The Thai Economy Is In Crisis

[highdiver]

At least I have a positive attitude about my distructive destructive habits.

I would like to insult you, but the sad truth is that you wouldn't understand it.

fish in a barrel come to mind ,

carry on ............................

its "shooting fish in a barrel"

I don't realy belive that you are a fool. But hey what's my opinion compared to that of thousands of others?

[chinthee]

At least I have a positive attitude about my distructive destructive habits.

I would like to insult you, but the sad truth is that you wouldn't understand it.

fish in a barrel come to mind ,

carry on ............................

its "shooting fish in a barrel"

I don't realy belive that you are a fool. But hey what's my opinion compared to that of thousands of others?

that was a good repartee. I heard a drum roll/cymbal crash. Mid?

[highdiver]

At least I have a positive attitude about my distructive destructive habits.

I would like to insult you, but the sad truth is that you wouldn't understand it.

fish in a barrel come to mind ,

carry on ............................

its "shooting fish in a barrel"

I don't realy belive that you are a fool. But hey what's my opinion compared to that of thousands of others?

that was a good repartee. I heard a drum roll/cymbal crash. Mid?

he is still searching for it...

love your new Aviatar.

[VegasVic]

StraFor- (Synopsis)

The U.S. Subprime Crisis and the Pain to Come

August 10, 2007 20 02 GMT

Summary

Fears of U.S. subprime instability have sparked a rash of panic-selling globally, with the worst impacts by far in Europe. The damage has concentrated on all things European for a number of reasons. Plenty of pain -- both American and European -- is yet ahead in the weeks and years to come.

Finally, and most certain, the worst of the subprime crisis lies ahead. Variable rate mortgages did not begin to be applied en masse to subprime lending until 2004, with massive growth in that practice throughout 2005. That means there are a large number of subprime borrowers out there currently coasting by with very low monthly payments, and they will continue to do so until they are forced to refinance. Since most U.S. variable rate mortgages require such refinancing after five years, five years from 2004-5 -- 2009-10 -- is going to be a very painful period.

The Global Problem Today and Tomorrow

Though nearly all the subprime securities out there are in the United States, U.S. mortgages are generally perceived to be among the most rock-solid of investments, so some invariably trickle out to the wider world, with Europe being a popular investor.

Crowning the fear was the Aug. 9 announcement by French bank BNP Paribas that it was suspending trading in $2 billion of funds on suspicion that subprime exposure meant they were not worth their listed value. Few things panic investors more when they are trying to pull their money out than being told they cannot pull their money out. A European stock market rout ensued.

Unlike the stock queasiness of the previous week that U.S. markets simply shrugged off – the American markets had already dealt with the subprime issue and so did not feel particularly threatened by European skittishness -- this rout crossed the Atlantic, and to East Asia as well. This was not because either the United States or East Asia actually was dealing with subprime issues, just that widespread fear was ruling in Europe. Those fears triggered a broad sell-off that went well beyond anything that smelled like subprime, resulting in market drops the world over.

To prevent a wider contagion, central banks the world over stepped in and flooded their respective banking systems with extra cash to ensure banks would be cash-flush enough to maintain normal operations.

These injections continued, albeit in smaller amounts, Aug. 10 as the panic subsided somewhat. The U.S. Federal Reserve Board injected $35 billion, the Bank of Japan $8.4 billion and the Reserve Bank of Australia $4.2 billion. The European Central Bank (ECB), the reserve authority that had the pleasure of presiding over the original meltdown, has so far pumped in a total of $211 billion.

Europe traditionally faces the most liquidity problems of the major poles of the global economy.

That explains why of the $339 billion that central bankers have pumped into the system in the past 48 hours, two-thirds has come from the ECB, "only" $59 billion from the U.S. Federal Reserve and little more than couch change from Japan.

Additionally, Europe will have its own homegrown subprime problem. Housing prices actually have taken off faster in Europe than they have in the United States during the past 10 years, largely on the back of the euro launch.

From 1998 to 2007, U.S. home prices increased by an average of 50 percent. The corresponding value in the Netherlands, France and Sweden was 75 percent, while for Spain, Ireland and the United Kingdom it was 100 percent. While at the same time, European Mortgage rates were very low, as much as only 3% in many places.

