New Skyscrapers Wherever one Looks
Readers may recall our recent discussion of the construction of the Jeddah Tower (see “Soaring to Bankruptcy” for details). This skyscraper is a typical symptom of an artificial boom that has moved past its due date, so to speak. The idea behind the skyscraper index is that in light of the immensity of projects that involve the construction of the tallest building in the world (or one of the tallest), they are only realized once the notion that boom conditions will continue forever has become firmly ingrained. By the time this happens, the boom is usually quite close to giving way to a bust.
Central Park Tower , a.k.a. the Nordstrom Tower, which is going to be finished in 2019. At a height of 547 meters (1,795 ft.) it will be the tallest building in the United States, as well as in the entire western hemisphere
Image credit: Extell
It is quite costly and time-intensive to build such an enormous structure. One needs to keep in mind that the effort involves much more than just the construction phase. Planning, permitting, solving technical and logistical challenges, organizing the necessary funding, etc., all have to be considered as well. The long term nature of such projects also means that they are far more likely to be tackled when interest rates are low – and especially when they are too low, i.e., suppressed below the natural rate by central bank intervention. As we have pointed out in the article on Jeddah, from an analytical perspective real estate can be viewed as akin to capital goods.
In recent years we have noticed that a string of very tall buildings has been erected all over the world. Many of them were even briefly considered the “tallest” at the time they were conceived. There was a noteworthy concentration of such projects in China and in oil-producing nations.
Even Iraq (!) is reportedly planning to build the tallest building in the world in Basra – the 1,152 meter (3,778 ft.) tall “Bride of the Gulf”. This one would even put the Jeddah Tower in the shade. We strongly suspect that the plans were made back when oil was still trading in triple digits. We also suspect that the “Bride” will remain stuck in the conceptual stage for the time being.
The planned “Bride of the Gulf” building in Basra. At a height of 1,152 meters, it would outdistance even the Jeddah Tower.
Image credit: AMBS
Frankly, we are actually a bit puzzled why anyone would want to erect such an extremely tall building in the desert of all places. It’s not as if one urgently neeeded to save space. We tentatively conclude that they just want to impress everyone.
Bubble Indicator Flashes Global Warning Sign
Recently we have come across news that seem to confirm that the global central bank printathon in the wake of the GFC has indeed created a major bubble on a global scale. This implies that the denouement of the bubble will likely be globally synchronized and may accordingly turn out to be quite intense.
We were very surprised to learn that the number of buildings classified as “super-tall skyscrapers” (with a height of 300 meters or more) has in fact doubled since 2010. It took 80 years to build the first 50 super-tall skyscrapers, and just five years to build the next 50! This is an astonishing datum – an awesome monument to bubble excess. Here is a chart from Bloomberg illustrating the historical trend:
“The majority of what the Council on Tall Buildings and Urban Habitat calls “supertalls” sprung up in Asia and the Middle East, mirroring construction trends and economic booms. While the first 50 supertalls took 80 years to complete — between 1930 and 2010 — their total number doubled to 100 in just five years, according to the CTBUH. The next frontier in the race for the skies? The “mega-tall,” or taller than 600 meters. There are currently only three completed mega-tall buildings in the world, a number set to more than double in the coming years as four more — including the Jeddah Tower in Saudi Arabia and Kuala Lumpur’s KL118 Tower — are completed.
We should add to this that two of the mega-tall buildings are under construction in China. The Suzhou Zhongnan Center will be China’s tallest building at 729 meters (under construction since 2014) and the Wuhan Greenland Center (to be finished next year) at 636 meters is definitely no slouch either. The latter building has a unique curved design and is going to be entirely covered in glass, which is supposed to give it “a unique feeling of luxury”.
As is often the case, it appears as though many of these “mega-tall” buildings will actually be finished once the bust is well underway (the Empire State building is a famous example of a record tall skyscraper that was started at the height of a major boom and was only finished at the very depths of a depression). We also find it amusing that there is actually such a thing as a “Council on Tall Buildings”.
Based on the skyscraper index, we appear to have experienced one of the biggest booms ever – as uneven as it has been, with real economic growth generally not much to write home about in most parts of the world. The same can obviously not be said of asset prices, which have benefited greatly from the flood of money unleashed by central banks in recent years.
Given the fact that there is a sound theoretical argument to be made for the signaling quality of the skyscraper index, as well as plenty of corroboration from empirical data, the above discussed development is quite ominous.
Maybe we should quickly build a few well-stocked and easily defensible cellars – just in case.
An upgrade to “severe” is probably indicated.
Cartoon by Bennett
Chart by: Bloomberg
Dear Readers! We are happy to report that we have reached our turn-of-the-year funding goal and want to extend a special thank you to all of you who have chipped in. We are very grateful for your support! As a general remark, according to usually well informed circles, exercising the donation button in between funding drives is definitely legal and highly appreciated as well.
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
4 Responses to “Skyscraper Mania Goes Global”
Most read in the last 20 days:
- Reality is a Formidable Enemy
Political Correctness Comedy We have recently come across a video that is simply too funny not be shared. It also happens to dovetail nicely with our friend Claudio's recent essay on political correctness and cultural Marxism. Since this is generally a rather depressing topic, we have concluded that having a good laugh at it might not be the worst idea. How to most effectively create a “safe space” on campus Cartoon by Nate Beeler It is especially funny (or...
