The last time I was in Thailand, several of the bars had signs with a cartoon of a traditional-looking Arab dressed in a Keffiyeh with a red line through it.
The meaning was clear: No Arabs allowed.
There is a dark and unseemly side to Saudi Arabia.
It is a kingdom run by thirteenth century laws; women and foreign workers are treated like cattle, and suspected criminals are dealt with by a scimitar in the public square.
The vast majority of 9/11 terrorists were from Saudi Arabia. Political descent is not tolerated, democracy is unheard of, and some 7,000 lazy, indulged princes wander about like a herd of hypocritical Charlie Sheens on spring break…
All of this is bought and paid for by U.S. dollars chasing oil.
Pride Before the Fall
Hubris is an innate human quality. We are always trying to do things bigger and better. We often reach too far.
Whether it be bridges in Holland during World War II, McMansions in Clearwater, or skyscrapers in New York City, the nature of the business cycle is to ramp up leverage and lay on the bets the farther you travel from the mean.
In the case of constructing the world’s tallest building, you must have confidence not only in the architect and the builder, but in the moneymen, the real estate people, and the political class. The simple, community-wide arrogance it takes to invest billions of dollars in a white elephant that adds millions of square feet of empty rental space is extraordinary…
And it never pays.
It is little wonder that, much like a flag on the moon, skyscrapers represent the high-tide mark of presumption.
The Big Idea
Twelve years ago, Andrew Lawrence — then a Hong Kong-based property analyst for a British investment bank — created the Skyscraper Index. This index correlated construction of the world’s tallest skyscrapers with economic crises going back to 1873. And it has proved incredibly accurate.
Lawrence described his index as an “unhealthy 100-year correlation.” It works like a charm.
The first example was the Equitable Life Building in New York, which was completed in 1873 at a then-skyscraping 43.3 meters. Completion was followed immediately by a recession in the United States and Europe that lasted for five years, historically known as the Long Depression.
The Auditorium Building in Chicago and the New York World Building, completed in 1889 and 1890 respectively, coincided with the British banking crisis of 1890 and a world recession.
Then there was Singer Building (1908), which presaged the Panic of 1907 and the Metropolitan Life Building, completed in 1909.
The skyscraper index accurately predicted the Great Depression with the completion of 40 Wall Tower in 1929, the Chrysler Building in 1930, and the Empire State Building in 1931…
The World Trade Center towers in New York were finished in 1972, and the Sears Tower in Chicago in 1974 “marked a period of U.S. currency speculation, the collapse of the Bretton Woods system, and the OPEC price rises that caused an economic crisis across the world.”
The Global Phallic Symbol
The Petronas Towers in Kuala Lumpur, Malaysia, was the first tallest-building constructed outside of the United States in 130 years.
It marked the top of the “Asian Tiger” period and coincided with the Asian currency crisis of 1997. The Petronas Towers currently has an occupancy rate of just 55%.
And of course, the Burj Khalifa in Dubai is now the tallest, standing 828 meters tall and 162 stories, and coinciding with the biggest global real estate bust of all time. It is estimated that 825 of the tower’s 900 luxury apartments are empty; Dubai property prices fell 60% since it opened in January 2010.
Mr. Lawrence updated his index in a report seven months ago: “Thankfully for the world’s economy, there is currently not a skyscraper under construction that is planned to overtake the height of the Burj Khalifa.”
He went on to describe the over-building of China and pointing to a possible collapse there.
But yesterday, dear reader, it was announced that a new world’s tallest skyscraper would be built in Saudi Arabia by the Bin Laden Group. According to Fox News:
The Kingdom Tower will measure at least 3,280 feet high and will be located in Saudi Arabia, where it will outdo its Gulf neighbor Dubai, which inaugurated its own record-breaking skyscraper — the 2,717-foot Burj Khalifa — less than two years ago. The tower’s final height remains a closely guarded secret, though it will be at least 568 feet taller than the $1.5 billion Burj Khalifa.
Once complete, the Kingdom Tower will take the title of the world’s tallest building.
The building is expected to be completed in 2016–2017 — about the time the famed Ghawar oil field bubbles up with salt water.
You see, the Saudis have developed Ghawar by using peripheral water injection; water is pumped into the reservoir, driving the remaining oil to the surface.
In 1980 (when they last let Western scientists look at it), the depth of oil in Ghawar was at 500 feet and depleting at 18.4 feet per year…
One day in the not-too-distant future, they will pump brine instead of black gold.
Sincerely,
Christian DeHaemer
Editor, Energy and Capital