By far the most exposed country will be Spain, where 98 percent of new mortgages are variable rate and the bulk of new mortgages go to recent immigrants with little to no to bad credit history. Notably made up in large part from the nearly 4,000 per day whom are exiting the UK.

Ultimately, though Europe so far has borne the brunt of the U.S. subprime woes, both it and the United States face tough times ahead.

(The Telegraph just this week reported that Foreclosures in the UK are at record levels this year.)

http://www.stratfor.com/products/premium/r...lected=Analyses

The 2006 US Total Mortgage Debt market was in 2006 the latest reliable data set at $10.921 Trillion by Ginniemae. The Total Subprime market in the US is current set at $580 Billion, or 5.3% of the entire US Mortgage Debt.

Of that 5.3% or $580 billion, 20% or $116 Billion is currently classified as delinquent (meaning the loans are 90 days or greater pass due) That is hardly an amount requiring over $ 211 billion capital infusions caused by a panic mob all rushing to the door screaming fire when there is no meaning fire in reality to begin with. Historically, having been directly involved in the 1980's bank and S&L default/liquidity panic as a FDIC offical, on average foreclosures return about 83% of defaulted value once put back onto the market.

http://freddiemac.com/news/factbook/pdf/re...ook.pdf#page=34

A persepective beyond the panic on this dark road of the unknown as if not known.

IMHO, this is like the Dot com boom of the 1990's and Bank and S&L over speculation of pricing in the 1980s. Price has reached an equilbrum with affordability and is just re-adjusting to the historical norms of affordibilty.

Greedy Speculators always over price things, then, cry and want help, when they are the last out and miss the peak of that always enevitable top in all things speculated on.

usatrader, You bring forth many good points and facts, however I have to disagree with you that this subprime mess is anything even closely resembling the dotcom crash or the S&L crisis at least as far as the U.S. is concerned. You accurately show that the U.S. subprime market is roughly 5% of the toal U.S. mortgages and that 20% of those are in deliquency or foreclosure, personally I think this number could rise to more like 30%, but that only equates to a little more than 1.5% of outsatanding mortgages in the U.S.. The folks who are mailing back their house keys to the banks, are for the most part people who have been living in aprtments or with their family up until a couple of years ago, and they will simply move back to an aprtment or move back in with their families, they still have their jobs and life goes on for them and in all actuality they will likely have more disposable income to spend now that they don't have a large mortgage to service. The current problem is not about a glut of foreclosed homes hitting the market as these will work their way through the market over the next 12-18 months, the current problem is a liquidity crisis created by the hegde funds who borrowed money and leveraged this money by ten times and sometimes higher in order to purchase this subprime paper. As I am sure you are aware if an investor was to purchase an investment vehicle with his own money and that investment went down 20% then that investor would likely just wait out the storm and wait for a turn around, the problem with the hedge funds is that they bought this high return paper and leveraged it 10:1 so a drop in their investment of 10% all but wipes them out and a drop in their investment by 20% puts them out of business. This is currently a hedge fund crisis (sadly a business that has gone virtually unregulated) and while additional liquidity will be pumped into the system from time to time I wouldn't look for Mr. Bernanke to take any drastic action to bail out these billionaires. The hedge fund industry will be pulling in their horns here shortly and regrouping, so I would expect some serious redemtions in markets from China to India including Thailand, this may be a real blessing for Thailand right now as these redemtions will cause the baht to weaken and possibily save the Thai export sector and help boost tourist spending.

[lannarebirth]

At times like this (anytime really), it's much more important to observe what market participants do, rather than what they say. Markets looking for a 4 1/2 year low over the course of the next few weeks IMO. The newspapers will always give you a reason.

[xbusman]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

[Solosiam]

House pricing in the US and the UK is definitely in need of a correction.

For example in the UK the average income is 30,000 pounds per household, whilst the average house price is 210,000 pounds. Add in mortgage payments, interest etc... I fail to see how teh average person can afford to own their home.

