Invest in lumber?

[Brett Nelson]

I actually work in the financial industry, heavily involved in securities (including futures markets) as well as financial analysis for businesses. Chris K. is right in that the stated numbers only represent a 16.5% annualized rate of return. I consistently do better than that with my own investing. BUT.......There is a much easier way for you to invest in lumber that doesn't present so many unknowns for you.

Currently the front month (March09) lumber futures are trading at about $150. There were a few periods between 1993 and 2006 where lumber hit $450. It is quite likely that during the next 10 years we will see at least $400 prices again. If you really want to invest directly in lumber, then I would advise that you simply do it through futures contracts. If you want to invest in lumber in a more indirect fashion you can do so in a timber exchange traded fund like CUT, that is sort of a mutual fund made up of only timber companies. It is currently trading at $9.00/share and there is a fairly high probability that it will reach $30 within the next 10 years.

If you would like a little more direction on this, then feel free to pm me. I'd be glad to steer you toward the products you are looking for. This group has helped me out so much that I would love to be able to pay it forward in my area of expertise.

[Jim King]

If it was that good Wheyerhauser would be there trying to offset their Billion dollar loss. Dont do it. Go with Bernie even after he is in jail, a safer bet.

[Bruce Benjamin]

Dear investor,

We regret to inform you that your trees have died. We are very sorry for your loss. Our company is also taking investments in the commercial salmon fishing market if you would be interested. Thank you for your interest...And your money.

Bruce

[Chris Konikowski]

Chris, I think we agree on the issue of the original post, but I would respectfully take issue with the perception that "16.5% is not unfathomable."

While it may happen at times, in the investment world, the rule is risk vs. return. Over time Treasury bills average 3.7%(low risk), corporate bonds 5.9%(moderate risk), and the market 10.4%(I think we can all agree this has been proven to be high risk)

So, 16.5% is beyond, by a long shot, the market expectation. That puts it at or above an extremely high risk. If one likes to gamble, has money to lose, and enjoys high stake investments while still sleeping well at night - then it may be a consideration.

Why would you say the stock market is high risk? You just said yourself that the average rate of return on the stock market is 10.4% since the beginning. This includes the great depression pulling the average WAY DOWN! I understand that we are in a monster downturn, but you should never play the stock market over a short period of time nor look at short term results. The market will come back and the floating 10 year rate will be NICE once again (I guess this relies on what our new president has in mind for this country....)

Being that diversified is also something that I would not call high risk. If you are in higher risk markets, you ought to beat the market average pretty handily...given that you pay your dues on research and education about the companies and industries you invest in...

JMHO...

[Ben West]

Paul,

It isn't quite that easy. The govt. subsidy you mention is Conservation Reserve Program payments, it it is only for pines that were planted to reclaim ag. lands. Buying timber land, clearing it, and replanting with pines will not qualify you for the CRP payments. Buying old crappy ag fields can, but of course most of that has already been bought and put into pine CRP. The good ag acreage is too expensive to make pines and CRP and sensible investment.

If you are serious about investing in this, I think there is a much safer way.

In the southeast US, there are people that buy land relatively inexpensively, clear it, and then plant those pine tree forests. In 10 years, you can harvest for paper. 15 years, you can harvest for framing lumber.
The government gives you a subsidy for planting the trees.. I think it is $50/acre per year.

Note, this information was from a relative that does this. It may not be 100% accurate. Do your own research.

[John Keeton]

It would seem that the previous post violates the TOS????

Edited to note that the mods have removed the post referenced.

[Darrell Fox]

I don't understand how I violated the TOS?

[Jeff Cremers]

TOS


don't violate these guys they are very heavy handed. Take a look at their website.

http://www.tos.org/


Jeff

[Darrell Fox]

I couldn't agree more about urban timber. I have a small mill in my backyard in Honolulu. I have been working with tree trimmers locally for a number of years and have had the good fortune to get some wonderful logs. A lot of trees outgrow their backyards in Honolulu and the sweeping changes that are taking place in Honolulu are causing the removal of many more. In my neighborhood the dominant salvaged wood is Mango. If you can get to it before the powder post beetles, it is magnificant. It is even more spactacular if you let it spalt a little, but then it is really a race to beat the beetles to the wood.

[Darrell Fox]

I belonged to TOS in my University years. You have a point there.

[sullivan mcgriff]

Reminds me of one I read of in post war England where a farmer was selling pigs in this manner, when someone went to investigate they found one pig with a whole pile of ear tags on it indicating it's owners. As a whole it seems that they are offering a legit investment, with the caveat that it is illiquid, as it has no secondary market, and speculative at best. I saw something like this with maple syrup a few years back where you bought the trees and could get the $$ when they stop producing and are cut down, I prefer the bacon myself, with maple syrup

[Roger Wilson]

A $6100 koa investment is predicted to make you $280,000 over 25 years, but you can start getting profits in as few as 7-10 years.

So money does grow on trees.

[Darrell Fox]

My wife and I followed a tree farm in Central America for over a decade. We even spent a month down there looking at similar operations. It isn't for everyone, but if I had invested in those guys I wouldn't have to listen to my wife say I told you so.

[Jamie Oren]

I live here in hawaii, and if this is the same add I got. they are on the big island, at any moment there intire operation could be over run by lava. food for thought.
good luck

[Darrell Fox]

The tree farms are on the Hamakua coast in lava zone 8. By definition there hasn't been a lava flow in that area since 1800 and less than 1% has experienced a lava flow in the last 10,000 years.