As
mentioned in a previous blog the
skyscraper index is one of the all time great market timing predictors (See
table below). What got me thinking about the skyscraper index again was an amazing article today on Bloomberg titled Mile-High
towers possible by 2025 as ego fuels race to top. What a great
title!
The main
commentator is the Chairman of the Chicago based council on Tall Buildings and
Urban Habitat (another great title). It’s a fascinating insight into what
drives these tall structures. It can be summed up in one word, ego. There is really
no need to build that high. This type of behaviour tends to occur after years
of strong growth and cheap money. Worryingly for China the council held its
first congress in Shanghai where it says “9 of the world's highest 20 buildings
under construction are going up”.
He had
an amazing admission “It might take time to fill up those buildings, but
China in general has the capacity to continue to grow,” Johnson said. “Maybe
you are not going to take your money back in two years, but in five or even 10
years.” Might make your money back in 5 or 10 years who knows, wish I had these
sort of investors!
Building
on ego and hope that in five to ten years time you can make your money back
does not sound very attractive to me. As a reminder it never seems to work out
investing in countries building the world's tallest skyscrapers, Dubai being
the most recent example. Luckily the Saudis are looking to complete a 1km Kingdom Tower which should be complete by 2018, hopefully in China they do not look to catch up. The skyscraper index is flashing.
World's Tallest Skyscrapers and Related Busts
Building
|
Location (Completed)
|
Spire Height
|
Financial Crisis
|
Singer
|
New York (1908)
|
187 meters
|
Panic of 1907
|
Metropolitan Life
|
New York (1909)
|
247 meters
|
Panic of 1907
|
40 Wall Street
|
New York (1929)
|
283 meters
|
Great Depression
|
Chrysler
|
New York (1929)
|
319 meters
|
Great Depression
|
Empire State
|
New York (1931)
|
443 meters
|
Great Depression
|
World Trade Center
|
New York (1973)
|
526 meters
|
'70s Stagflation
|
Sears Tower
|
Chicago (1974)
|
527 meters
|
'70s Stagflation
|
Petronas Towers
|
Kuala Lumpur (1997)
|
452 meters
|
Asian Financial Crisis
|
Taipei 101
|
Taipei (2004)*
|
509 meters
|
Tech Bubble
|
Burj Dubai
|
Dubai (2008/9)**
|
828 meters
|
Global Credit Crunch
|
*Taipei 101 was financed and construction began in 1999, quite near the
peak of the technology boom. **It is interesting to note that the uncompleted
Burj Dubai tower was classified as the world's tallest structure on July 21,
2007, right around the peak of the U.S. market before the financial meltdown.
Source: Table
sourced from http://www.forbes.com/2011/03/10/skyscrapers-burj-dubai-leadership-leaders-bubbles.html
Jason Sedawie
The material in
this article is for informational purposes only and in no way constitutes a
solicitation of business or investment advice. The material has been prepared
without regard to any client's or other person's investment objectives. Before
making an investment decision you should consider the assistance of a financial
adviser and whether any investment or service is appropriate in light of your
particular investment needs.