[VegasVic]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

xbusman, I don't think that you are getting old or curmdgeonly, anyone in your position viewing southern Califirnia or for that matter Florida as a model would think that total devestation was at hand. The fact is that serious deliquencies and foreclosures are currently running at about 1.2% of the total market and will likely rise to slightly more than 1.5%. Overall U.S. home values have droped by approximately 10% on a national level, in some areas they are actually rising and in areas like California and Florida you can certainly find pockets that have dropped by 30% or more, but you have to remember that these areas that have been droping the most are the same areas that went up by 70% or more a couple of years ago. As for your friend that bought a $300,000 house and has a $3000/month mortgage he must have a loan in excess of 11%, a standard loan of lets say 6% on a $300,000 home even with the high property taxes there in cali would have a monthly payment of somewhere around $1800/mo. not $3000. Also you have to realize that most homeowners in the U.S. purchased their home before all this escalation began 5 years ago and their homes are actually worth more now than they were before all this started. I know you didn't mean to misrepresent the real situation, you just got a skewed view of things from your visit to California. The current real estate situation in the U.S. will work itself out before the elections next year, but the liquidity crisis and the hedge fund crisis will be with us for a while longer.

[ray23]

Actually I do belive this sub prime discusion is relevant as it has effected the economy here as well. One of the great joy's of moving to Thailand was affordable housing I lived in L.A. before, Simply crazy there and how do you really make money. Sell the house get out. Move to a more restrained area if you can.

Even the little area around Udon has shown unrealistic costs increases for this area. Basic farm land here now is as expensive as the states and in most cases really more expensive for unimproved land, in a state like Texas.

Condo's in Bangkok way out my reach. Some Thai people here owe more in monthly payments on trucks and houses then they earn. Where was the money coming from outside Issan, workers in the factories Ect. So in the end it would appear that overreaching was happening here as well. Those factories where simi skilled workers were employed are in jeopardy.

Eventually the prices have to be paid.

[Mid]

to reflect continued robust trade in the second half of this year. ,

the freight ain't there anymore ...........................................

JP Morgan cut Thai stock index forecast down to 810 points from 870

BANGKOK, Aug 11 (TNA) – Investment banker JP Morgan revised downward its forecast of the Thai stock market index this year from 870 to 810, citing concerns over possible volatility caused by the sub-prime loan crisis in the US

snip

etna.mcot.net

[highdiver]

usatrader, You bring forth many good points and facts, however I have to disagree with you that this subprime mess is anything even closely resembling the dotcom crash or the S&L crisis at least as far as the U.S. is concerned. You accurately show that the U.S. subprime market is roughly 5% of the toal U.S. mortgages and that 20% of those are in deliquency or foreclosure, personally I think this number could rise to more like 30%, but that only equates to a little more than 1.5% of outsatanding mortgages in the U.S.. The folks who are mailing back their house keys to the banks, are for the most part people who have been living in aprtments or with their family up until a couple of years ago, and they will simply move back to an aprtment or move back in with their families, they still have their jobs and life goes on for them and in all actuality they will likely have more disposable income to spend now that they don't have a large mortgage to service. The current problem is not about a glut of foreclosed homes hitting the market as these will work their way through the market over the next 12-18 months, the current problem is a liquidity crisis created by the hegde funds who borrowed money and leveraged this money by ten times and sometimes higher in order to purchase this subprime paper. As I am sure you are aware if an investor was to purchase an investment vehicle with his own money and that investment went down 20% then that investor would likely just wait out the storm and wait for a turn around, the problem with the hedge funds is that they bought this high return paper and leveraged it 10:1 so a drop in their investment of 10% all but wipes them out and a drop in their investment by 20% puts them out of business. This is currently a hedge fund crisis (sadly a business that has gone virtually unregulated) and while additional liquidity will be pumped into the system from time to time I wouldn't look for Mr. Bernanke to take any drastic action to bail out these billionaires. The hedge fund industry will be pulling in their horns here shortly and regrouping, so I would expect some serious redemtions in markets from China to India including Thailand, this may be a real blessing for Thailand right now as these redemtions will cause the baht to weaken and possibily save the Thai export sector and help boost tourist spending.

absolutly right...100%

We debated this at the early stages of this thread way back in April. unfortunatly this is happening a lot faster and stronger then expected.

[highdiver]

U.K.'s Subprime Crisis May Be Worse Than U.S.'s

http://www.bloomberg.com/apps/news?pid=206...&refer=home

The U.K. has had a property bubble every bit as crazy as the U.S.'s. Valuations were stretched, and lending criteria loosened. And now arrears are starting to rocket, even while the economy remains healthy.

Not only does the U.K. face its own subprime crisis, it could be far worse than in the U.S.

[MaiPenLai]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

You are on the mark with your observations and specifically Florida as I have ties to that community and the report is exactly as you have characterized it.

