FROSTY FUTURES
February 25, 2005

LUMBER

One of my clients started buying lumber, commenting that a friend
of his who owns a lumber yard thought that lumber was going to explode this year. His trades, for the most part, have been successful. Prices have risen steadily, stage after stage.
Yesterday I was in a conversation with a developer/realtor in south
Florida. Demand for housing is exploding, and has been for quite some
time. There are reports of price increases on existing houses as high
as 15% per month. PER MONTH!!!! The March and May lumber contracts are reacting vigorously, but the July and Sep contracts are lagging. This may mean demand is not seen as potentially as great. I disagree. Earnings reports in the housing sector are growing, demand for housing is strong.
In my own area, around Nashville, TN, demand is growing, albeit at not
so great a rate, but in the area of 15% per year, which is a very strong trend.
There is a good chance we could see lumber above $500/brd ft by the end of summer.

Lumber is a thin market, so I suggest you use call options and be very
careful what you pay. Look at the July and Sep contracts.

Best to all,

Bill

CONTACT ME: williamfrost@comcast.net  or call 615 331 8567.
TO SUBSCRIBE: www.frostyfutures.com.

Trading futures is for individuals willing to assume greater risk for the opportunity of greater rewards. Only speculative capital should be used. Past performance is no assurance of future profits. Information contained herein is believed reliable but original sources of data have not been independently verified therefore is not guaranteed. Ideas and suggestions are just that. Nothing herein should be construed to be a solicitation to trade futures or options. Hedgers should have a defined plan.