General A thread to discuss and follow the incoming inflation bomb

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Hauler

Hauler

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JorgeMasvidalsBeard said:
The demand has more to do with renos than it does home building.

It's also not really correct for people to refer to not as a "supply issue" as if we can just ramp up timber harvesting.
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US housing starts are at a 15-year high
 
BeardOfKnowledge

BeardOfKnowledge

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Hauler said:
US housing starts are at a 15-year high
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I understand. Home renos are at an all time high. The supply market can withstand one or the other, but not both. I was listening to one of the heads of a Canadian lumber producer on the radio the other day and he explained it very matter of factly. Yearly timber harvests are capped in the interest of conservation. Over the last 12 months demand has far exceeded the maximum harvest even if there had been no shutdowns and no one with any sense is going to build new productions facilities or challenge quotas when everyone knows the problem will solve itself by this time next year.
 
Rambo John J

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Hauler @Hauler this isn't really related but it makes me think of you when I see 15 logging trucks in a row on the highways and freeways.

The fires in Oregon last year scorched a lot of massive trees which are now being logged. Log trucks all over the place, 20 or more times as much logging as usual I would guess. Crews from around the country are logging 7 days a week in the burnt forests. Massive trees, old growth trees...so much good lumber. You would think the prices would be reasonable here but lumber is spendy spendy. People are also now protesting some of the logging because some of the out of state crews are marking and taking a lot of trees that don't need to be taken. A massive wood grab is underway here, massive wood grab.

Soooo Much Damn Wood!!!
 
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Hauler

Hauler

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JorgeMasvidalsBeard said:
I understand. Home renos are at an all time high. The supply market can withstand one or the other, but not both. I was listening to one of the heads of a Canadian lumber producer on the radio the other day and he explained it very matter of factly. Yearly timber harvests are capped in the interest of conservation. Over the last 12 months demand has far exceeded the maximum harvest even if there had been no shutdowns and no one with any sense is going to build new productions facilities or challenge quotas when everyone knows the problem will solve itself by this time next year.
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I've heard prognosticators say the under-supplied housing market - which is still recovering from the 2008 clusterfuck - will take 4 years to catch up.

But to your point, if timber is maxed out there's not much point in firing up another mill. Although if there is money to be made, I would think quotas will increase.
 
BeardOfKnowledge

BeardOfKnowledge

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Hauler said:
I've heard prognosticators say the under-supplied housing market - which is still recovering from the 2008 clusterfuck - will take 4 years to catch up.

But to your point, if timber is maxed out there's not much point in firing up another mill. Although if there is money to be made, I would think quotas will increase.
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I'm very disappointed that the guy who monopolizes the outdoors thread would suggest circumventing the quota system.
 
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kneeblock said:
Why this is wrong in simple terms:

1) There is a rebellion underway among neoclassical economists as MMT is gaining purchase in policy circles. Part of the analysis from AEI (no surprise) is ideologically pitched against MMT, as obviously is Burry's investor advice. Inflation panic and deficit hawkishness is trying to make a comeback in certain circles attempting to move past the populist insurgency. MMT has been good for populism, but bad for austerity evangelists which has serious implications for the management of a global north centric economic order.

2) CPI and food or "real goods" decoupling naturally happens during times of crisis due to much more basic laws like supply and demand. We would need to know more about this trend over more extended time than that graph offers. The reasons certain goods and services on your last chart have risen more sharply largely has to do with the marketization and deregulation of industries (e.g. education and healthcare).

3) Asset inflation has been a regular feature of the neoliberal order of the past 40 years. It comes and goes because of hoarding tendencies at the top, as has been documented through numerous crises, and is especially influenced by tax policy. What's missing is the role of tax policy in offsetting inflation, a cornerstone of the MMT framework. Unfortunately, there hasn't been much appetite for using that instrument appropriately among legislators and to the ultimate point of this argument, that's likely what will be needed or else we'll continually be subject to bubbles primed to burst somewhere, though not all bubbles burst and crisis cash doesn't always devalue, strictly speaking, especially with a global reserve currency.

Not trying to convert you to MMT because I'm not fully sold on all of its premises myself, but am trying to say see the forest for the trees, which is largely that as an economic theory, it's growing in influence and the inflation panic argument is a broadside against it. If the fiscal policy doesn't do some of what it's expected to do to balance the monetarists may eventually be forced to bring the pain, but that's a political question largely.
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Hauler

Hauler

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JorgeMasvidalsBeard said:
I'm very disappointed that the guy who monopolizes the outdoors thread would suggest circumventing the quota system.
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Haha.
That's like a double-shot across the bow. Someone piss in your cornflakes?