I would only add that it is not that you are old and ......... People ( U.S. savers ) may not fully understand all that is going on, But they do understand that putting money in the bank at super low interest rates and watching the dollar's actual value slide further than even the meager interest rate income can offset is clearly understood.

Then the attitude becomes " Why save as I get less by saving? Might as well spend it all before it is worth less." Naturally I don't agree with this thinking but I do understand the frustration of Americans with limited financial IQ and the feelings that they have. They feel as there is no solution they can grasp.

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

[midas]

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

Thanks for this insight because it shows what is really happening.

I watched Cavuto, Your World on FOXNews yesterday - the whole thing devoted to putting

a positive " spin " on the US stockmarket decline last week. They kept emphasising that

97.5 % of Americans ARE paying their mortgages so it is not as bad as it seems

[midas]

U.K.'s Subprime Crisis May Be Worse Than U.S.'s

http://www.bloomberg.com/apps/news?pid=206...&refer=home

The U.K. has had a property bubble every bit as crazy as the U.S.'s. Valuations were stretched, and lending criteria loosened. And now arrears are starting to rocket, even while the economy remains healthy.

Not only does the U.K. face its own subprime crisis, it could be far worse than in the U.S.

" The average British home already costs 11 times the average local salary, and that figure continues to increase "- I can remember when the banks would base your suitability for a UK mortgage on 2.5 - 3 x your salary - no wonder people are in such a pickle

[MaiPenLai]

U.K.'s Subprime Crisis May Be Worse Than U.S.'s

http://www.bloomberg.com/apps/news?pid=206...&refer=home

The U.K. has had a property bubble every bit as crazy as the U.S.'s. Valuations were stretched, and lending criteria loosened. And now arrears are starting to rocket, even while the economy remains healthy.

Not only does the U.K. face its own subprime crisis, it could be far worse than in the U.S.

" The average British home already costs 11 times the average local salary, and that figure continues to increase "- I can remember when the banks would base your suitability for a UK mortgage on 2.5 - 3 x your salary - no wonder people are in such a pickle

Exactly. But since U.S. banks and I would guess U.K. banks hold much less of the paper anymore, why should they care if a borrower can afford to repay the loan. They are more than happy to grant the loan and then pass off the paper to speculators. I wish the speculators would actually get caught holding the bag and actually eat the defaulting loans as that was part and parcel of the bargain.

BUT

Somehow I see these guys being bailed out and then having a big laugh as they plot the next wave of creative financing to come over a few drinks.

[VegasVic]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

You are on the mark with your observations and specifically Florida as I have ties to that community and the report is exactly as you have characterized it.

I would only add that it is not that you are old and ......... People ( U.S. savers ) may not fully understand all that is going on, But they do understand that putting money in the bank at super low interest rates and watching the dollar's actual value slide further than even the meager interest rate income can offset is clearly understood.

Then the attitude becomes " Why save as I get less by saving? Might as well spend it all before it is worth less." Naturally I don't agree with this thinking but I do understand the frustration of Americans with limited financial IQ and the feelings that they have. They feel as there is no solution they can grasp.

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

Mai Pen Lai, once again you have clearly shown that people outside the U.S. really do not fully understand what is going on! As I prevously posted there are areas like California and Florida that saw in some cases a doubling of real estate values 3-4 years ago, so the expected correction in those areas of 30% or so should be no surprise. You are also correct that Americans have not been putting their $ into savings accounts that yeild 2%, and why should they when they can put their hard earned money to work in the booming U.S. stock (mostly through their 401K programs that are not included in the national savings rate) market and earn 15- 20% per year. My stock portfolio has doubled in the last 5 1/2 years and my wifes much more conservative 401K has risen by about 65% in that same period. As for real estate values, most Americans (like myself) owned their homes before all this bubble started 5 years ago and even with the down turn in the past year most of us have realized a 40-50% increase in our real values over the last 5 years. Thailand will certainly be effected by all of this shortly, but generally in a good way as the hedge funds exit the asian and chinese markets and currency traders begin to unwind their positions, the baht will finally have the air let out of it and then the Thai export sector can be saved by the weaker baht and the tourists will be able to spend more money in Thailand. I too am sorry for going slightly OT, but when I see misinformed drivel I feel the need to clarify the situation!

