Lumber ETF Continues Climbing

As detailed in a previous article, the exchange traded fund for lumber, Claymore Beacon Timber (NYSEARCA: CUT), is a preferable way to play the rebound in the housing market. Good news from the National Association for Home Builders that home sales and prices rose in July has home builder stocks and the exchange traded fund rising in recent market action. For the week, the CUT is up 2.14%. The exchange traded fund for home builders, SPDR Home Builders (NYSEARCA: XHB), jumped 4.2% for the week, too.

The CUT is a better vehicle to trade for gains in housing. While it will rise based on good news from the housing market in the United States, it also jumps from the fundamentals of economic c demand. Much of the timber harvested from the United States is now sold to buyers abroad, particularly in Asia. Even though the housing market has been soft in China, it has been strong in other countries.

As a result, the CUT is not held hostage to growth in the housing market in the United States. That is a good thing for investors as there is still much weakness in that area. The “shadow inventory” of millions of homes in various stages of foreclosure must be processed through the system. Until it is, the American housing market cannot be fully recovered.

In addition, consumer spending is rising in emerging market nations. By the year 2025, McKinsey & Co., the global consulting firm, projects that this will total $30 trillion, half the amount for the entire world. As the emerging market middle class expands, there will be a greater demand for housing, particularly home ownership. This is an undeniable trend as even during The Great Recession the emerging market middle class continued to expand. To profit from this growth in housing demand around the world in addition to the United States, the CUT is ideally positioned.