Replies to post #218 on Investing in Timber

[sbrunner]

Dear fawtsc, Please enlighten the readers of this forum from where you have obtained the board feet per tree for each thinning and final harvest, and much more important, from where you have obtained the prices per board foot hat you have used in your figures.

Both are demonstrably wrong and very much mislead the readers.

I would guess that your first thinning figures were derived by mistakenly dividing the first thinning board feet yield by the total of the mortality and cull loss plus the actual trees thinned to arrive at the 19.2 board feet per tree, and then extrapolated from there. The 19.2 board foot beginning figure is simply wrong. The corret figure is 29 board feet per thinned tree for their first thinning.

But much more inaccurate and misleading are your prices per board foot.

To dramatically illustrate, please review your $3.60 price per board foot for the teak lumber from 25 year old trees, 25 years from now.

The most authoritative independent source of market price data for tropical hardwoods is the ITTO or International Tropical Timber Organization.

The ITTO reports show that the teak sawn wood price in the U.S. today averages $5.01 per board foot. Higher in the U.K.

How do you support your figures that the teak sawnwood price will somehow fall over the next 25 years from $5.00 today to $3.60, 25 years from now?

Of course each person is entitled to make your own assumptions, just as we have made assumptions in our projections and have openly published those assumptions along with our projections.

You would do the forum readers a service if you would clearly state your assumption of this large fall in price over the next 25 years and disclose the basis for that dramatic assumption.

You may want to revisit your tax figures as well. The portion of the yield above the original cost that is attributable to the growth of the trees and the increase in the value of the lumber is deemed a capital gain in the U.S., and not ordinary income, and therefore taxed at a lower rate federally and tax free in some states. Your figures also reflect a 28% tax on the return of the initial investment. That is similarly flat wrong. There is no U.S. federal or state tax on the return of any investment.

It is a disservice to the readers of this forum, and damaging to TATF, to publish assumptions as if they were facts.

Steve Brunner