[VegasVic]

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

Thanks for this insight because it shows what is really happening.

I watched Cavuto, Your World on FOXNews yesterday - the whole thing devoted to putting

a positive " spin " on the US stockmarket decline last week. They kept emphasising that

97.5 % of Americans ARE paying their mortgages so it is not as bad as it seems

I now see why a lot of you guys don't trust Fox news. I certainly agree with you this is a horrendous misrepresentation of the actual situation! The truth is that 98.7% of Americans are paying their mortgages not 97.5%, shame on that Cavuto guy for giving those liberaly slanted figures on Fox News.

[Naam]

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. .

mortgage rates of 11% during the last five years?

[Mid]

hey 'diver , this can't be right , after all it comes from monsters and critics.com

Foreign direct investment up 20 per cent in troubled Thailand

Aug 13, 2007, 4:27 GMT

Bangkok - Despite political uncertainties and economic worries, foreign direct investments (FDI) in Thailand increased 20.7 per cent during the first seven months on 2007, compared with the same period last year, news reports said Monday.

According to the Board of Investment (BoI) - the government's investment promotion office - implemented foreign direct investments amounted to 183.5 billion baht (5.4 billion dollars) in January to July compared with 152 billion baht (4.5 billion dollars) in the same period in 2006, The Nation newspaper reported.

snip

Deutsche Presse-Agentur

[highdiver]

hey 'diver , this can't be right , after all it comes from monsters and critics.com

Foreign direct investment up 20 per cent in troubled Thailand

Aug 13, 2007, 4:27 GMT

Bangkok - Despite political uncertainties and economic worries, foreign direct investments (FDI) in Thailand increased 20.7 per cent during the first seven months on 2007, compared with the same period last year, news reports said Monday.

According to the Board of Investment (BoI) - the government's investment promotion office - implemented foreign direct investments amounted to 183.5 billion baht (5.4 billion dollars) in January to July compared with 152 billion baht (4.5 billion dollars) in the same period in 2006, The Nation newspaper reported.

snip

Deutsche Presse-Agentur

an optimistic post???

who are you and what have you done to MID??

[MaiPenLai]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

You are on the mark with your observations and specifically Florida as I have ties to that community and the report is exactly as you have characterized it.

I would only add that it is not that you are old and ......... People ( U.S. savers ) may not fully understand all that is going on, But they do understand that putting money in the bank at super low interest rates and watching the dollar's actual value slide further than even the meager interest rate income can offset is clearly understood.

Then the attitude becomes " Why save as I get less by saving? Might as well spend it all before it is worth less." Naturally I don't agree with this thinking but I do understand the frustration of Americans with limited financial IQ and the feelings that they have. They feel as there is no solution they can grasp.

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

Mai Pen Lai, once again you have clearly shown that people outside the U.S. really do not fully understand what is going on! As I prevously posted there are areas like California and Florida that saw in some cases a doubling of real estate values 3-4 years ago, so the expected correction in those areas of 30% or so should be no surprise. You are also correct that Americans have not been putting their $ into savings accounts that yeild 2%, and why should they when they can put their hard earned money to work in the booming U.S. stock (mostly through their 401K programs that are not included in the national savings rate) market and earn 15- 20% per year. My stock portfolio has doubled in the last 5 1/2 years and my wifes much more conservative 401K has risen by about 65% in that same period. As for real estate values, most Americans (like myself) owned their homes before all this bubble started 5 years ago and even with the down turn in the past year most of us have realized a 40-50% increase in our real values over the last 5 years. Thailand will certainly be effected by all of this shortly, but generally in a good way as the hedge funds exit the asian and chinese markets and currency traders begin to unwind their positions, the baht will finally have the air let out of it and then the Thai export sector can be saved by the weaker baht and the tourists will be able to spend more money in Thailand. I too am sorry for going slightly OT, but when I see misinformed drivel I feel the need to clarify the situation!

I actually have (own) several properties in Florida ( Palm Beach county, Boca to Palm Beach ) so I think I am in touch with what is going on there. I am fortunate in the sense that I don't need liquid assets right now but everyone is not in the same position.

It really does not matter what the estimated or perceived increased value of anything is if you can't sell it. And that was more the thrust of my orignal post.That should be pretty simple to understand. You can only calculate that after it is actually sold. I did note that your 70% in five years has come down to a slightly more reasonable 50% in fewer years.

