Market Curiosity: Exploring Markets And Systems

June 27, 2012

A steady way to prosperity: Timber (update 2, July 15)

Filed under: Editorials, Just Watching — Tags: , , — Jeff Fitzmyers @ 11:33 pm

I wanted to highlight some info Dr. Steve Sjuggerud recently posted via The Most Accurate Investment Forecast Ever because I love the idea of selling options on Timber: An Excellent Retirement Vehicle.

On December 31, 2001, Jeremy Grantham issued a 10-year forecast [on] 11 different asset classes… He got the order almost exactly right… It may be the most accurate 10-year call in stock market history…

How does Grantham come up with these predictions? … His firm “predicts asset class returns in a simple and apparently robust way: we assume profit margins and price earnings ratios will move back to long-term average… from whatever level they are today.” … “These estimates are not about nuances or PhDs. They are about ignoring the crowd, working out simple ratios, and being patient.”

So what’s Grantham predicting today?

Grantham predicts that over the next seven years, bonds will lose money (after inflation). He predicts that managed timber will be the best-performing asset class, followed by emerging-market stocks.

This PCH move today spurred me to highlight timber again. The dividend is currently around 4%.

The monthly shows price to be closer to the bottom of it range than the top.

Update June 29 2012: Pretty good for a boring timber stock!

Update July 15 2012: The July 30 put sold for $64 is far out of the money 😉

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