European Crisis Signal

The ECB has once again come to the rescue by cutting interest rates in order to forestall a collapse of the European economy. Also, in a “surprise” move, the Chinese central bank cut interest rates in response to a continuing slow down in economic activity.

When the Skyscraper Index issued a European crisis signal last summer the European stocks markets were riding a wave of optimism and the Euro was worth about a $1.50. Most European stock markets have lost considerable ground along with the value of the Euro. However, we can best visualize the economic trouble from where the skyscraper crisis signal was issued: in the London real estate market. The Shard Skyscraper (which issued the crisis signal by becoming the tallest skyscraper in Western Europe) opened its doors to a badly slumping real estate market. Its owners made the bad mistake of buying out one of its primary lessee at 70 pounds per square foot. Leases are now going for 55 pounds per foot and probably heading lower.

In addition to Europe, there has been a regional crisis signal in China and possible world crisis signals coming from both China and the Middle East.

Comments

  1. I’m sure you’ll like this skyscraper story. The four tallest buildings in Spain, all built in Madrid on what was formerly a giant training complex owned by Real Madrid, were completed on the eve of the housing bust in Spain (2007–08). One of these buildings (formerly called “Torre Repsol”) was meant to be the headquarters of Repsol YPF, but was sold in mid-2007 to Caja Madrid (and renamed to “Torre Caja Madrid”) for a little over 800€ million. Caja Madrid, of course, merged with a number of smaller regional banks to create Bankia, which was just bailed out by the European Union.

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