As we prepare to move to a new decade, a quick look back to another turning point, 1999, saw the creation of the "Skyscraper Index" by Andrew Lawrence, research director at Dresdner Kleinwort. Since Mr. Lawrence developed it he can call it whatever he likes but from what I've read, it seems more like an indicator than an index. Here's why; the theory behind the index is that the desire to build the world's tallest building is usually a precursor to an economic downturn in the place where the building is located.
Examples include: the Singer and Metropolitan Life buildings before the Panic of 1907; the Chrysler and Empire State Building and the Great Depression, the World Trade Center and Sears Tower before the stagflation of the 1970's and the Petronas Tower in Kuala Limpur before the East Asian Crisis.
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Further proof of the index's effectiveness is the Burj, currently the world's tallest building located in that creator of palm tree shaped islands, Dubai. Construction was completed in 2007.
With all of the fantasy surrounding some of Dubai's development projects it should not come as a surprise that Francis Matthew, the editor-at-large for the "Gulf News", the largest English-language daily in the U.A.E., has created a "style guide" for his reporters instructing them to avoid the words "bailout", "default" and "debt-crisis" while encouraging the use of "financial consolidation" and "fiscal support". When asked about the new rules, Mr. Matthews said, "We're trying to restrict people from using financially incorrect terms".
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Given that logic, the whole issue with Dubai World's debt could probably have been avoided if they would have described the Burj as "least vertically challenged" instead of the world's tallest building thus avoiding the scenario described by Andy Lawrence.
It should also be noted that the next "world's tallest building" is being built in Shanghai and is scheduled for completion in 2012. It will be called Shanghai World. Given what just occurred on the banks of the Persian Gulf, if they can't stop construction maybe they can at least change the name.
Not showing any signs of impending doom, the National Bureau of Statistics in Beijing announced last Friday that the Middle Kingdom's GDP for 2008 was 31.405TN Yuan ($4.6TN) about 4.5% higher than the previous estimate of 30.067TN Yuan putting YoY growth at 9.6% vs. the 9.0% original estimate.
These numbers also appear to be "cleaner" than earlier thought with regard to the nation's carbon footprint as the same agency said that energy use was 5.2% less per unit of GDP than previously reported.
Services also seemed to gain as a proportion of total GDP with the revised number equal to 41.8% vs. 40.1% originally reported. This is still a bit away from the 70% of GDP that services comprise in many Western economies.
With that type of growth it could be possible for China to surpass Japan as the world's number two economy as early as 2011.
Speaking of "11", Li Yizhong, China's Minister of Industry and Information Technology, said that the target rate of growth for industrial production is 11% for next year which should allow China to maintain the nation's growth at 8%. Some experts believe 9% growth in 2010 is well within the realm of possibility.
Dubai's CDS closed last week at 445bps which was just about in the middle of the range bounded by the pre-crisis (hopefully Francis isn't reading this.) levels in the high 200bps and the post "financial consolidation" high of 647bps.
China's CDS closed at 75bps also in the middle, but of a smaller range of 58bps (9/23) and 92bps (11/27)
CDS for the U.S. of A. broke above its previous interim high of 40bps (7/10) last week reaching 42bps on 12/21 but closing the week at 38bps. Of the three, the US's CDS's would appear to have the most upside momentum.
Enjoy the Holiday shortened week.