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David Stafford
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Student of markets, enjoys following their course.
My book:
Around the World in Several Pieces
  • An Odd Couple; Lumber And Gold. 0 comments
    Nov 12, 2013 8:23 PM

    Things often come in pairs of 2. Adam and Eve, Silver and Gold, Christmas, and then the New Year. However, there are also some investments which come in some unlikely pairs.

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    An interesting discussion perhaps entails relating the desired properties of gold, and the real-life properties of various lumber investments.

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    As an Example of this, lets think about common refrains concerning Gold, and why its valuable. Lets also post some lumber stocks that may have similar qualities.

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    Gold maintains its value in periods of inflation because its a commodity amongst other reasons.

    WY(Weyerhauser), RYN(Rayonier), and PCL(Plum Creek Timber), all have dividend yields, in the 3-4% range, hence one is at least annually keeping up with inflation(presumably; if one believes official figures), and the basis of their business is also commodities in so many words, hence these too will perhaps fluctuate with inflationary currents if they are to sincerely arise.

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    Gold can in large quantities provide cash flows, via leases without the complete disposal of said asset.

    The beauty of Lumber investments, and/or managed lumber investments like those mentioned above is that they can maintain a similar cash flow stream, even at much smaller ownership levels. Hence though one wouldn't really be able to presumably individually get into the leasing game without having a large stash per se of precious metals, with even a relatively small amount of land devoted to renewable lumber resources one could begin to develop a cyclical growing and selling plan, to ensure at least almost constant cash flows from one's asset per se.

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    Gold can provide sort of special commodity based diversification within an investment account.

    Lumber companies being quite unique per se themselves, can also provide this alternative beta to ones portfolio.

    To detract from lumber companies on this point though, their stocks may be more commonly caught up in volatility inherent to the stock market per se(if they are publicly traded), due to the heightened level of indexing possible and available in the stock market currently.

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    Gold is a "sustainable investment", it maintains its value without expending energy, as long as one considers its initial mining a "sunk cost" as it were.

    Lumber though it can be managed in a sustainable way is somewhat like precious metals unfortunately in this way. Though they can be managed in such a way as to maintain an ecosystem on lumber yielding per se assets, they are still not the same as far as ecosystem capacity is concerned, as undisturbed natural forests, however, one could say that being in the business of producing a "product" which is in an of itself, useful in absorbing carbon per se, is hence a valuable sustainable resource, though of course not as ideal in this sense as an untouched forest.

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    Hence, we thus have an interesting pairing. Perhaps by investing in both of these investment opportunities at once, one could have the sort of Bruce Lee and Jackie Chan of Alternative investment opportunities, namely their differences would make them stronger as one, while their similarities could add a synergistic multiplier per se, to their potency in regards to having their desired balancing on one's portfolio. Either way, the lack of such a high transaction cost to stocks as their is to precious metals, at least on the physical level, along with their constant yield in some cases in the form of dividends, may make lumber related investments attractive to those desiring something like gold for their portfolios. For surely if this world has the capacity to hold so many different animals and organisms on its fair crust one can also invest in both if one so desires.

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    thank you for reading,

    David

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