Skyscrapers Predict

Real and Financial Markets

A Spurt of Airy Buildings

Marks an Asset Bubble
and Portends a Market Crash

A Market Brief
by

Steven Kim

MintKit Investing
www.mintkit.com

Disclaimer This brief is provided as a resource for information and education.

The contents reflect personal views and should not be construed as
recommendations to any investor in particular. Each investor has to conduct
due diligence and design an agenda tailored to individual circumstances.

2014 MintKit.com

Summary
A breakout of soaring skyscrapers can presage a crash of the stock market and a
recession in the real economy. That is, a bubble in real estate by way of oversize buildings
heralds the end of a boom and the onset of a bust. In this way, a rash of record-busting
construction serves as a portent of doom during the long-lived cycles in the property
market as well as the financial forum.
In the modern era, real estate and financial assets form the bulk of wealth for the
population at large. For this and other reasons, the tangible and virtual markets are closely
intertwined. In the larger scheme of things, the fortunes of both types of assets depend on
the health of the economy at large. In that case, it makes sense for the real and financial
markets to display a heap of correlation and even a glob of causality with each other.
In their own way, skyscrapers can serve as beacons for investment planning by
spotlighting bouts of excess in the property sector as well as other domains such as the
stock market. All too often, an upcast of buildings that set fresh records for height is a
glaring sign of froth in the real economy and the financial system. For this reason, the
sober investor should pay heed to high-rise projects that make little or no sense from a
pragmatic stance. To wit, a spate of record-breaking buildings is a cue for the canny player
to rejigger their portfolio and prepare for a blowout in the real and financial markets.
* * *
Keywords:
Real Estate, Realty, Housing, Stock, Financial, Market, Forecasting, Bubble, Crash,
Cycles, Speculation, Strategy, Wealth, Correlation, Causality, Growth, Recession,
Economy, Prediction, World

* * *
A wave of frippery in real estate can provide glaring cues for forecasting a crash of the
stock market and a flop of the real economy. More precisely, a gush of ostentation in the
form of hulking skyscrapers heralds the end of a boom and the start of a cave-in. In this
way, a binge of record-busting construction signals a turning point during the prolonged
cycles in the property market and the financial forum.
In the modern culture, real estate and financial assets form the bulk of wealth for the entire
population. Given the central roles they play in the accumulation and allocation of
resources, the real and financial markets are bound to be intertwined. Looking at the big
picture, the fortunes of both types of assets depend greatly on the vigor of the global
economy. For this reason, it would be natural for the real and financial markets to display a
measure of correlation and even a dollop of causality in a reciprocal fashion.

Linkup of Real and Financial Markets

At first glance, the notion of using skyscrapers as a signal for investment planning would
appear to be far-fetched. The idea seems to make as much sense as using the length of
miniskirts to augur the course of the stock market.
On second thought, however, neither approach is as loony as it might seem at first glance.
For starters, people in all walks of life tend to be more carefree and liberal when the
economy is expanding at a breezy pace.
As a consequence, the hemline is wont to climb higher during periods of prosperity and
optimism. At the outset, the miniskirt made its debut in the halcyon years of the 1960s.
Unfortunately, the average hemline slumped during the tough times brought on by the oil
crises of the next decade. In this woeful era, the economy as a whole was stricken by a
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wayward scourge in the form of stagflation; namely, an unholy combo of stagnation and
inflation.
Even so, that dismal decade gave way to better times after another couple of years. As a
result, large patches of skin began to appear once more on shapely legs as the 80s wore
on and the good times waltzed back.
When the economy faltered back in the 70s, the mass of folks took a conservative
approach to attire. In particular, miniskirts fell out of favor in an age of hardship and
distress. The story was similar in the early 90s when the real and financial markets of the
West tripped up and conked out. And likewise for the bombshells and their aftershocks that
racked the first couple of decades of the 21 st century.
In terms of causal links, the activities in the property market affect as well as reflect the
goings-on in a slew of fields ranging from construction to financing. The story is similar for
the purchase of furniture, appliances and other goodies for brand-new homes. As a
consequence, the housing sector is a primary engine of growth for the economy at large.
Naturally the hubbub in real estate impinges on, and is swayed by, the vigor of the entire
economy.
When a hulking building is designed to shatter the standing records for height, then the
property market shows clear signs of an asset bubble (Thornton, 2009). For this reason, a
bout of manic construction acts as a cue for the savvy investor to initiate an orderly
program of withdrawal from the risky segments the marketplace.