- Fresh Mainstream Nonsense on Gold Demand
They Will Never Get It... We and many others have made a valiant effort over the years to explain what actually moves the gold market (as examples see e.g. our article “Misconceptions About Gold”, or Robert Blumen's excellent essay “Misunderstanding Gold Demand”). Sometimes it is a bit frustrating when we realize it has probably all been for naught. Gold wants to know what it has done now... Photo credit: Ajay Verma / Reuters This was brought home to...
- Drowning the Fir
Presidential Duties Our editor recently stumbled upon an image in one of the more obscure corners of the intertubes which we felt we had to share with our readers. It provides us with a nice metaphor for the meaningfulness of government activity. First, here is a look at the picture – just quietly contemplate it for while and let it work its magic on you: Yes, these two gentlemen are actually watering a tree in the middle of a downpour... Photo via...
- The Wonder Years Are Over
Everybody Is Unhappy PARIS – “France?” We were in a cab on the way from Charles de Gaulle Airport yesterday. We had innocently asked our cab driver how things were going in the country. He had some thoughts... French president Francois Hollande: against all odds, he managed to attain the most powerful position in French society. And yet, even he is unhappy. Photo credit: Patrick Kovarik / AFP “France is a mess. We have 5 million people unemployed. And...
- Gold – The Commitments of Traders
Commercial and Non-Commercial Market Participants The commitments of traders in gold futures are beginning to look a bit concerning these days – we will explain further below why this is so. Some readers may well be wondering why an explanation is even needed. Isn't it obvious? Superficially, it sure looks that way. As the following chart of the net position of commercial hedgers illustrates, their position is currently at quite an extended...
- Corporate Tax Receipts Reflect Economic Slowdown
Tax Receipts vs. the Stock Market Following the US Treasury's update of April tax receipts, our friend Mac mailed us a few charts showing the trend in corporate tax payments. Not surprisingly, corporate tax payments and refunds mirror the many signs of a slowing economy that have recently emerged. An overview in chart form follows below. First up, corporate tax receipts in absolute figures. Corporate tax receipts in absolute dollars and cents – this is quite astonishing...
- Heretical Thoughts and Doing the Unthinkable
Heresy! NORMANDY, France – The Dow rose 222 points on Tuesday – or just over 1%. But we agree with hedge-fund manager Stanley Druckenmiller: This is not a good time to be a U.S. stock market bull. Legendary former hedge fund manager Stanley Druckenmiller at the Ira Sohn conference – not an optimist at present, to put it mildly. Photo credit: David A. Grogan / CNBC Speaking at an investment conference in New York last week, George Soros’ former partner...
- Staying Home on Election Day
Pretenses and Conceits The markets are eerily quiet… like an angry man with something on his mind and a shotgun in his hand. We will leave them to brood… and return to the spectacle of the U.S. presidential primaries. On display are all the pretenses, conceits, and absurdities of modern government. And now, the race narrows to the two most widely distrusted and loathed candidates. US election circus: Deep State Rep vs. Rage Channeller The first, a loose...
- The World's 100 Most Influential Hacks, Yahoos and Monkey Shiners
Hacks and Has-Beens NORMANDY, France – What has happened to TIME magazine? Henry Luce, who started TIME – the first weekly news magazine in the U.S. – would be appalled to see what it has become. Time cover featuring the sunburned mummy heading the globalist IMF bureaucracy (which inter alia advocates that governments should confiscate a portion of the wealth of their citizens overnight, even while its own employees don't have to pay a single cent in taxes). Once you...
- A Trump Landslide in November?
Objective Reality After spending three weeks with objective truth at the ranch, we are now forced to return to the world of myths, delusions, and claptrap. Yes, we are in Buenos Aires looking at a TV! And there they are... talking about the world of politics, money, culture... the world of Facebook and CNBC... of Trump and Clinton... of ZIRP and NIRP... and of Game of Thrones. The royal seating accommodation fought over in “Game of Thrones”. It looks decidedly...
- Kuroda-San in the Mouth of Madness
Deluded Central Planners Zerohedge recently reported on an interview given by Lithuanian ECB council member Vitas Vasiliauskas, which demonstrates how utterly deluded the central planners in the so-called “capitalist” economies of the West have become. His statements are nothing short of bizarre (“we are magic guys!”) – although he is of course correct when he states that a central bank can never “run out of ammunition”. BoJ governor Haruhiko Kuroda Photo credit:...
- How the Deep State’s Cronies Steal From You
Expanding in Ireland DUNMORE EAST, Ireland – We came down the coast from Dublin to check on our new office building. For this visit, we wanted to stay somewhere different than we normally do. So we chose a small hotel on the coast, called the Strand Inn. Irish landscape with alien landing pads. Even the guys from Rigel II have heard about Ireland's corporate tax rate. Photo credit: Tourism Ireland It is an excellent place for seafood and soda bread on a...