Planning to invest in Saudi Arabia? Find out why their skyscraper could lead to economic collapse

I have always thought the Big Building or Big Arena theory is true. When you see too many football stadiums with huge sponsorships that do not make any sense then start worrying when you see to many empty office skyscrapers being built its also time to worry. I have always wondered about the Devon Building in OKC as it sits in a city with so many already empty vacant offices. I feel they wasted too much money on that. But let’s look at Saudi Arabia.

Economists love to play with all sorts of outlandish indicators of impending economic collapse including bread prices and milk prices, prices of microchips, even the rates currently being charged by escorts in an attempt to pinpoint the time and place where the next economic meltdown will take place. Because the volume of data potentially affecting macroeconomics is so enormous, there is an infinite number of ways a skilled mathematician can rationalize the predictive model of their choosing no matter how wild it may seem.

A trend has established itself within industrialized nations for more than 140 years now and has managed to repeat itself multiple times through some of the 20th and 21st centuries’ darkest economic hours. This would be the Skyscraper Index where the location of the world’s current tallest building under construction is where financial ruin is coming next or has already arrived. Think about it.

Take a look at some of the past examples:

The Equitable Life Building, finished in New York in 1873, coincided with a 5-year recession.

The Empire State Building first broke ground in 1930 but was planned well before Wall Street crashed in 1929 and was built as the world sank into the Great Depression.

The World Trade Center and the former Sears Tower were both built around the time of the oil crisis in the early ’70s.

Kuala Lumpur’s Petronas Towers, completed in 1998, coincided with the Asian financial crisis of the late ’90s.

In 2009, the Burj Khalifa, the tallest building ever, stood finished and mostly vacant over a financial collapse that nearly ruined Dubai.

And remember when the MGM Mirage and investment partner Dubai World appeared unlikely to make a $220 million payment on City Center – a massive resort and casino project under construction on 67 acres. The project is a stark example of how excesses spawned during a lengthy gambling boom are came back to haunt the casino industry.

Right now the Shanghai Tower is scheduled for completion over the summer and the Chinese economy is now threatening yet another global crisis.

What leads up to this is the height of a building while we normally associate skyscrapers with success and prosperity but not a predictor of lucrative times. People build higher when square footage of property becomes more expensive. When developers start to max out their building heights that’s the general area where an economic peak is also on the horizon.

There’s a building in the planning stages that will put the the world’s current tallest building the 2,700-foot Burj Khalifa to shame. The “Kingdom Tower,” will be over a kilometer in height and will beat the herald of Dubai’s economic recession by 550 feet. Construction began in 2013 of the kilometer-tall (3,200-foot) building with previous plans calling for an even taller behemoth standing more than 1,600 meters or around a mile high. This building will be twice the height of the newly finished Freedom Tower in New York which is currently the tallest building in the Western Hemisphere.

The building is going up in Jeddah, Saudi Arabia considered the gateway to both Mecca and Medina, the holiest and second-holiest cities in Islam, respectively, Jeddah is also a major urban and economic center of the Saudi Kingdom. A recession there would mean a definite shift in the fundamental structure of today’s oil supply chain.

This could mean that Saudi oil and stocks are heading lower. In 2014, for the first time in decades, American oil production exceeded Saudi production, all thanks to alternative extraction methods such as fracking. Not to mention wind and solar are making great gains. Saudi oil production has stagnated, and its single-biggest asset the Ghawar oil field being the biggest in the world is a mere shadow of its former self.

The skyscraper or big building obsession could be about to take its next victim. It may take a few years more to find out as The Kingdom Tower isn’t due to be completed until 2019. It will be interesting to see how energy investment will change over the next decade or two.

Another thing to keep in mind is that Saudi Arabia just opened its stock market to the world.
Until now, Saudi stocks were restricted in ownership to just Saudis and citizens of the nearby Gulf states. Westerners could only get a slice of the action through exchange-traded funds and similar financial vehicles. It’s not just the biggest stock market in the Middle East the TADAWUL is bigger than all of the Gulf states’ stock markets combined and the only stock exchange in Saudi Arabia. The Tadawul All-Share Index reached its highest point at 20,634.86 on 25 February 2006.