By
Tom Dyson, publisher, The Palm Beach Letter
Tuesday, December 15, 2009
The "skyscraper curse" has struck again...
Every time a country builds the world's tallest building, it seems their stock market crashes soon afterward.
It happened in America before the Great Depression. Architects unveiled two awesome new skyscrapers – the Chrysler Building and the Empire State Building – just as the worst bear market in America's history was getting started.
There was another bear market in the 1970s. The stock market lost 75% of its purchasing power in a decade. The completion of the Sears Tower in 1973 marked a two-year, 45% decline in the Dow.
In 1997, Malaysia's Petronas Towers took the title of the world's tallest building from the Sears Tower. The same year, the Malaysian stock market fell 50%.
Most recently, the curse struck Dubai. The Burj Dubai became the world's largest building last year. Now Dubai is close to bankruptcy, and its stock market has crashed.
Famous speculator Victor Niederhoffer says mankind has a tendency to build high before a fall. He devotes a chapter to this tendency in his second book, Practical Speculation.
One example Niederhoffer cites is the Nasdaq's MarketSite tower, which featured the world's largest video display on its facade. The building was completed in December 1999, three months before the Nasdaq composite crashed 70%.
Enron is another example he uses. Enron was halfway into construction on a $200 million, 40-story skyscraper, with an eight-story trading floor when the company collapsed into bankruptcy in 2002.
The book's advice is, don't just look at "tallest in the world" when trying to guess where the skyscraper curse could strike next. You should also pay attention whenever you see the tallest in the nation, the state, or the city. These buildings could attract the curse.
Also, skyscrapers make a lot more sense in Hong Kong than they do in Omaha. So watch out for "conspicuously tall buildings" where population density or land values don't justify them.
So where will the curse strike next?
Dubai is still in play. The Burj Dubai isn't yet complete. The official completion day is sometime in 2010. So there could be more trouble to come for Dubai...
There's a gargantuan skyscraper going up in Shanghai right now. The Shanghai Tower will be the world's second-largest building when it's complete in 2014.
South Korea's stock market could be in danger. The Koreans are building the world's tallest twin skyscrapers, the Incheon Towers, scheduled for completion in 2012. And the country will also get a building that's going to be taller than the Shanghai Tower. It's scheduled for 2015.
But my favorite candidate for an attack of the Skyscraper Curse is Saudi Arabia...
The Saudis are building a complex called the Abraj Al-Bait Towers in Mecca. It'll be the largest building in the world in terms of floor space and the tallest building in Saudi Arabia. The complex will include a prayer room with capacity for 10,000 people and a seven-star hotel.
The project is scheduled for completion in 2010. If the curse strikes, you should expect a stock market collapse in Saudi Arabia to follow shortly thereafter.
Dillard's... Nordstrom... Home Depot... Best Buy... Disney. These are all stocks that "should" be struggling.
After all, unemployment is at a 26-year high. Manufacturing jobs continue to flee to Asia. It's not an environment that should support profits for the "spending stocks" of America. Thing is, these five stocks are now at new 52-week highs.
And let's remember one of our favorite "real world" indicators... the share price of Starbucks. Today's chart displays the extraordinary 2009 performance of the world's largest seller of $5 lattes. Starbucks is up 50% in just the past six months. What's going on here?
The market has a way of confounding nearly everyone, that's what. Especially when the government is providing the biggest credit "goosing" in history. We have to agree with the "bears" out there: Yes, the U.S. economy is facing major problems. The government is spending money like a man with two days to live. But until stocks like Starbucks start to falter, we have to respect that the government has inflated prices and demand. Whether these six companies are enjoying "real" demand or not, the trend in spending stocks is up.
Today's Biggest Bets Against the Crowd By Tom DysonMonday, December 14, 2009
The surest way for you to make a quick buck in the stock market is to bet against the crowd at extremes. When you see traders all piling onto the long side of the market, and ignoring the short side, you know betting on the short side is more likely to show the profit. This is called contrarian trading.
How to Be Extra-Ordinary By Dr. Steve SjuggerudFriday, December 11, 2009
The two other speakers that evening were smart guys. But they're investing the ordinary way. They're fishing in the same pond as everyone else... using the same tools. They're hoping for something extraordinary. But you don't get extraordinary results with ordinary methods.
How to Trade Precious Metal Stocks Right Now By Matt BadialiThursday, December 10, 2009
Gold miners are selling for an average of 35 times future earnings right now. That's too high. I won't pay more than 20 times future earnings, even when the price of gold is on the rise (and it's much better and safer to buy gold miners for five or 10 times earnings).
What the Government Should Do to Save America By Dr. Steve SjuggerudWednesday, December 9, 2009
This work is a long way from Lee's dream. But Lee's been forced to recalibrate... to hit "reset." I'm sure he's not the only one...
