RECORD HIGH LUMBER PRICE: Another Warning That The Market Is In A Bubble

As the price of lumber reaches an all-time record high, investors better take this as another warning that the market is in a massive bubble.  However, a large percentage of investors today are unable to spot bubbles because everything is in a bubble.  So, to see the price of lumber hit the highest price ever, doesn’t phase the market one bit.  Well, maybe the home builders understand the dangers of rising lumber prices, but the overall market is clueless.

The price of 1,000 board-feet of lumber reached a new high of $629 today, up from $592 last week when I wrote my article, The 3 Stage Housing Bubble CollapseThe lumber price is not only up a staggering 42% this year, but it’s also up 175% since the beginning of 2016:

According to the article, With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices:

Marc Towne of Classic Homes, which builds midrange to high-end houses in Colorado Springs, Colo., said he is spending $8,500 more on lumber for a typical home than a year ago, an increase of almost 40%. The company’s passing on about half the cost to buyers for now while it waits to see if lumber prices fall.

Even though many homebuilders lumber costs have increased significantly, many are passing half of that cost to the buyer waiting to see if prices will fall.  Well, ever since that article was written back at the beginning of March, lumber prices have jumped by another 14% from $550 to $629.

As home prices increase, more Americans are pushed out of buying a home.  In a recent interview on BNN Bloomberg, the CEO of the NAHB, the National Association of Home Builders stated that for every $1,000 increase in the price of a new home, 150,000 potential American homebuyers are priced out of the market.  At the time of the interview on Feb 20th, the extra lumber cost for the average house was $3,000.  However, the lumber price on Feb 20th was only $517 compared to the $629 today.

Now, the reason for the surging lumber price has been blamed on three factors:

  1. Canada lumber tariff
  2. Shortage of rail cars for transportation of lumber
  3. Increased forest fire damage to lumber stocks

Regardless, the price of lumber has never been higher.  Also, if we look at the lumber market sentiment, it is also at a new record high:

Looking at the Sentiment Trader’s chart, the lumber price at $619 (yesterday) pushed the market sentiment (optix) to a new high reading of 90.  If we go back all the way to 1991, the sentiment has never been higher.  Also, the second highest lumber price, not including the current 1-year trend, was $470 in 1993.  So, the record high lumber price is being set up for one heck of a BIG FALL.

With rising lumber prices and higher interest rates, fewer Americans will be able to afford new homes.  And it looks like we are feeling the pain already in the new home market, Housing Starts Tumble In April:

The driver of the tumble in housing starts is a 11.3% plunge in multi-family.. (single-family 893k vs 894k prior and multi-family 374k from 428k).

Three of four regions posted declines in starts, led by a 16.3 percent decrease in the Midwest and a 12 percent drop in the West.

While we may continue to see more demand for homes and higher prices this summer, the fall looks like a perfect storm for the market to start disintegrating.  Furthermore, even though the energy cost to build a home is quite high, it still pales in comparison to the staggering amount of energy to run the U.S. Suburban Economy.

Just think about the amount of energy that is consumed by the 2-3 cars the drive to work, store and school for only one household.  Or, how about all the energy it takes to supply water, electricity, and phone to each house.  Then, of course, we have to consider the energy cost to run and maintain the wastewater treatment plants the treat all the millions of tons of sewage each year.  How many of you realize that 2% of total U.S. electric consumption goes toward moving and treating wastewater and sewage (source: wastewater factsheet).

Americans have no idea that a new home built today will likely be totally dysfunctional within the next 10-20 years.  If we also consider the energy and dollar cost to maintain a home, most of us would be better off moving to the country and renting a mobile home… LOL.

The American Suburban Economy reminds me a bit of the German War Machine during World War 2.  Few people realize that Hitler invaded the European countries, not only for strategic reasons and to control their population and economies but to also acquire their stocks of oil for the attack on Russia.  Yes, Hitler obtained 5 million barrels of oil from conquering Norway, Holland, Belgium, and France (source: axis history).

And here’s another little tidbit that most readers may not know.  The reason the German Blitzkrieg was so successful in the beginning stages was that the German Army was high on crystal meth.  Yes, it sounds hard to believe, but true.  I watched a fascinating documentary on this subject matter that the military was given millions of pills of crystal meth called Pervitin:

When the German military launched their Blitzkrieg attack on Holland, Belgium, and France, the army was high on crystal meth.  Without needing sleep for days, high on crystal meth, the German military was able to conquer large areas of Europe in a very short period of time.  Today, most of us think that crystal meth’s origins started from some kitchen in a rural area in the United States.  However, it’s use went mainstream by the consumption of millions of Germans, 80 years ago, before and during World War 2.

