Do Newly Built Skyscrapers Signal The Top Of The Stock Market?

Tyler Durden's picture

Have you heard of the Burj Khalifa in Dubai?

It’s the tallest skyscraper in the world at 828m (2,717 ft), and it was completed in 2009. The price tag was a whopping $1.5 billion, making it one of the most expensive buildings of all time.

As Visual Capitalist's Jeff Desjardin explains, for these bold projects to get the go ahead, global financial conditions have to be just right. Record-breaking skyscrapers can take multiple years to build, and things can change drastically from start to finish.

In this case, construction of the Burj Khalifa started in 2004. By the time it was completed, however, the financial markets were in ruins. Lehman had collapsed, and rescue efforts such as TARP and QE were in full force to try and stop the bleeding. Between October 2007 and March 2009, the Dow Jones Industrial Average lost 55% of value.

The crisis didn’t only bankrupt financial markets – it also took its toll on competing projects that aimed to unseat the Burj Khalifa as the world’s height record-holder. For example, One Dubai Tower A was supposed to be a whopping 1,008m (3,307 ft) tall – but it was shelved in March 2009 once it was clear that global financial conditions would not be improving any time soon.

DO NEWLY BUILT SKYSCRAPERS SIGNAL THE TOP OF THE STOCK MARKET?

Could record-setting skyscrapers signal economic over-expansion and a misallocation of capital?

EWN Interactive, a subscription service focused on technical analysis, thinks so. The following infographic follows the “Skyscraper Curse” through six different market tops and subsequent crashes over the past century.

It is gigantic in size, so please click here or the below image to access the legible version:

Courtesy of: Visual Capitalist

EWM Interactive sums up the infographic with these words:

In the market, extreme optimism results in price bubbles. One of the real-life manifestations of extremely positive social mood is the construction of enormous buildings. Market tops and skyscrapers often seem to emerge simultaneously, because both phenomena are the result of the illusion of infinite prosperity.

 

But extreme psychological conditions do not last very long. That is the reason why record-breaking buildings, whose construction starts during a market bubble, are often completed after the bubble’s collapse.

That said, there are counter-examples that show the “skyscraper theory” is not perfect.

The recession after World War I, the recession of 1937, and the recession in the early 1980s were not correlated with any record-breaking skyscraper projects. An empirical test in 2015 that looked at the theory found that record-setting skyscrapers did not correspond directly with the business cycle.

Let’s hope that they are right, since the Jeddah Tower – a 1,008m (3,307 ft) monster in Saudi Arabia – is expected to unseat the Burj Khalifa as the world’s tallest building by the year 2019.

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Here2Go's picture
Here2Go (not verified) Aug 30, 2016 10:00 PM

What is hip? Tell me tell me if you think u know

remain calm's picture

Building "The Wall" taller than Kingdom Tower and calling it the "Great Wall of Don" That be cool.

Dutti's picture

I remember having read essentially the same article on ZH one ore two years ago. Now when exactly is or was the stock market top?

dogfish's picture

The stock market was just about where it is right now.And the world had about 10,000,000,000,000 less in debt.

Stuck on Zero's picture

Don't forget the Tower of Babel. 

And don't forget the giant Taj Mahal corporate HQs of the about to fail companies: Sears Tower, RCA, Enron, ... 

The new Apple Building isn't tall but it's huge. I predict Apple will collapse.

Mustafa Kemal's picture

I used to think Berger Barn was pretty hip in the sixties.

King Tut's picture
King Tut (not verified) Aug 30, 2016 10:04 PM

I just don't understand who/what they fill these huge towers with- are they empty and just totemic? 

pitz's picture

Law firms and other assorted crap.  Toilette and Douche cube farms. 

King Tut's picture
King Tut (not verified) pitz Aug 30, 2016 10:40 PM

Their whole economy is oil- I'm assuming all of the infrastructure to take care of that is already in place.

Here2Go's picture
Here2Go (not verified) King Tut Aug 30, 2016 10:07 PM

They just build them so people named Silverstein can 'double insure' right before his partners in crime fly remote controlled planes into them.

 

FFS ~ for that pricetag, might as well just build a death star.

khakuda's picture

This last eight year period represents the largest central bank global free money orgy ever. If anyone can figure out when it is going to end please let us know. What is clear is that central bankers will not hit the brakes. They are driving the car at 200 miles an hour straight toward the wall that is out there somewhere.

Dutti's picture

"They are driving the car at 200 miles an hour straight toward the wall that is out there somewhere."

There is no wall out there. They are driving through the desert and since 2008 they had to engage the 4x4. Tthe sand is getting deeper though...

