Skyscraper Index: China Next Up?

Brazilian Bubble Blog (June 2012): Skyscraper Index Never Fails: China plans world’s tallest building

According to CNN, China is planning the construction of the world’s tallest building to be ready by early 2013, a 220-story structure which would cost the Chinese about US$628 million. Once completed, it will surpass Dubai’s Burj Khalifa to become the tallest structure in the world. The building will also outshine China’s current skyscraper poster boy: the 632-meter Shanghai Tower.

CNN (June 2012):  It took Dubai more than five years to build the 828-meter Burj Khalifa, the world’s tallest building (for the moment, anyway).

But Chinese architects and engineers reckon they need a mere 90 days to leave the Emiratis in the dust.

At least, that's what they've claimed.

Wikipedia: The Skyscraper Index is a concept put forward in January 1999 by Andrew Lawrence, research director at Dresdner Kleinwort Wasserstein, which showed that the world's tallest buildings have risen on the eve of economic downturns. Business cycles and skyscraper construction correlate in such a way that investment in skyscrapers peaks when cyclical growth is exhausted and the economy is ready for recession. Mark Thornton's Skyscraper Index Model successfully sent a signal of the Late-2000s financial crisis at the beginning of August 2007.

The buildings may actually be completed after the onset of the recession or later, when another business cycle pulls the economy up, or even cancelled. Unlike earlier instances of similar reasoning ("height is a barometer of boom"), Lawrence used skyscraper projects as a predictor of economic crisis, not boom.

Source: http://brazilianbubble.com/skyscraper-index-never-fails-china-plans-worlds-tallest-building/
Source: http://www.ritholtz.com/blog/2012/04/skyscraper-index/
Source: http://en.wikipedia.org/wiki/Skyscraper_Index
Source: http://www.cnngo.com/shanghai/life/sky-city-chinese-company-proposes-worlds-tallest-building-098182

Got a Great Public Sector Pension or State Retiree Health Benefits? Now Watch Your Children and Grandchildren Suffer...

Summary: Too many lofty promises were made to workers of older generations, and too little (or nothing) was contributed by workers for their mathematically-flawed pension schemes and now we are dealing with the fallout. Changes are happening to reduce the gigantic funding holes, but the most pain will be felt by younger workers. Older workers, you should thank irresponsible policy-makers, your unions, and now, your children, grandchildren, and great-grandchildren for their generosity for paying for your what is "owed" to you.

The Pew Center on the States (June 2012):

States continue to lose ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care, due to continued investment losses from the financial crisis of 2008 and states’ inability to set aside enough each year to adequately fund their retirement promises. States have responded with an unprecedented number of reforms that, with strong investment gains, may improve the funding situation they face going forward, but continued fiscal discipline and additional reforms will be needed to put states back on a firm footing.

Though states have enough cash to cover retiree benefits in the short term, many of them—even with strong market returns—will not be able to keep up in the long term without some combination of higher contributions from taxpayers and employees, deep benefit cuts, and, in some cases, changes in how retirement plans are structured and benefits are distributed. 

Many experts say that a healthy pension system should be at least 80 percent funded.

States have not done nearly enough to set aside money for their retirees’ health care and other non-pension benefits such as life insurance. As of fiscal year 2010, they had put away only 5 percent of their total bill coming due for those benefits.

States’ public sector retirement funding gap for both pensions and retiree health benefits grew by $120 billion, from $1.26 trillion to $1.38 trillion, from fiscal year 2009 to 2010. The largest part of that year-over-year growth was the increase in pension liabilities ($126 billion), which outpaced the growth in pension assets ($29 billion). The total public pension liability in 2010 was about $3.07 trillion; assets were $2.31 trillion, leaving a $757 billion gap.

Retiree health care and other benefits liability in 2010 was $660 billion; states had assets to pay $33.1 billion, leaving a $627 billion hole.

To manage long-term pension obligations, nearly every state has moved to reduce its retirement bill in the last three years. Between 2009 and 2011, 43 states enacted benefit cuts or increased employee contributions, or did both.

The most common actions included asking employees to contribute a larger amount toward their pension benefits; increasing the age and years of service required before retiring; limiting the annual cost-of-living (COLA) increase; and changing the formula used to calculate benefits to provide a smaller pension check. States also have cracked down on abuses, such as the practice of “spiking” final pay to get a larger pension check by including overtime pay and sick leave. 

The reforms that states have enacted in the last three years mostly affect future state workers, as it is legally difficult to reduce benefits for current employees and retirees.

Source: http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Pensions_Update.pdf
Source: http://www.zerohedge.com/news/us-retirement-benefits-underfunding-rises-record-14-trillion

What Other Elements Can be Used as Money?

Source: http://www.slatev.com/video/why-gold-why-not-argon/

Chris Martenson on the Next 20 Years

In Summary:


Economy (Must Grow) + Energy (Can't Grow) + Environment (Depleting) = 20-Year Outlook Alarming.

Source: http://www.youtube.com/user/GoldMoneyNews/featured?v=8WBiTnBwSWc
Source: http://www.peakprosperity.com/

Greece's Path Once it Leaves or Gets Kicked Out of the Euro

Whether Greek elections today (or August if they can't form a coalition, again) start the exiting process, Greece will ultimately leave the Euro one way or another.

Here's Bloomberg's prediction for events following an exit. If it's anything like Argentina in 2001, then it covers a three-year timeframe.



Source: http://www.bloomberg.com/video/94651351-here-s-what-happens-if-greece-leaves-the-euro.html

Sovereign Defaults of the Past Ain't Got Nothing on the PIIGS

Don't worry, Greece, Portugal, and Ireland are just specks compared to large European countries like Italy, France, and Germany.

Just make sure you don't compare them to prior sovereign defaults. Or come to the realization that any one of those specks defaulting have large consequences on the rest of the EU members, such as no longer being part of the bailing-out group and joining the being-bailed-out group. Oh wait, that's already the case. Once they get bailouts, they are on the receiving side and their commitments to the bailing-out group disappear and their Italian, French, and German friends get to pay a larger portion. I can't see anything that could possibly go wrong with that.

Source: http://p.twimg.com/AiZgN2qCQAA66aK.jpg:large
Source: Barclays Capital
Source: Things that Make You Go Hmm... (June 10, 2012)

Spain is Ok -- For Real This Time

Remember the good old days? From April 2012?
http://stockuponcannedgoods.blogspot.com/2012/04/spain-is-ok.html

Spanish Economy Minister Luis de Guindos ruled out seeking a bailout hours before Standard & Poor’s cut the country’s credit rating to three levels above junk and a report showed unemployment jumped close to a record.
“Nobody has asked Spain, either officially or unofficially” to turn to Europe’s bailout mechanisms, he said in an interview in Madrid late yesterday. “We don’t need it.”


 The Economist, June 10, 2012:

Whatever the €100 billion ($126 billion) made available by euro-zone countries to recapitalise Spain's banks looks like, the Spanish government would really rather not call it that. "In no way is this a rescue," said Luis de Guindos, Spain's economy minister, while announcing that a deal to rescue Spain's banks had been done in a two-and-a-half-hour conference call with the 17 euro-zone finance ministers on June 9th. "It's a loan with very favourable conditions."

Turns out Spain needed $126 billion, at least for now. "...very favourable conditions"? Ok, now let's see what Portugal and Greece have to say about their bailouts and the conditions that came with them.

But fret not, everything is fine in Spain, because remember, it's the banks that generate all economic productivity in a country, right? And drive unemployment down?

Source: http://www.economist.com/blogs/newsbook/2012/06/spains-banks