Okay, getting back to energy and the housing market.  The U.S. Suburban Economy will run out of oil just like the German military.  Without a certain level of oil supply, the U.S. Suburban Economy will peak and collapse.  This is not up for debate.  While we can debate the timing of this event, it’s foolish to believe in an ENERGY SILVER BULLET to save our way of life.

I continue to receive emails in my inbox of some new energy source or technology that is going to save us.  I gather this must be delusional thinking because folks, there is no PLAN B.  Even the conspiracy theories that claim the Elite are trying to take down the population due to various tactics, it doesn’t matter… we are heading that way with or without the Elite’s supposedly diabolical plans.

Just like the collapse of the ancient Roman Empire, the modern global economy is standing at the cliff, and it won’t take much to push it over the edge.  More technology couldn’t save the ancient Roman Empire from collapse, because high degrees of technology consumes even more energy.  Thus, the collapse of the Roman Empire was due to the Falling EROI – Energy Returned On Investment.

The peddlers of high technology via robots and auto-piloted electric cars that can drive 65 mph straight into a cement median have no clue about the Falling EROI.  Unfortunately, investors who think Tesla still has a chance to provide us with electric vehicles to fill the highways, need to learn some basic science and financial accounting.  Tesla is going down in flames.  The only question is the amount of time it will take.

This is also true for the U.S. Shale Oil Industry.  I am currently putting together the last few graphs for my newest video on the U.S. Shale Oil Industry.  Let me tell you; it’s much worse than the market realizes.  If investors truly understood that the U.S. Shale Oil Industry was a Ponzi Scheme, then they wouldn’t invest in it.  However, just like Bernie Madoff who defrauded investors for $65 billion, seemingly NO ONE HAD A FRICKEN CLUE either.

The same is true today, not only in the shale industry, but also in the entire market.  The market is one big giant fraud.  But of course, frauds can last for quite a while before the fan hits the cow excrement.

Lastly, people will continue to put their money in highly inflated stock, bond, real estate, and cryptocurrency assets right until the time the BIG KAHUNA comes crashing down.  Just like the crash of 1929, everyone will be blindsided…. or mostly everyone.  Which means, many individuals will continue to write silly comments how GOLD and SILVER are old worthless relics while EVERYTHING else is the place to be.  That is… until the PHAT LADY SIGNS.


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17 Comments on "RECORD HIGH LUMBER PRICE: Another Warning That The Market Is In A Bubble"

  1. We live in frightening times. It’s my belief that “you personally” will most likely die of starvation or conflict between 2020 to 2050.

    You will experience a collapse of human civilization, a die-off of humans, a destruction of the ecosystem, a loss of access to mined and drilled resources, and a dark age from which your descendent’s will not reemerge.

    Simple really….when the World Economy Collapses everything shuts down…the end… We’re talking about grids down all over the world and 7.5B people dropping like f*** flies in short order. The collapse will be absolutely horrible..There is no collapse or horror movie ever produced that has even come close to imagining what the collapse of BAU might look like. I’m talking about every corporation and every social program going bankrupt at once. I’m talking about people eating people. I’m talking about the Worst Catastrophe to ever happen in the history of mankind. Nothing has ever, or will ever come close…

    Scholarly references:

    Scientific American: Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?

    Inside the new economic science of capitalism’s slow-burn energy collapse (Ahmed, 2017)

    Peer Reviewed Study: Society Could Collapse In A Decade, Predicts Historian (Turchin, 2010)

    NASA Peer Reviewed Study: Industrial Civilization is Headed for Irreversible Collapse (Motesharrei, 2014)

    The Royal Society: Peer Reviewed Study, Now for the First Time A Global Collapse Appears Likely (Ehrlich, 2013)

    Peer Reviewed Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)

    Peer Reviewed Study: Financial System Supply-Chain Cross-Contagion: Global Systemic Collapse (Korowicz, 2012)

    • Maurice Miner | May 17, 2018 at 12:28 am |

      MasterMind, it must be cheerful times in your house of an evening.

      I tend to think that we will “muddle through”, as initially (I think) proposed by John Maudlin.

      “Economists are often asked to predict what the economy is going to do. But economic predictions require predicting what politicians are going to do – and nothing is more unpredictable.”
      – Thomas Sowell

    • Yikes bro, quit scarring me. You make Steve look like a glass half full optimist.

    • And I looked, and behold peak oil: and his name that sat on him was Death, and Hell followed with him. And power was given unto them over the fourth part of the earth, to kill with sword, and with hunger, and with death, and with the beasts of the earth.

