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In A World Of Bubbles, Tokyo’s ‘Skyscraper Curse’ May Be Scariest

It’s been a medal-caliber few years for Japan’s property developers. Not Olympic gold of the kind Tokyo will award athletes 12 months from now. But construction ahead of the 2020 Games, building that’s been a godsend for Japan’s property developers. That will happen when the cost of staging a few weeks of sporting events explode to $25 billion from the $7 billion Tokyo originally estimated.

What if, though, the 2020 construction boom spells trouble for the century ahead? The reference here is to the “Skyscraper Curse” that may be rearing its head in the third-biggest economy.

Building related to Tokyo 2020 turned the Japanese capital into a giant construction site. Even developers unattached to the August 2020 Olympics have used the excitement to build new office towers throughout the city. Office space that, frankly, might have a hard time renting out floors two years from now.

Multinational companies, after all, continue to favor Singapore and Hong Kong (for now, at least) for Asian headquarters. And it’s not Shinzo Abe’s seven-year reflation scheme is catalyzing a startup boom to fill all that office space once the five-ring Olympic circus leaves town.

Today In: Asia

Mori Building recently unveiled ambitious plans to construct Japan’s tallest skyscraper, a title suddenly held by Osaka. This epic redevelopment project that will include offices, residences, shops, restaurants, a hotel, and an international school will come at a cost of 580 billion yen ($5.45 billion), which surely has contractors and rivals salivating at the possibilities. But there’s reason for broader caution.

One can quibble with the wisdom of putting a 64-story, 330-meter edifice in the center of one of the world’s most seismically active metropolises. It’s economic risks, though, that Prime Minister Abe’s office should be considering.

History betrays an uncanny correlation between world’s-tallest-building projects and financial crises. Roll your eyes if you want, but I’ve been covering the phenomenon for two decades. Here’s a quick recap of the last 112 years.

The Panic of 1907, when the New York Stock Exchange lost 50%, occurred just as Manhattan celebrated the opening of the 47-story Singer Building and 50-story Metropolitan Life North Building. The Great Depression that began in 1929 coincided with the New York christenings of 40 Wall Street and the Chrysler Building. Despair and homelessness spoiled the party over the 1931 opening the Empire State Building.

Fast forward four decades to New York and Chicago, the hosts to the world-topping World Trade Center and Sears Tower projects. Both opened as the Bretton Woods monetary system was breaking down and stagflation was fueling fiscal crises.

In 1997, Kuala Lumpur was quaking amid regional market turbulence just as Malaysia’s Petronas Towers came online. In the early 2000s, Taipei opened the world’s biggest architectural marvel in time for political turmoil at home and growing tensions with China, which views Taiwan as a breakaway province. The 2008 completion of Dubai’s 828-metre Burj Khalifa Tower dovetailed with the city’s bust, cascading oil prices and the “Lehman shock” a world away.

This is just the last 100 or so years of the Skyscraper Curse. Spiritualists may track the phenomenon back to the biblical Tower of Babel. But coincidence or not, it’s hard to miss the overlap between history-making economic disruptions and new architectural Guinness World Records entries.

The common, and indisputable, thread is ultra-low interest rates fueling over-investment and froth. Developers are always looking to harness the newest engineering and technological advances. That impulse gets supercharged by excess monetary expansion. It’s not surprising, then, that tallest-building projects often get green-lighted near the top-ticks of speculative manias.

Again, not the most solidly scientific of arguments. Yet Asian developers still engage in serious real-estate one-upmanship. South Korea’s tallest building, the Lotte World Tower, opened in 2017 just in time for President Park Geun-hye’s impeachment and imprisonment on bribery charges. Also in 2017, Shenzhen toasted the opening of the Ping An Finance Center, the No. 4 tallest building globally, as U.S. President Donald Trump was telegraphing his China trade war.

In Melbourne, the ongoing Australia 108 project aims to become the Southern Hemisphere’s tallest residential tower. A coincidence, maybe, but many economists worry Australia is veering toward its first recession in more than 25 years.