Case in point:

A dear friend that is 73 years old has a property in West Palm. He built his home (4br/3ba/2car, 1.25 acres) some 8-9 years ago in a good area for a little over 400,000.00.

In the last year his wife's health has rapidly declined so he wanted to relocate to his second home (smaller, more manageable ) in NC. He can't even get offers at 20% over his actual cost 8-9 years ago, Nor can he get offers at 400,000.00. Now this is a pristine home, good area, built by him so quality is ensured and documented.

The guy is now a full time care giver to his wife and the property and home are large. He would love to get out.

To make matters worse, over time a percentage of the homes around his have foreclosed causing a blighted area appearance making it even more difficult.

I guess to some, making money no matter what the real cost to the masses at the end of the day is fine. I would say that loaning on mortgages, at 0% down, loaning 125% of the value of the property, and then granting an ARM was a recipe for disaster. Many people realize that financial markets over time cycle, many do not.

I will not take issue with the 401K as that is another topic on it's own other than to say it is still a savers mentality. Different people view investing in differing ways, Don't, Don't lose, and WIN. Not much different than a savings account ( 401 ) although granted, better performing. I remember the mid 70's on most levels. There is a clear difference between retirement packages then and now and there is no comparison.

What we do seem to agree on is that Thailand may wind up having some of their problems taken care of by circumstance. But, It could hardly be otherwise. So we will not agree on many other things and that is fine.

MPL

reason for edit = dyslexic figure transposition.......

Edited August 13, 2007 by MaiPenLai

[Mid]

who are you and what have you done to MID??

I'm Back ............................

Strong baht takes a toll on garment industry growth

ARANEE JAIIMSIN

The baht's appreciation is expected to trim the textile and garment industry's growth this year from the 4-5% earlier projected by the Thailand Textile Institute (TTI), according to Chen Namchaisiri, chairman of the textile industry club under the Federation of Thai Industries (FTI).

The TTI said the industry grew 2.6% in the first half this year and would expand by 4-5% to US$6.9-7 billion for the full year. This is due to the Japan-Thai Economic Partnership Agreement (JTEPA), which could help lift the sector's overall exports to Japan from $400 million now.

''The TTI's projection is considered rather high given the current environment,'' said Mr Chen.

snip

The Post Publishing Public Co.

[Mid]

Taiwanese boss flees owing Bt6.5m to 463 workers

Published on August 9, 2007

The Labour Ministry has blacklisted a Taiwanese businessman who disappeared without paying workers after his firm failed.

Apart from legally required severance payments, Lee Chen <deleted> will be subject to civil action to clear debts and will be barred from making future investments here, Phadungsak Thephasdin, director-general of the Labour Protection and Welfare Department, said yesterday.

The department took action following the unannounced shutdown of Lee's Phoenix Furniture Group in Samut Prakan's Muang district yesterday. Lee has since disappeared without paying Bt6.5 million in wages to 463 workers and a number of other full-time employees.

snip

Meanwhile, a ministry report said three foreign-owned companies in Rayong had closed down and more than 300 workers had received all payments they were entitled to. A construction company will close down soon and all 96 workers and 47 full-time employees are expected to receive their money.

The Nation

[Mid]

Economy in South continues decline in 2Q07

BANGKOK, Aug 13 (TNA) - General economy in southern Thailand during the second quarter of 2007 continued to retreat from the first quarter due to several negative factors including persisting violence in the restive provinces of Pattani, Yala and Narathiwat, according to a report issued by the Bank of Thailand (BoT).

Security concerns led some foreign tourists to forgo visiting the South, the report said, noting that only 607,240 foreign tourists, chiefly Malaysians and Singaporeans, visited the South during the second quarter of this year, a decline of 4.3 per cent from the corresponding period of last year.

Tourism business on the Andaman coast was also sluggish during the period due to the low season, with fewer Europeans, especially Scandinavian tourists, visiting attractions in the area, the report said.

It said revenue from sales on agricultural products in the South fell 10.6 per cent during the second quarter after rubber prices dropped 14.8 per cent. Production of fisheries and crude palm oil slipped 4.2 per cent and 32.5 per cent respectively.

Most manufacturers faced higher production costs but were able to raise prices marginally due to high business competition, the report added. (TNA)-E111

MCOT Public Company Limited

[highdiver]

back with vengence

[VegasVic]

I hate to talk about the subprime mess on Thai Visa but a few observations.