Long Reach of Skyscrapers

On one hand, the miniskirt has its attractions as a guide to the state of the economy. On
the other hand, the hemline cant compete with the high-rise in one aspect at least.
A key advantage of the skyscraper lies in the fact that its been around longer than the
miniskirt. For this reason, we can tap into a larger trove of data in sizing up the role of the
high-rise as a portent of doom.
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To bring up a showcase of giantism, we can turn to the most storied skyscraper in the
world: the Empire State Building. The structure was an extravagant fancy brought to life by
John Jakob Raskob, an executive and businessman who had headed the financial division
of General Motors before he resigned in 1928. The hustlers express goal for the Empire
State was to surpass the Chrysler Building which was then under construction and slated
to set a global record for excess (Wikipedia, 2014).
At the time that excavation began for the Chrysler Building in 1928, there was a buzz of
competition in New York City to shatter the records for height. After two years in the
making, the Chrysler tower claimed the prize as the worlds tallest building. The
monstrosity would hold the crown for just 11 months until the Empire State came to
completion in 1931.
The latter building was conceived in 1929 at the height of a whopping bubble in the stock
market. Construction for the landmark began the following year, shortly after the bourse
reached its zenith then burst into flames.
The Empire opened for business in 1931, just in time to face the greatest depression to
rage across the planet. Needless to say, it was not a propitious moment for a titanic
building to throw open its doors to a market where the would-be tenants were biting the
dust in droves.
Based on the structural height, the Empire remained the tallest building for 42 years. Its
stature was eclipsed only by the erection of the North Tower of the World Trade Center in
1973.
Whatever its claims to fame, the Empire upon its rollout marked the beginning of the end
for the good times in the real economy as well as the financial sector. In that case, a
shrewd investor would have done well to dump their stakes in the stock market as soon as
the plans for the high-rise were announced. Moreover any company in any industry could
have heeded the omen and hunkered down in order to prepare for the impending crackup
of the entire economy.

To sum up, the Great Depression followed on the heels of the manic buildup in the
property sector followed by the epic bustup of the stock market. The latter bombshell
shattered the financial system and trashed the real economy for nearly a decade. Only the
onset of another calamity namely, the Second World War brought an end to the
devastation and misery that plagued the planet throughout the 1930s.

Standard Playbook
When the economy is expanding, companies of all stripes are able to rack up oodles of
profits. The earnings of the firms then enrich an expanding wave of beneficiaries. The
happy folks who enjoy the spoils include internal stakeholders in the form of owners and
employees as well as external parties such as suppliers and creditors.
The gleeful recipients of the booty then scrounge around for apt uses for their newfound
wealth. As an example, a portion of the bounty goes into sedate assets such as
government bonds and corporate debt. Given the flood of money sloshing around the
financial system in a vibrant economy, all manner of firms find it easy to borrow gobs of
money by way of the capital markets or commercial banks.
In addition, the groundswell of affluence gives rise to an upbeat mood throughout the
populace. Thanks to the high spirits, a growing corps of individuals as well as companies
cast off their inhibitions and chase after glitzy projects that offer dreamy prospects of
fabulous wealth in exchange for hefty risk. The swarm of gamesters have no trouble
convincing themselves of the riches just waiting to be scooped up: things have turned out
so well in recent years that the future will bring forth similar results, no?
The upsurge of wealth throughout the population powers a mindless rush into financial
assets of all kinds ranging from common stocks to index funds. As for the tangible
economy, the housing market is a major beneficiary of the swelling prosperity.
Amid the gush of wealth for companies as well as individuals, anyone who wants to borrow
money finds it easy to obtain loans at skimpy rates from diverse sources ranging from

personal acquaintances to commercial banks. A direct outgrowth is a whirlwind of wheeling

