A New Way to Play Lumber

The long-awaited, by me anyway, Claymore/Clear Global Timber Index ETF (CUT Quote) is finally up and running.

This is the first exchange-traded fund that offers a pure play on lumber -- or at least logging companies. And lumber is another commodity with a low correlation to U.S. equities. Jack Meyer, the former CEO of the Harvard Management Company, and Julian Robertson, of Tiger Management fame, have both been noted as timberland investors

The chart below shows how lumber can potentially insulate a portfolio from the ups and downs of the stock market. The correlation with S&P 500 is not always as low as it is on this chart, but timber prices do often move in the opposite direction of stocks.

It remains to be seen how good of a proxy CUT is for lumber, however. The chart shows the price of lumber to be down about 11% year to date, while back-tested results indicate that CUT would be up 16% year to date, assuming it had been trading all year. ...