I recently was forced to spend a few months in LA on business in the middle of all this and I think the ramifications are bigger than just 1.5% of total mortgage loans.

Over the past five years, I have watched LA become a feeding frenzy of prices and speculation. Now granted, California in general has always been the worst for this in the US but I think it also took place in states like Florida, Illinois and New England in general.

I watched as employees in our LA based company, making $40,000 a year, first took out a mortgage on a little, cracker box house in a bad area for over $300,000. Now that roughly equates to a mortgage of $3000 per month for a couple bringing home around $50,000 a year. Now if thats not bad enough, the mortgage companies would then get this same couple to buy home two, and maybe home three, on interest only loans. They would rent them out and expect the homes to be worth 800,000 in just a few years.

With the collapse of the subprime market, and the loss of liquidity, nothing is selling, I mean nothing. House prices are tumbling across the board. That means that families making $50,000 a year are losing huge amounts of equity in their homes. Thats still a loss. They now owe much much more than their house is worth. Granted you could wait it out but in the meantime, consumer spending has plummeted. We normally retail 150 to 180 motorcycles a day, thats down to less than 100.

Just observations but I think this could go widespread and really put the brakes on the economy in general. Honestly, isnt it about time? What ever happened to living within a budget and saving for a rainy day. Maybe I am just getting old and curmudgeonly.

You are on the mark with your observations and specifically Florida as I have ties to that community and the report is exactly as you have characterized it.

I would only add that it is not that you are old and ......... People ( U.S. savers ) may not fully understand all that is going on, But they do understand that putting money in the bank at super low interest rates and watching the dollar's actual value slide further than even the meager interest rate income can offset is clearly understood.

Then the attitude becomes " Why save as I get less by saving? Might as well spend it all before it is worth less." Naturally I don't agree with this thinking but I do understand the frustration of Americans with limited financial IQ and the feelings that they have. They feel as there is no solution they can grasp.

Sorry for going OT, But I wanted to respond to your observations and as many posters have point out it will only be a matter of time before effects are felt globally including Thailand. For better or worse.

Mai Pen Lai, once again you have clearly shown that people outside the U.S. really do not fully understand what is going on! As I prevously posted there are areas like California and Florida that saw in some cases a doubling of real estate values 3-4 years ago, so the expected correction in those areas of 30% or so should be no surprise. You are also correct that Americans have not been putting their $ into savings accounts that yeild 2%, and why should they when they can put their hard earned money to work in the booming U.S. stock (mostly through their 401K programs that are not included in the national savings rate) market and earn 15- 20% per year. My stock portfolio has doubled in the last 5 1/2 years and my wifes much more conservative 401K has risen by about 65% in that same period. As for real estate values, most Americans (like myself) owned their homes before all this bubble started 5 years ago and even with the down turn in the past year most of us have realized a 40-50% increase in our real values over the last 5 years. Thailand will certainly be effected by all of this shortly, but generally in a good way as the hedge funds exit the asian and chinese markets and currency traders begin to unwind their positions, the baht will finally have the air let out of it and then the Thai export sector can be saved by the weaker baht and the tourists will be able to spend more money in Thailand. I too am sorry for going slightly OT, but when I see misinformed drivel I feel the need to clarify the situation!

I actually have (own) several properties in Florida ( Palm Beach county, Boca to Palm Beach ) so I think I am in touch with what is going on there. I am fortunate in the sense that I don't need liquid assets right now but everyone is not in the same position.

It really does not matter what the estimated or perceived increased value of anything is if you can't sell it. And that was more the thrust of my orignal post.That should be pretty simple to understand. You can only calculate that after it is actually sold. I did note that your 70% in five years has come down to a slightly more reasonable 50% in fewer years.

Case in point:

A dear friend that is 73 years old has a property in West Palm. He built his home (4br/3ba/2car, 1.25 acres) some 8-9 years ago in a good area for a little over 400,000.00.

In the last year his wife's health has rapidly declined so he wanted to relocate to his second home (smaller, more manageable ) in NC. He can't even get offers at 20% over his actual cost 8-9 years ago, Nor can he get offers at 400,000.00. Now this is a pristine home, good area, built by him so quality is ensured and documented.

The guy is now a full time care giver to his wife and the property and home are large. He would love to get out.