What about Tokyo? Abe’s seven-year revival project has been 90% monetary easing and perhaps 10% structural reform (and that’s being generous). All that liquidity, coupled with the construction boondoggle that is Tokyo 2020, has revived land prices in an otherwise deflation-traumatized economy.

As of February, the Nikkei Financial Review reported, Tokyo property prices, as measured by new condos, approached late 1980s bubble-period levels. Yet inflation is advancing just 0.6% year-on-year, less than halfway to the 2% target. And ominously, real wages are down six straight months now as Trump’s China trade war slams Japan’s export engine.

All this means the Bank of Japan’s historic easing has Tokyo construction sites buzzing with activity. The rest of the nation’s slowing economic regions, not so much. All that building is stellar news for property developers, but it’s also creating a bull market in concerns that Japan’s latest building boom could be, well, cursed.

I am a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” My journalism awards include the 2010 Society of American Business Editors and Writers prize for commentary.

Source: In A World Of Bubbles, Tokyo’s ‘Skyscraper Curse’ May Be Scariest

The one-year countdown to the 2020 Summer Olympics begins! As Tokyo gears up to host the games, NBC’s Keir Simmons takes us around the amazing venues in Japan’s capital city. » Subscribe to TODAY: http://on.today.com/SubscribeToTODAY » Watch the latest from TODAY: http://bit.ly/LatestTODAY About: TODAY brings you the latest headlines and expert tips on money, health and parenting. We wake up every morning to give you and your family all you need to start your day. If it matters to you, it matters to us. We are in the people business. Subscribe to our channel for exclusive TODAY archival footage & our original web series. Connect with TODAY Online! Visit TODAY’s Website: http://on.today.com/ReadTODAY Find TODAY on Facebook: http://on.today.com/LikeTODAY Follow TODAY on Twitter: http://on.today.com/FollowTODAY Follow TODAY on Instagram: http://on.today.com/InstaTODAY Follow TODAY on Pinterest: http://on.today.com/PinTODAY #SummerGames #TokyoOlympics #TodayShow 2020 Olympics 1 Year Out: How Tokyo Is Prepping For Summer Games | TODAY

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Here’s Why We Suddenly Stopped Hearing About A Recession

Topline: Economists—especially after the stock market took a dive in December—had been warning that a recession was coming, and possibly imminent. But a combination of low-interest rates and an improving labor market has quickly silenced those fears — and complicating the hopes of Donald Trump’s foes in 2020.

  • The risk of a recession decreased last week after the Federal Reserve declined to raise interest rates this year, said Brian Rose, senior Americas economist at UBS Global Wealth Management’s Chief Investment Office.
  • Combined with a stock market bounce-back and a growing economy, investors are now optimistic — a big shift from earlier this year.
  • Major economic predictors showing an increased threat of a recession have scaled back it’s predictions in recent weeks.
  • Asterisk: If President Donald Trump escalates the trade conflict with China by adding more tariffs on Chinese imports—particularly auto parts—the economy could suffer, increasing the chances of a recession, Rose said.

Earlier this year, half of economists surveyed by the National Association for Business Economics predicted a recession in 2020. Another poll of economists by the Wall Street Journal in January put the chances of a recession at 25 percent—the highest since 2011.

Coverage piled on (a few examples: “4 Signs Another Recession Is Coming―And What It Means For You,” “A recession is coming, but don’t flee markets yet,” “The Next Recession Is Coming. Now What?”), with many predicting bad news for Trump (Politico: “Trump advisers fear 2020 nightmare: A recession”). Some industries girded for the worst, like online lenders, who tightened its rules to lessen risk.

And then, suddenly, the panic eased. Now Goldman Sachs economists say there is only a 10 percent chance of a recession. What happened?

The biggest factor in that shift came when the Federal Reserve opted not to not raise interest rates, a pleasant surprise to economists. Rose said lower-than-expected inflation led the Fed to keep rates modest.

The economy, too, has grown, allaying recession fears. According to the latest job numbers, the U.S. has the lowest unemployment rate in 50 years.

“It is hard to have a recession when unemployment is this low and interest rates are this low,” Richmond Federal Reserve president Tom Barkin said on Wednesday.

