Do you need a Joseph Kennedy moment?


Referring to the famous story about how Joseph Kennedy sold his shares on the eve of the Wall Street Crash after being given investment tips by a shoe-shine boy, my answer to the above is a definitive YES.

Over the course of rest of this week I am going to detail why I think reports of China’s economic recovery have been greatly exaggerated.

Petrochemical producers talk about a significant and perhaps sustainable demand recovery, but I am even more firmly of the view now – having read some more worrying economic analysis – that we are in the middle of a mini commodity-price bubble (this applies to crude as well as chemicals) that’s not supported by the fundamentals.

And as mentioned in this article, (apologies for the laziness of using the same intro twice!) the bubble has yet to significantly deflate.

Chinese domestic polypropylene (PP) and polyethylene (PE) prices slipped slightly last week by around CNY400-500/tonne, but import prices remained unchanged.

The sentiment, though, seems to have become more bearish on the feeling that prices have gone up by too much too quickly.

Trading volume in linear-low density PE (LLDPE) on the Dalian Commodity Exchange continues to post staggering increases.

If you take the number of contracts traded to date in April and multiply this by the size of each contract (5 tonnes), 48.65m tonnes have been traded. This about twice the annual global demand for the polyolefin.

This compares with just 166,330 tonnes during the same period last year, representing at 29,157% increase.

What’s interesting to note is that the year-to-date increase over the same four-and-a-bit months in 2008 is far less dramatic: to 149.85m tonnes from 132.5m tonnes – a modest 13.06% rise.

Have the shoe-shine boys started punting on the exchange in a commodity that they don’t have a clue about?

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