To make matters worse, over time a percentage of the homes around his have foreclosed causing a blighted area appearance making it even more difficult.

I guess to some, making money no matter what the real cost to the masses at the end of the day is fine. I would say that loaning on mortgages, at 0% down, loaning 125% of the value of the property, and then granting an ARM was a recipe for disaster. Many people realize that financial markets over time cycle, many do not.

I will not take issue with the 401K as that is another topic on it's own other than to say it is still a savers mentality. Different people view investing in differing ways, Don't, Don't lose, and WIN. Not much different than a savings account ( 401 ) although granted, better performing. I remember the mid 70's on most levels. There is a clear difference between retirement packages then and now and there is no comparison.

What we do seem to agree on is that Thailand may wind up having some of their problems taken care of by circumstance. But, It could hardly be otherwise. So we will not agree on many other things and that is fine.

MPL

reason for edit = dyslexic figure transposition.......

Like I said, Florida (especially condos near Miami) and southern California are not indicative to what is happening around the country. With that said there are plenty of folks that bought condos in Dade county 6 or 7 years ago for $150,000 and watched as prices for those properties skyrocketed to $325,000-$350,000 at the height of the bubble and now those same condos have come back down to $230,000-$240,000, even with the downturn thats $80,000 in net equity over 6-7 years! My daughter is in a much more typical situation, she bought a home in Las Vegas (another area that got overheated) 5 1/2 years ago for $208,000, then a couple years later at the height of the bubble identical homes to hers in the same neighborhood sold for $365,000, while the market has backed off more in Vegas than the national norm her home currently has a market value of $310,000-$315,000. Thats over $100,000 in equity in less than 6 years, now of course you could tell a story of someone who bought at the top of the bubble and now they are down 25% on their home but that wouldn't be telling the whole story. Those that bought at the top of the bubble with the creative loans are for the most part first time homeowners(or flippers who bought multiple homes) who shouldn't have been given a loan in the first place and they are the ones sending the keys back to the lender, this is a very small portion of mortgage holders and many of these folk simply moved back into the apartments that they were in prior to being approved for these crazy loan vehicles. If 401K's were computed in the savings rate then data on the U.S. would show a very high savings rate instead of the nominal savings rate that is usually published and the vast majority of homeowners in the U.S. have substantial equity in their homes. The brunt of the current crisis is with the hedge funds and the real estate speculators (flippers), neither of these groups will get much of a tear from my eye! Over the coming months you will see redemtions by hedge funds in the asian markets and the baht will begin to weaken further which will be a great thing for the Thai economy.

[LaoPo]

.....who shouldn't have been given a loan in the first place..........

We do not always agree but you hit the nail on the head here.

IMHO the problem lies:

1st. with the buyers of (too expensive) houses in the first place, which, in fact they can't and/or couldn't afford

and

2nd. The absence of a moral responsibility by the mortgage banks -towards their clients- who gave them a risky mortgage.

A certain group of both are in problems now.

It is to be feared that the same problem is going on, or around the corner, in Thailand with the stricter rules for loans by Thai banks.

LaoPo

[soundman]

(Bangkok Post)

Property market slowing sharply

The property market slowed sharply in the second quarter, with new land registrations down more than 50% from the same period last year, said the latest data from the Bank of Thailand.

New housing starts and property transactions also slowed due to weak consumer confidence and uncertainties over mass-transit expansion plans. New property registrations in Greater Bangkok fell 30.9% year-on-year in May, with single-home registrations off 19.7% and condos and apartments down 52.2%.

New land development applications dropped 54.2% in the second quarter as developers awaited clearer signals on transit extensions.

Story Here

Soundman.

Edited August 14, 2007 by soundman

[LaoPo]

(Bangkok Post)

Property market slowing sharply

The property market slowed sharply in the second quarter, with new land registrations down more than 50% from the same period last year, said the latest data from the Bank of Thailand.

New housing starts and property transactions also slowed due to weak consumer confidence and uncertainties over mass-transit expansion plans. New property registrations in Greater Bangkok fell 30.9% year-on-year in May, with single-home registrations off 19.7% and condos and apartments down 52.2%.

New land development applications dropped 54.2% in the second quarter as developers awaited clearer signals on transit extensions.

Story Here

Soundman.

Ouch!

That's more serious than I expected.

LaoPo