The biggest risk of recession comes from Trump himself. If he increases tariffs on more goods than the $200 billion in Chinese imports he’s already promised, the risk of a recession increases, Rose said. As trade negotiations remain rocky, investors are increasingly concerned.

“Left on it’s own, there’s little risk to the economy,” he said. “The real risk of a recession comes from policy, particularly trade.”

Barring another recession, positive economic growth should mean good news for Trump in 2020. But as it stands, Trump is still relatively unpopular (his approval rating sits at 46 percent, although that is a high for him). And most forecasters agree the economy won’t grow as much as the White House says it will.

“A normal president with these economic numbers would have job approval somewhere in the vicinity of 60%,” Republican pollster Whit Ayres told the Los Angeles Times. “But Donald Trump is a nontraditional president, and he has, at least at this point, severed the traditional relationship between economic well-being and presidential job approval.”

Still, a recent CNN poll found that 56 percent of Americans approve of Trump’s handling of the economy. And while many Democrats haven’t focused on the latest job numbers, Senator Amy Klobuchar (D-MN), who is running for president, tried spinning the numbers a different way during an appearance on CNN, crediting President Obama with job growth.

I’m a San Francisco-based reporter covering breaking news at Forbes. Previously, I’ve reported for USA Today, Business Insider,

Source: Here’s Why We Suddenly Stopped Hearing About A Recession

Jobs Growth Recovers In March After A Disappointing February

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That sound you’re hearing might be a sigh of relief from investors reacting to this morning’s monthly payrolls report.

After a weak showing in February that raised fears of an economic slowdown, job creation bounced back in a big way with 196,000 jobs added by the U.S. economy in March. That was about 20,000 above expectations, and way above revised growth of 33,000 in February. What we’re seeing here is a revergence to the mean in terms of average employment numbers, and that’s reassuring.

With the March number in hand and job growth back on a more healthy pace, the February number might now be chalked up to the after-effects of the government shutdown and bad winter weather. The government said job growth over the last three months has averaged 180,000, and that’s thanks to strong growth in January and again in March.

Average hourly wages grew 3.2% year-over-year last month, another sign of possible economic strength, while the overall unemployment rate stayed at 3.8%, near 50-year lows. Inflation has been a non-starter lately, so the better than 3% wage growth isn’t likely to get many people worried about potential rising prices that sometimes go along with higher wages.

With the jobs data in hand, stocks added to earlier gains in pre-market trading. If we’d gotten another report like February’s, it conceivably might have weighed on the market. Still, one thing to potentially worry about today is a possible “Friday fade,” where investors see a good number, decide jobs growth isn’t something to worry about, and then go back to worrying about other things.

If you want to find imperfections in today’s data, it might be in the type of jobs created. While business and professional services and health care led the gains—which we’ve seen most of the year and looks great—manufacturing and construction again showed little change, the government said, though 16,000 construction jobs did get added. Those are areas many analysts look for when they seek signs of economic strength, but they’ve been a bit quiet the last two months.

Restaurants and bars, along with construction, all had weak growth in February likely due in part to weather, but only restaurants and bars bounced back as temperatures warmed in March. That could be something to keep our eye on, though it’s not worth worrying about too much.

Going into the report, a lot of focus had been on the February number and what it might mean for the economy. When you combine weak jobs growth with some of the low inflation and sluggish retail sales data seen recently, it appeared to send signals about possible underlying consumer weakness. The stock market struggled in early March as investors wrestled with the February jobs data.

Since then, economic data have improved, but that ominous February jobs reading wasn’t far from many investors’ minds. Today’s report could mean one less worry.

China, Strong Data Also in Focus

The market has seemed a bit like an eager dog straining on a leash this week. Excitement about the potential completion of a trade deal between the United States and China has helped provide forward momentum to continue the enthusiasm from Monday’s strong manufacturing data.

But there does seem to be a leash keeping the market from really going gangbusters. One part of that could be some less-than-stellar economic data this week on U.S. durable goods orders, domestic private-sector payrolls, and German industrial orders.

But it’s also possible that investors and traders have kept their optimism in check given the uncertainty ahead of today’s jobs report. And the fact of the S&P 500 nearing an all-time high could be acting as a weight of its own, as the market doesn’t have a huge catalyst to move dramatically higher.