YourAverageJoe's picture

Phillips 66 just completed their brand-new headquarters in Houston. It's probably a ghost town.

When this oil glut shit happened in the early 80's, I knew I needed a trade that would be by and large layoff proof, so now I manage, operate and maintain office buildings. Those suckers have to run whether they're empty or full.

Nothing fucks up a property more than deferred maintenance, and there is no civilization with electricity, HVAC and plumbing.

jonjon831983's picture

Also things like building VLCCs.

cliffynator's picture

Aready read about this concept in "The Message of the Markets" by Ron Insana 15 years ago.  The only theory I took away from the whole book.

By the way, "Ron Insana" always sounded like a great wrestling name.

King Tut's picture
King Tut (not verified) cliffynator Aug 30, 2016 10:41 PM

Ron and his "Virtual Portfolio"- what a douche 

AE911Truth's picture

Top? Well, it depends. If we permit Fascism to own us, then yes, this is a top and humanity is doomed to enslavement. However, that is not my view of the future at all. In my view of the future, we defeat the Fascist Globalists and become free and wealthy. Poverty is eliminated for every person on the planet, and productive work required to offset necessities takes up no more than 5 hours per week. The remainder of our time is disposable, meaning it can be spent acquiring discretionary income, or recreation, as we see fit. Once suppressed productive technologies are fully disclosed, (and they are being disclosed) there will be no need to use oil, coal, gas or uranium for energy. There will be no need for surface roads between cities. There will be no need for an electric grid, or energy pipelines, or railroads, or long haul trucks for delivery of goods. The choice is entirely up to us.

Andy2016.com  SiriusDisclosure.com

HedgeJunkie's picture

It's nice to have pleasant dreams.  I respect optimists.

But you're going to be woken up with an ice bath down your back.

Yen Cross's picture

 

   At least)))> in China and the Middle East, Mother Nature reclaims your mistakes.

 Don't you gals and guys remember the videos of pissed off Chinese investors using hammers and crowbars to remove the sand from their swanky highrise apartment walls???

  If you want your Chinese Sand Castle, you can have your cheap chinese sand castle. lol

  Your memories aren't that short >>> "Made Out Of Sand" - A Dramatic Look Inside A Newly Built Chinese Apartment | Zero Hedge

King Tut's picture
King Tut (not verified) Yen Cross Aug 30, 2016 11:57 PM

A yard of concrete used that used to cost $70 10 years ago now goes for $160- the asshole cement company owners claim that  huge cement demand from China is responsible for the price increases but by the looks of that video there is hardly any cement at all in that concrete

Yen Cross's picture

 For the uneducated, cement is limestone, mixed with some other goodstuff.

  I'm sure they were LONG Rebar, when building those beauties.

Archive_file's picture

I keep waiting for the construction of the monstrosity on Mission street 2nd in SAN FRANCISCO to stall. Who the fuck has the money to build, let alone buy a unit in, that tower??

christiangustafson's picture

Can any of you in the NYC report on the progress of Central Park Tower? Massive project.

Kirk2NCC1701's picture

This is the fluffiest article that Visual Capitalist has written. 1 star.

Milton Keynes's picture

Well, the Kingdom tower could easily be the end of Saudi Oil Money.

 

 

HedgeJunkie's picture

So there is something to look forward to...

Unholy Dalliance's picture

Huh! So that is the correlation. Just look at the London skyline and how it is rapdily changing. Look at the railway corridor between Clapham Junction and London Waterloo. Huge blocks of flats going up everywhere along the corridor. Every available scrap of 'brown field' is being used. An old Sainsbury supermarket at Vauxhall which could have been taken over by another supermarket chain was razed to the ground to make way for 4 huge aprartment blocks. It is absolutely crazy with most of the activity started in the last year - 2 at most!

It is absolutely astonishing because lots of people on trains going into Waterloo sate at them and ask: 'Who on earth are these being built for?' 

Allen_H's picture

Well, it is Aircraft carriers and skyskrapers that show these effects, but more so A.Carriers. They are floating cities almost, with plenty gay bars and men for those USSA gaylers.

sanddweller's picture

I don't see the Kingdom tower being finished in 2018, 2019 or even close. Bin Laden group has laid off a 1/3 of its workforce (70,000 people) due to financial difficulties and the fact Saudi government can't pay its bills. And that's not even discussing the financial problems the country has with the low price of oil. Construction progress is snails pace like 1 floor per month and with another 130 floors to go you can do the maths. Probably end up being a white elephant just like Palm Jebel Ali in Dubai!

Long memory man's picture

I reckon that the Arab nations can build some really good high towers, they suffer many fires and do not fall down.