting timber is a quick trade but rather a multi-year holding in a portfolio.

[Antoshkawes]

I'm bullish on timber as a long-term inflation hedge as part of a longer-term, diversified portfolio. I will be watching this general market pullback for a good entry position in timber names. In the meantime it looks like we're seeing mixed signals in one timber ETF. There is bearish divergence at the same time a Cardwell Positive Reversal signal went off. The rectangle pattern implies the share price goes to 23.30 if it can breakout from resistance. Need to watch how the RSI(14) reacts at the 40-45 level. If it finds support this is bullish. If it crashes through on its way to 30 or even 20 then this would be bear market activity.

[ariuqloqo]

Contrary to popular practice I often do not draw trendlines and Fib levels from extreme highs and lows. Instead I prefer to draw them from areas that seem to represent the trend better. Extreme highs and lows are often accompanied by high volume and long upper or lower shadows on the session candle and represent retail trader stops being run up by floor traders. I've found it is often better to use the pivot just prior to the extreme high or low or to use a level that has been tested twice or more.

A look at a few of the larger names in the timber business.

[AlfredoMl]

Heard something on the news that lumber prices were spiking in wake of Hurricane Sandy. I would expect this to be a short-term drop in the bucket compared to the correlation timber/lumber should have with the global economy.

http://www.bloomberg.com/news/2012-10-31/sandy-to-boost-construction-jobs-as-rebuilding-spurred.html

You owe it to yourself to set aside 19 minutes to watch the following (pass it on):
http://youtu.be/jboTeS9Okak
-----------------------------------
Perspective:
http://frontpagemag.com/2012/dgreen...tm_campaign=446602d97a-Mailchimp_FrontPageMag
http://www.rushlimbaugh.com/daily/2012/11/07/in_a_nation_of_children_santa_claus_wins