Thursday, November 26, 2009
The Skyscraper Index
The emerging Dubai debacle is only starting to play out but it looks like another case of the world's tallest building heralding a major market top.
"The Skyscraper Index is a concept put forward in January 1999[1] by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein,[2] which showed that the world's tallest buildings have risen on the eve of economic downturns.[3] Business cycles and skyscraper construction correlate[4] in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession.[5] The buildings may actually be completed after the onset of the recession or later, when another business cycle pulls the economy up, or even cancelled.[5] Unlike earlier instances of similar reasoning ("height is a barometer of boom"[6]), Lawrence used skyscraper projects as a predictor of economic crisis, not boom.
Lawrence started his paper as a joke (emphasized by a title referencing a comedy show[1]) and based his "index" on mere comparison of historical data, primarily from the United States experience. He dismissed overall construction and investment statistics, focusing only on record-breaking projects.[4] The first notable example was the Panic of 1907. Two record-breaking skyscrapers, the Singer Building and Metropolitan Life Insurance Company Tower, were launched in New York before the panic and completed in 1908 and 1909, respectively. Met Life remained the world's tallest building until 1913. Another string of supertall towers - 40 Wall Street, Chrysler Building, Empire State Building - was launched shortly before to the Wall Street Crash of 1929. The next record holders, World Trade Center towers and Sears Tower, opened up in 1973, during the 1973–1974 stock market crash and the 1973 oil crisis. The last example available to Lawrence, Petronas Twin Towers, opened up in the wake of the 1997 Asian Financial Crisis and held the world height record for five years. Lawrence linked the phenomenon to overinvestment, speculation and monetary expansion but did not elaborate these underlying issues.[4] The concept was revived in 2005, when Fortune warily observed five media corporations investing in new skyscrapers on Manhattan[3] (none of them, including the tallest New York Times Building, broke any records"
Singer Building
Met Life Tower
Panic Of 1907
40 Wall Street
Chrysler Building
Empire State Building
1929 Stock Market Crash/ Great Depression
Sears Tower
World Trade Center
1973-74 Stock Market Crash/ 73 Oil Crisis
Petronas Twin Towers
1997 Asian Financial Crisis
But here comes the doooozy
2008 World Financial Crisis
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