Responsible forestry can be good for the environment - I'm not suggesting we bulldoze Canada or anything like that.
 
BeardOfKnowledge

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Hauler said:
Haha.
That's like a double-shot across the bow. Someone piss in your cornflakes?

Responsible forestry can be good for the environment - I'm not suggesting we bulldoze Canada or anything like that.
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I was just making a joke. The quotas cant really be fucked with because it takes a long time for trees to grow. Also, I like piss in my cornflakes.
 
D

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peter_weyland said:
Lumber is up like 350% year over year. I was going to re-do a patio covering that buckled in the Valentine's Day storm- $20K for a wood lean-to design with polycarbonate roofing. 2020 quote was like $11K.

Apparently lumber costs are adding $35K to new house prices.
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I was going to build a boat house this year but that's a no-go now. Price is 25% higher than it would have been a year ago.
 
Hauler

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Splinty said:
I was going to build a boat house this year but that's a no-go now. Price is 25% higher than it would have been a year ago.
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Your poor yacht is gonna be homeless now!



Also - someone on here probably warned you about those prices going up. ?
 
kneeblock

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Hauler said:
Sorry.
OSB stands for oriented strand board. It's a plywood sheathing typically sold in 48" x 96" sheets used on walls, flooring and roofs in house construction.

Other than guaranteed contracts, nobody can buy OSB right now. Every mill is OTM - which stands for Off The Market - basically offering nothing - or very, very little - for sale other than what you agreed to contractually purchase for the year - which generally represents about 50% of your typical business.

The mills are blaming the labor shortage on why they can't keep up with demand. They can't fully staff their mills - and the logging companies aren't providing enough fiber - again blaming labor shortage. Trucking and rail are also problematic - again...labor.

Meanwhile, housing is as busy as it's ever been. So everyone needs more OSB than what is available for sale. This basically creates a bidding war which has driven the price to ridiculous levels.

7/16" 4x8 in April 2020 was $8/sheet
Today it is $38.50

That's just OSB.
The same principle applies to lumber. And windows. And doors. And adhesives. And fasteners. And etc...

I got word today that a major supplier of subfloor glue - a necessary component for construction - is not taking any orders from now until September. That's how behind they are in keeping up with demand.
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What is driving the underlying new construction demand, in your view? Is it actual consumer demand or principally development projects that got stuck in the pipeline and are now reactivated by the developers post pandemic? Or is it, as @Splinty suggests owing to greater liquidity and cheaper credit in the hands of the general public?
 
ThatOneDude

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kneeblock said:
What is driving the underlying new construction demand, in your view? Is it actual consumer demand or principally development projects that got stuck in the pipeline and are now reactivated by the developers post pandemic? Or is it, as @Splinty suggests owing to greater liquidity and cheaper credit in the hands of the general public?
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D) all of the above.
 
Hauler

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Feb 3, 2016
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kneeblock said:
What is driving the underlying new construction demand, in your view? Is it actual consumer demand or principally development projects that got stuck in the pipeline and are now reactivated by the developers post pandemic? Or is it, as @Splinty suggests owing to greater liquidity and cheaper credit in the hands of the general public?
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It's a combination of a lot of things.

Low mortgage rates are a big factor for sure.

Another factor is the hangover from the 2008 fiasco. The housing market crash crushed a lot of construction businesses, and taught them a valuable lesson on risk. A common practice was to build market or spec houses before you had a buyer. When the crash happened, many companies were left with giant inventories in what suddenly became a heavily saturated market. They all learned their lesson and have been much more conservative on how many houses they build and who they are building them for. As a result, the housing market has been undersupplied of new homes for a while.

So low mortgage rates, an influx of $1300 stimmie checks and a lot of people are like "Hey, let's build a new house". And that happened right after most lumber mills slammed on the brakes because everyone thought the market was going to grind to a halt during Covid.

Well, the construction industry ended up being deemed essential and the housing market was as busy as it's ever been. Lumber mills haven't been able to get caught up with demand - which was being fueled by both new construction and a huge amount of DIY folks who suddenly had a lot of extra time - and some free gov't cash - on their hands. Many of the millworkers who were laid off were already signed up for the unemployment and extra $600/week and figured "Nah, I'm good" and just didn't come back to work. The mills can't get caught up so there isn't enough lumber to go around - so up go the prices.
 
D

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not going to get better anytime soon

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3-4 years to catch up on inventory, but then everyone has 2008 on their mind and don't want to overextend and be left holding the bag.
 
Hauler

Hauler

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