 By Euan Wilson, originally published in the May 2009 SocionomistDownload the Complete Issue (420 KB) |
Edward R. Dewey hypothesized in the 1940s that the tallest skyscrapers are completed after significant market peaks. We would add that in light of social mood’s hierarchical nature, larger waves produce larger construction endeavors and, when those waves are over, larger failures.
The advance in the stock market from 2002 to 2007 echoed the enthusiastic social mood attending the major top of 2000 and brought announcements of impressive construction projects around the world. But since the bear market resumed in 2007, global social mood has undergone the biggest swing from positive to negative in generations, and those same projects are now experiencing massive cutbacks, delays, controversy and outright cancellation. Ventures in Saudi Arabia and Dubai provide an excellent case study.
The developers of Saudi Arabia’s Mile High Tower have put their project on hold indefinitely. The December 2008 issue of The Elliott Wave Financial Forecast predicted that the Mile High would never get beyond the blueprint phase.
Figure 1
Mile High’s proposed rival, the Nakheel Tower of Dubai, also appears unlikely to get off the ground. In January, its government-backed construction firm announced the project’s shelving for at least one year. While Nakheel assures the press that the project will restart, it offers no reason for the delay, and we doubt the tower will ever see completion. That the company still positions the tower as a future possibility fits our characterization of a bear market as a Slope of Hope. It also confirms that full capitulation to the bearish mood trend still lies ahead.
Figure 2
If the current countertrend rally has more to go, project leaders may attempt to resurrect plans for both towers later this year. But the onset of the next wave of decline will quickly swallow up any residual optimism.
Some of Dubai’s already-completed mega-projects suddenly face problems. For example, The New York Times suggests that the Palm Jumeirah, Dubai’s man-made, palm-tree-shaped island, literally may be sinking. Donald Trump partnered with Nakheel in 2005 to build the Trump International Hotel and Tower on this island, but the project failed to survive the rapid change from positive to negative mood; Nakheel cancelled construction in December. Nakheel has called off projects on its other man-made islands as well, to the tune of $30 billion in investment losses so far.
Dubai’s problems extend overseas. The Dubai World company is a partner in Las Vegas’s $9 billion CityCenter development. Reuters reports that the group “now needs $800 million more to access a $1.8 billion credit facility to let it complete the project,” observing, “funding prospects look bleak in a global recession.” Dubai World, alleging mismanagement, is now suing its American partners in an attempt to exit the deal.
Clouds have their silver lining, though, and for Dubai that lining is the Burj Dubai. The Burj is already the world’s tallest building and will be finished later this year, in line with EWFF’s analysis from December. As the larger bear market gains steam, so too will derision for grandiose construction projects. By the bottom, the very idea of a mile-high skyscraper will be the subject of mockery, and the Burj will stand as a monument to the exuberance and hubristic overreach that attended the Grand Supercycle peak.■
Euan Wilson writes for The Socionomist.
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Socionomist is designed to help readers understand and anticipate
waves of social mood. We also present the latest essays in the field of socionomics,
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Most economists, historians and sociologists presume that events determine society’s mood. But socionomics hypothesizes the opposite: that social mood determines the character of social events. The events of history—such as investment booms and busts, political events, macroeconomic trends and even peace and war—are the products of a naturally occurring pattern of social-mood fluctuation. Such events, therefore, are not randomly distributed, as is commonly believed, but are in fact probabilistically predictable. Socionomics also posits that the stock market is the best available meter of a society’s aggregate mood, that news is irrelevant to social mood, and that financial and economic decision-making are fundamentally different in that financial decisions are motivated by the herding impulse while economic choices are guided by supply and demand. For more information about socionomic theory, see (1) the text, The Wave Principle of Human Social Behavior © 2011, by Robert Prechter; (2) the introductory documentary History's Hidden Engine; (3) the video Toward a New Science of Social Prediction, Prechter’s 2004 speech before the London School of Economics in which he presents evidence to support his socionomic hypothesis; and (4) the Socionomics Institute’s website, www.socionomics.net. At no time will the Socionomics Institute make specific recommendations about a course of action for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended.
