Look to the Sky for the Next Economic Downturn

Home > U.S. Economy
Look to the Sky for the Next Economic Downturn
What does Barclays Capital's Skyscraper Index tell us?

By Bob Stokes
Mon, 12 Mar 2012 17:15:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

During the Civil War, the economy of the North boomed, and the boom continued even after the war ended.

Confidence surged: in 1868 construction began on an office building of record-height. Construction was completed in 1873, and the Equitable Life building in New York stood 130 feet. Many people considered it America's first skyscraper.

1873 was also the year of a major financial panic. A multi-year recession followed.

What's this have to do with today?

Well, it appears that 1873 was just the start of a trend which links skyscraper booms with economic downturns.

The British Broadcasting Corporation reports (1/10):

There is an "unhealthy correlation" between the building of skyscrapers and subsequent financial crashes, according to Barclays Capital.

Examples include the Empire State building, built as the Great Depression was under way, and the current world's tallest, the Burj Khalifa, built just before Dubai almost went bust.

China is currently the biggest builder of skyscrapers...

India also has 14 skyscrapers under construction.

Other examples include:

Chicago's Sears Tower (now Willis Tower): Completed in 1973, as the worst stock market decline since the Great Depression was underway

The second of New York City's former two World Trade Center towers: Completed in 1972, shortly before the severe market decline

The Petronas Towers in Kuala Lumpur: Completed in 1998, just in time for the Asian financial crisis.

In December 2011, the Shard London Bridge became the tallest building in the European Union. Now under construction, One World Trade Centre will be the tallest building in the Western Hemisphere.

Also consider Las Vegas. The 76-acre CityCenter is the largest privately funded construction project in U.S. history. Construction started in 2006, and the project teetered on financial collapse until its 2009 completion.

And what timing for the opening of Wynn's Encore casino and hotel -- December 2008.

Not all skyscraper construction coincides with a financial crisis. The Woolworth Building was completed in 1913 and still stands in lower Manhattan. It was the world's tallest for years. Five-and-dime king Frank Woolworth paid cash for the building's construction.

By contrast, the modern-day race for the world's tallest building reflects "a widespread mis-allocation of capital and an impending economic correction" according to Barclays Capital.

But the global skyscraper boom is just one indicator.

Our analysis reveals that the next leg of the ongoing economic contraction will be far more severe than most suspect.

You'll find our latest analysis in our flagship Financial Forecast Service. It's yours to read risk-free. Prepare now for what we see ahead by following this link>>

The Financial Forecast Service delivers the most insightful market analysis you can buy - period

Your risk-free subscription saves you 24% and gets you instant online access to:

1. Short Term Update (Mon, Wed, Fri)

You get latest forecasts 3 times a week, after the close.

2. Elliott Wave Financial Forecast (Monthly)

Tracks intermediate-term patterns in U.S. markets.

3. Elliott Wave Theorist (Monthly)

Prechter's cutting-edge view into when, where, and why the waves are unfolding.

Plus, Subscriber-Only Extras -- FREE

Advanced Elliott wave tutorial, classic EWI reports, market update videos, Message Board Q&As, educational tools, and more. Best of all, it's completely free.

Learn more about the Financial Forecast Service here >>

Tags: deflation, economic depression, Elliott wave, history

Aug. 15-17

San Francisco Money Show

Nov. 10-13

New Orleans Investment Conference

Get the Perspective You Need to Act Apart from the Herd

"The clarity of your thoughts is so powerful that I typically read an issue at least a half dozen times." - R.N., Financial Forecast subscriber

The Elliott Wave Financial Forecast is a rational voice in a volatile marketplace with an unrivaled record of providing tomorrow's news today.

It helps you take control of your investments and anticipate the larger trends that most investors don’t recognize until it's too late.

Preview the latest Financial Forecast now>>

Most Read

Highest Rated

Free 50-Page eBook

Learn to Think Independently

The Independent Investor eBook can help you to challenge conventional notions about investing and explain market behaviors that most people consider "inexplicable."
Download your free Independent Investor eBook

CLOSE [ X ]

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.