The Curmudgeon - The Great Wheel of China
By Brad Zigler

A columnist checks mail with the same trepidation as when overturning a garden rock. One never knows if a struggling shoot or a creepy spider will be found. The Curmudgeon’s mailbag, as usual, is brimming over with slams and swipes for columns past. Does that trouble this back-page sophist? Nah. Ignorance is bliss, at least until the editor threatens termination again.

Let’s instead look forward and pull out the letters that have the greatest import for readers of this august publication. Ah, here’s one …

“You may already be a winner! Mail your sweepstakes entry TODAY!” Oops. Sorry.

This one’s from Dave in New York City:

Dear Curmudgeon –
Your columns lately seem to focus on spurious indicators and benchmarks such as the porn index (“Marrying Vice and Virtue,” November/December 2007) and a baseball performance index (“Dear Retiree,” May/June 2007). We in the investment trenches need insight into real-world markets. Can’t you devote your numeracy to analyzing important markets like China? Should we still be buyers of Chinese equities or has the tiger finally turned tail? Is Chinese demand for basic materials going to continue to propel commodity prices higher?

“After all, China’s looked toppy since construction began in November on the $99 million, 680-foot-tall, Beijing Great Wheel of Excess, a bid to outdo itself as the home of the world’s tallest Ferris wheel.”

Dear Dave –
You’re right, of course, to be concerned about the continuing strength of the Chinese market. After all, China’s looked toppy since construction began in November on the $99 million, 680-foot-tall, Beijing Great Wheel of Excess, a bid to outdo itself as the home of the world’s tallest Ferris wheel. On the exact day construction commenced, the FTSE/Xinhua China 25 stock index swooned more than 6 percent, setting up a slide of more than 7 percent in the ensuing two weeks.

Coincidence? I think not.

So much financial controversy swirled ’round the erection of London’s 443-foot Millennium Wheel, and its successor to the “world’s tallest” title, the 525-foot Star of Nanchang, that Ferris wheel construction has become a bellwether of irrational exuberance.

Is the Chinese stock market, which has been growing at a compound annual rate better than 50 percent over the past three years, itself suffering from preposterous prodigality?

Could be. But then, think about this, Dave: You’re seeking investment advice from a humorist.

As for commodities, it’s undeniable that Chinese demand has been a driver of basic materials prices. The country’s impact in the metals space, in particular, is huge. China accounted for about half the new demand for steel, copper and aluminum this decade, and virtually all the new demand for lead, zinc, nickel and tin.

According to the International Monetary Fund, China’s taste for lead alone more than doubled global demand for the metal. The United States has been feeding the trend, too. American exports of lead scrap grew 634 percent year-over-year in the first three quarters of 2007.

While Chinese officials try to deflect blame for the upswell in lead costs, a rise in export taxes could push prices even higher. The only export likely to escape the reverse tariff would be the lead in toys China ships to the States.