Of the two main causes for worry about global economic growth—the U.S.-China trade war and Britain’s exit from the European Union—it’s a trade deal that seems to be the closest to becoming a catalyst for a rise in stocks. However, it’s also arguable that much of the optimism for a deal has already been priced into the market, as expectations of a resolution have been one of the key drivers for this year’s solid comeback after the market tanked late last year.

Onward and Upward

On Thursday, investors continued to look for developments on the trade front, as President Trump was scheduled to meet with China’s top trade negotiator after the market closed. With sentiment leaning bullish, the S&P 500 continued advancing toward its record Thursday, posting its best close so far this year. The trade meeting ended without too many new details, but stocks moved mostly higher overnight in Europe and Asia.

The Dow Jones Industrial Average also gained yesterday, led by a nearly 2.9% rise in shares of Boeing despite Ethiopia’s transport minister saying the crew in the deadly crash last month of a 737 Max jet made by Boeing had repeatedly performed procedures provided by the company but still couldn’t control the plane. The company’s shares appeared to get some lift after Barron’s highlighted a tweet by Boeing’s CEO about a software update performing safely in a demo flight. Bloomberg reported that the company’s shares gained ground as optimism about a trade deal helped shares shrug off the latest developments on the crash.

In other corporate news, Tesla’s shares fell more than 8% Thursday after the automaker disappointed investors by reporting a bigger-than-expected drop in auto sales. The roughly 63,000 deliveries fell short of what analysts had been expecting.

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Figure 1: Eye on the Greenback: The U.S. dollar (candlestick) has been climbing vs. other currencies, though it leveled off this week. It’s not far from its 2019 highs thanks in part to some strong U.S. data and concerns about Brexit. Meanwhile, gold (purple line) has been descending, which often happens when the dollar gains ground. Data Sources: ICE, CME Group. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

Data Sources: ICE, CME Group. Chart source: The thinkorswim® platform from TD Ameritrade.

Consumers Keeping Their Jobs: In U.S. economic news, initial jobless claims fell to their lowest level since 1969, according to the latest Labor Department numbers. In the seven days ended March 30, initial claims for state unemployment benefits, a rough gauge of layoffs, fell by 10,000 to about 202,000, the third consecutive decline. “The key takeaway from the report is that it suggests employers are reluctant to let go of employees,” Briefing.com said. “That is a positive consideration in terms of the economic outlook since feelings of job security help fuel increased consumer spending activity.”

Sentiment Data on Tap: Speaking of the U.S. consumer, which drives a huge portion of the domestic and global economies, investors are scheduled to get a reading on consumer sentiment for April from the University of Michigan next week. The last reading, for March, increased from February’s number. “Rising incomes were accompanied by lower expected year-ahead inflation rates, resulting in more favorable real income expectations,” the university said then. “Moreover, all income groups voiced more favorable growth prospects for the overall economy.” It could be interesting to see if consumer sentiment for April continues to improve.

Cain on Rise? On Thursday, President Trump said he had recommended former Republican presidential candidate and pizza chain chief executive Herman Cain for a Fed board seat. The news comes after Trump has expressed displeasure with Fed Chairman Jerome Powell after a series of interest rate hikes. But as CNBC points out, Cain may not end up being as dovish as the president might wish, noting a 2014 tweet where Cain said the central bank “can’t keep the economy running on the fumes of artificially low interest rates forever.” For now, though, the Fed seems committed to a dovish policy as inflation remains muted.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500…

Source: Jobs Growth Recovers In March After A Disappointing February

TED – The Rapid Growth of The Chinese Internet & Where It’s Headed By Gary Liu

The Chinese internet has grown at a staggering pace — it now has more users than the combined populations of the US, UK, Russia, Germany, France and Canada. Even with its imperfections, the lives of once-forgotten populations have been irrevocably elevated because of it, says South China Morning Post CEO Gary Liu. In a fascinating talk, Liu details how the tech industry in China has developed — from the innovative, like AI-optimized train travel, to the dystopian, like a social credit rating that both rewards and restricts citizens…..

 

 

 

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