Minor & Major FDPs
Forecasted Decision Points, FDPs, will be my legacy. These markers of when the price of lumber will rise and fall are misunderstood by at least 90% of our lumber industry. The reason is the same as why I do not understand what holds the universe together. I am fascinated by the stars, planets, and solar systems to the point of knowing a few constellations, but I have no clue how the big ol’ universe stays together and works.
I acknowledge my lack of understanding and am not so foolish as to make assumptions that astronomers are guessing. My ignorance or lack of understanding does not create a space for other experts work to be minimized.
The sun rises and sets every day, never at exactly the same time and position, but still close enough for me to plan my life by it.
I won’t try to compare LLG’s FDPs to reliability of the universe, but I will insist that our lumber market is merely the expression of repeating human behavior that is governed by life and seasonal cycles. These repeating cycles are influenced by occasional disruptions, and, even then, our reactions to the events are equally as predictable. Where we err is in the miscalculation of human response. After the fact we always see clearly. The best example of this is the 2020 lumber market. Our initial response was completely the opposite of what the reality was. We thought decreased lumber demand, totally overlooking the obvious scramble to flee to the suburbs and spend vacation money on lockdown DIY projects.
It’s all about timing. Eventually, we humans will revert to our root behaviors, which means the FDPs may get jolted out of alignment by unforeseen disruptions, but, over time, they are the only logical forecaster of price movement, because they forecast how we will behave based upon how we usually behave.
We have a minor FDP this week, projecting a short composite reversal and a longer SYP reversal. Each FDP is a new one, a stand-alone event not a carry-over from a previous one.
Disruptions or Distortions?
“Disruption”: Noun. Disturbance or problems which interrupt an event, activity, or process. We have come to expect disruptions. In fact, disruptions are perceived as the newest innovation in business that displaces or replaces an existing icon...like electric vehicles. These disruptors have become perceived as financial opportunities. Disruptions create unforeseen impacts and, if anticipated correctly, can be very fruitful.
At some point in every disruption there is a “Distortion”: Noun. The action of giving a misleading account or impression. Example, electric vehicles. Imagine a driverless flatbed loaded with 40,000 pounds of lumber being transported by a 40,000 vehicle, traveling down the road at 70 miles per hour with no one behind the wheel. It’s frightening.
Imagine a lumber market that escalates in price by 400% in 12 months, supply is unable to increase, and demand relentlessly begs for more. Supply disruption eventually transforms into distortion, seemingly with no disruption relief, no demand relief, no supply relief, and a relentless request for more of the same. The result is the inability or refusal to recognize distortion. That is where our lumber market is headed. We are not there yet. FDPs project distortion recognition in September 2020.
To get there we must endure a counter-cyclical summer rally. What can make that happen? Home buyers making decisions based upon monthly payment affordability, not long-term financial analysis.
Looking Forward...ML
Are you fed up with being caught on the wrong side of the market...losing orders because your lumber prices make you uncompetitive? I can assure you the orders you lose are not because the other guy is selling at a loss. It’s not you or your buying style. It’s just timing. I forecast when the Lumber Market will rise and fall. No one else tells you months in advance when prices will reverse…no one! Call me @ 336.516.5584… www.laymansguide.info… matt@laymansguide.info