      If you were born after 1960, you will probably die of violence, starvation or contagious disease. Although it’s news to you, your generation is challenged with a technically-insoluble problem – a political problem – which will ultimately kill five out of six worldwide – or perhaps all. You can not solve this problem because that carbon-based, selfish-gene rational computer on your neck isn’t logical!

    • OutLookingIn | May 17, 2018 at 11:43 pm |

      I salute you.

      My long time interest has been and continues to be demographics.
      For tens of thousands of years the bio mass of planet earth could comfortably support about 2 billion humans. Utilizing human/animal power and augmented in small part by water and fire. The world population remained stable at about 2 billion humans until the early 1700’s. Then what happened?
      The mining and burning of coal, along with the invention of the steam engine. Followed closely (within 150 years) by the invention of the internal combustion engine and drilling/pumping and refining of oil.
      A successful bio mass farmer could produce enough food to support himself, his family and a few others.
      Today? A successful farmer produces enough food to feed a multitude of people. All compliments of energy, derived almost exclusively from oil. As a consequence, the world population, after being stable at 2 billion for thousands of years, has exploded to 8 billion just in the past 200 years! Exponential growth.

      Take oil away and what happens? Some 6 billion people are going away.

      • Take away oil and physical labour intensive farming returns and we all become farmers. people dont die off instead everyone will become healthier and fitter.

    • Mastermind – thanks for the links. I read them all. Last year I thought it would be an EMP I was prepping for. Now I am reminded about what I always intuited in the 80s and 90s. Long live Jared Diamond! Just glad I will die out before the rest of us will. And your links helped me to realize it was time to call a R/E broker in northern Idaho, albeit I understand I will likely be burned out in the coming firestorms.

  2. Steve, where is the PMs breakup that you wrote about? Your timing in case of Dow Jones and Bitcoin was correct but in case of PMs it was premature.

    • Ed,

      Actually, I never gave a date for the rise in the prices of gold and silver. However, I stated we would see much higher prices over the next 1-2 years as the markets roll over. That being said, it does seem like the fall will be a good time for the rise in precious metals prices to begin.


  3. Paul D Anders | May 17, 2018 at 4:14 am |

    Another Great article!

  4. Oil at 80 USD, incredible bull market.
    USD/JPY continues to rise and rise.

    • DisappearingCulture | May 17, 2018 at 6:51 am |

      Oil is not at 80, and we are not in a bull market; it’s flat or down for all indices this year. What cheer-leading planet are you from?
      No crypto cheer-leading lately I see; maybe becasue in the short term it is down? No matter. Let their be one day the pendulum swings up and you will be back on the bandwagon.

    • RD,

      I actually enjoy your comments because it comes from a mentality that agrees with the term, FRAUD & MANIPULATION IS GOOD and will continue forever. I would suggest anyone who thinks the Central banks will be able to continue this charade for years and years, need to go to GORDON T LONG’s Youtube Channel and watch about a half dozen of his videos. If that doesn’t wake you up, then your BRAIN most certainly is MUSH.


      • “FRAUD & MANIPULATION IS GOOD” : because fraud did not exist before 1913 I guess !
        “Central banks will be able to continue this charade for years and years” : I agree with you as I belive the logical and historical categories born and consitutive of capitalism will disappear.
        However, if the next debt/bubble crisis is taking place only in 2018, 2019 or 2020, it is only thanks to the FED which its rate increases policy. Should all western central banks had maintain all their rate at 0, it could have last another 5/10 years more.

        PS : it is brent which is at 80, not WTI indeed…

  5. Steve,

    They don’t call most of us “sheeple” for no good reason. Keep ’em coming. Love your articles. Read everyone. Really good stuff! 🙂

  6. Alternate View:
    What you are observing is “controlled Hyperinflation” by TPTB.
    They have the power to pump up the asset of choice and deprive the asset of scorn.
    They are trying to deny the crypto sector because they rightly see that sector as an immediate threat to their fiat economic system. That is why you have recently seen the old dinosaurs being trotted out bad mouthing Bitcoin, i.e. Buffet: Bitcoin is “rat poison squared” nonsense.
    Profit from the crypto sector and use some of those profits to stack silver. Use the rest of those profits to live life. Works like a charm and you don’t have to try to time “the end”

  7. I believe crucial shortages of fresh water will also be a variable in the next few years, combined with lower supplies (example:Lake Mead) and the lack of energy to supply it. Guess we all should invest in a few acres of land out in the boonies as well as PM. You can still find some good buys near about’s the Ozarks and live off the land (ponds, bears, outhouses and Hickory nuts). Don’t watch the movie Deliverance before investing.

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