More than twenty-five years of lumber and futures trading confirm the fact: itís hard to outguess the market. Win some, lose some, but the key to profitability is keeping the losses small when youíre wrong and making a sack full when youíre right.
Using Relative Prices is one of the surest ways of making that happen. If you use relative prices when you make your trading decisions, you will know which items are under-valued and which are over-valued. Under-valued items tend to go up more than the average in a bull market, but they don't fall as quickly during a bear market. If you are right, you fill up the sack. If you are wrong, you get a chance to get out with your shirt.
Over-valued items can take your breath away when the market falls. And they can take most of your yearís profit too. But if you eliminate over-valued items from your inventory, youíll take a big step toward minimizing the effects of market crashes.
Lumber Numbers Weekly Analysis shows you which
items are likely to add value to your inventory and which items are
high risk. Each week we provide a Lumber Numbers Relative Value Table
describing each item's price relative to the market. Lumber Numbers
Relative Price Charts provide about 200 Weekly Relative Price Charts
like the one below, updated every Friday. The Lumber Numbers Weekly
Report discusses the market and a few key under-valued and over-valued
In the Relative Price Chart above, the vertical black bars represent the historical range (10+ years) of Southern Pine Eastside #1 2x6-16's price, relative to the Southern Pine market average. The red line is this year's track of the item's price relative to the market. These charts are a unique copyrighted graphic display by that clearly indicates if the item is under-valued or over-valued. They also indicate historical seasonal trends of this item's price relative to the market. See the Quick Start Guide for more on charts.
Looking again at the #1 2x6-16' example, in January (week 2), 1999 , the red relative price line indicated #1 2x6-16' was over-valued. We expected its price, relative to the market, would decline. From week 2 to week 26, the relative price of #1 2x6-16' declined as expected. While the market rose a robust $107during that time, #1 2x6-16' rose a meager $12. Owning #1 2x6-16' didn't give you much bang for your inventory buck.
At week 26, #1 2x6-16' was under-valued. We expected
its relative price would rise, so we thought it was good value, even
though we didn't know which way the market was going. By October (week
41), the relative price of #1 2x6-16' had increased. From week 26 to
week 41, the market fell $90, but #1 2x6-16' rose by $40. #1 2x6-16'
showed a profit, even though the market dropped $90. That's good
|How to Subscribe||