and dealing in real estate in tandem with a hike in prices throughout the property market.
As the hoopla gathers steam, the initial spate of investment in sound assets at reasonable
prices turns into a spree of speculation in iffy widgets at berserk prices. Given the onrush
of newfound wealth in recent years, making money in spades turns into the main topic of
conversation at work and play. Everyone, it seems, knows somebody who has made a
killing in no time by flipping houses, stocks or other doodads. And just as many people,
eager to repeat the performance, scrounge around in order to raise even more money to
pump into slick schemes of similar ilk.
If a particular deal requires more funding than a single bettor can muster, why thats no
problem at all. The obvious move for the plunger is to round up a bunch of kindred spirits
be they friends or relatives, neighbors or strangers and form a raiding party. An example
of the latter is a syndicate whose mission is to buy and sell dicey properties in the
residential market or the commercial patch.
As the blaze of speculation turns into a wildfire, the traditional sources of credit also jump
into the ring. Legions of bankers throw caution to the winds and elbow each other to drum
up business by handing out loans to one and all. In some cases, a jobless person who has
nothing by way of income or assets can obtain a series of huge mortgages, each of which
exceeds the market value of the target property.
In this giddy environment, no one can take on too much debt. In a heated competition for
profits, a growing horde of rogue bankers go out of their way to coax paupers into taking
on more debt than they can shoulder by any sane measure.
Even in the absence of extreme ploys to dish out loans, the lenders battle each other in a
frenzied effort to corral more customers. The targets in their sights run the gamut from
wild-eyed individuals to reckless syndicates. Amid the furor, a swelling army of speculators
compete with each other to land the biggest deals. Before long, the closest thing to a
rationale behind each project is the fond hope that the housing bubble will continue to
expand without end. In their delusion, its hard for the zanies to come across any gimmick
that doesnt look enticing.
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The scramble for business by the wanglers drives an orgy of construction projects. From
the standpoint of the lenders, a mammoth project is a godsend that offers the opportunity
to move a mountain of money in one fell swoop. The bigger the deal, the greater the booty:
the bankster can bag a windfall by charging a fat fee that amounts to a juicy percentage of
the entire amount lent out.
Thanks to the wingding in full swing throughout the property market, a mortgage of any
kind is a cinch to justify. The mound of money dished out regardless of the intrinsic value
or lack of such of the project funded will surely return a heap of profit in due course, just
like similar projects in the recent past. Why, everybody knows that a jackpot is pretty much
guaranteed! Joy of joys, its a brand-new world altogether!! Any wimp can see that the
straitjackets of reason and caution from bygone days no longer apply am I right or am I
right?!
As the inferno of greed rages out of control, the starkest symptom of the delirium is an
outcrop of strutting skyscrapers that break new ground. For their part, the wheelers and
dealers in the property sector dream up woozy projects whose main purpose is nothing
more than grabbing the spotlight by topping old records for height. In the process, making
money hand over fist is no problem, you see, since any price assigned to any building
today will doubtless be topped by a higher figure tomorrow.
With the passage of time, the rampage of hubris and excess sets the stage for a
thunderous blowout. Sadly, though, the day of reckoning when it comes doesnt limit the
fallout to the perpetrators of the crackpot schemes. Rather, the entire population pays the
price when the blowup of the housing bubble knocks out the banking system as well. A
second wave of destruction sweeps across the rest of the financial sector including the
stock market. For the climax, a third round of carnage tears through the real economy as a
whole.
While the bacchanal was in full swing, the binge of gambling in the property market caused
mounds of assets to be funneled into worthless schemes. The resources squandered in
this fashion ran the gamut from raw materials and construction equipment to office space

and human labor. Given the severe distortions in the chains of production and distribution,
the upshot is a mangling of the entire economy (Kim, 2012).

Roundup for Investment Strategy

Although it may sound wacky at first, a bout of skyscraping at the outer limits stands out as
a sign of excess in the marketplace. For this reason, a rash of record-breaking buildings
serves as a portent of doom writ large.
In the age of the information highway, theres no need for people to cram themselves like
sardines into vertical canisters that jut into the clouds. On the contrary, theres plenty of
room on or near the surface of the planet for sensible folks to live within easy reach of
urban centers. In that case, a dweller in the suburbs or the hinterlands can easily enjoy the
attractions of the city at their leisure. In this light, the draws of the metropolis span the
spectrum from grand museums and artsy theaters to quirky restaurants and edgy
concerts.
To add to the bliss, a resident of the outlying locales need not put up with the headaches
and hassles of the city on a continual basis. The putoffs of this sort run the gamut from
traffic jams and noise pollution to rampant crime and pervasive smog.
Given this backdrop, the wily investor would do well to keep track of the news wires and
take note of flaky plans for hulking structures that makes scant sense from a practical
standpoint. In an era of digital networks and multimedia channels, theres no good reason
for hordes of people to stuff themselves into cramped and overpriced quarters in the form
of outsize buildings.
In that case, we can safely infer that the ulterior motive in erecting a phallic symbol of
monstrous size is to assuage some jokers inferiority complex. In the face of such
perversity, the best move for well-adjusted folks is to run for cover and hunker down for an
impending bust of the real and financial markets.

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To wrap up, the announcement of plans for an oversize building anywhere on Earth is a
trusty prompt for the mindful investor to rejigger their portfolio. In view of the froth bubbling
in the property market, the best move is to pare down the exposure to risky assets in the
financial bazaar as well as the real economy.
In this way, the biggest cues for investment strategy can come from the tallest structures.
From a larger stance, the tie-up of the property sector and the stock market serves to
showcase the intrinsic bondage of the financial forum and the real economy.

References
Kim, S. Charade of the Debt Crisis. MintKit.com: Library, 2012. http://www.mintkit.com/lib
tapped 2014/10/22.
Thornton, M. Skyscrapers and Business Cycles. Original talk titled Our Enemy,
Inflation: recorded 2009/1/24; uploaded 2009/1/29. http://www.youtube.com/watch?
v=wWMtQxos5BQ&feature=related tapped 2014/10/22.
Wikipedia. John J. Raskob. http://en.wikipedia.org/wiki/John_J._Raskob tapped
2014/10/22.

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