Is The Sky Gonna Fall ?

[Ricardo]

I remember how, in 1997, there was a surplus of goverment statements, to the effect that there was no problem & nothing to worry about.

My suspicions are therefore aroused by the recent spate of statements, that there will be steady growth in 2006 and that the country isn't broke. While at the same time begging for overseas-investment in major infrastructure-projects.

As a naive farang, I would expect the tsunami-effect (on tourism) and the oil-price-hike (on transport-costs & economic-confidence) to be negative, and the boost to consumer-spending from handing out loans to every village-headman to be running out of steam (and central-funds).

So IS a serious crisis near, for the Thai economy, and what are the signs to watch for ?

What do you think ??

[ilyushin]

The government doesn't have enough money to operate the last few months of this fiscal year. Limited domestic spending, almost zero government spending and zero foreign investment spells trouble. Housing market is in serious trouble, interest rates up and Thai baht sinking, no confidence in the market will kill lots of businesses. Loads of bad credit. No real figures so that is of major concern. Get ready for a rough ride.

I see the government as broke already. Just waiting for disclosure.

Looks like a makeup job which rubs off on the pillow before we all wakeup.

[Heng]

Ah yes, the annual "sky is falling" economic predictions. Curiously, where are you getting these "facts" that the gov't "is out of money" and "the housing market is in trouble?" I'd love to see a property crash (as it means an influx of foreclosed property onto the market... contrary to popular TV belief, the banks DO foreclose and DO auction foreclosed property), but frankly I haven't seen any such trend over the past 5 years.

[george]

The Baht sinking? Source?

[ilyushin]

BANGKOK, Dec 30 Asia Pulse - The US dollar was trading at 41.075 baht at 4.28 p.m. Friday, up from 40.945 baht at 4.42 p.m. Thursday.

ASIA PULSE

More to come.

[Mr_Dave]

The Baht sinking? Source?

<{POST_SNAPBACK}>

Wise question.

Source is the front window of every gold shop in Thailand.

For thousands of years, gold has been a steady, reliable, store of value.

In ancient Rome, a common gold coin could buy a nice toga.

In Bangkok today, a similar weight of gold will buy a nice suit.

Most people look at gold prices and think, "The price of gold is going up."

That's exactly wrong.

The value of the counter-currency is going down.

So it takes more currency (baht, euro, dollar, yen, peso), to buy the same amount of gold.

If you wish to look at details, here is one source . . . http://www.oanda.com/convert/fxhistory

I went back to 1999.

The Thai baht has been sinking steadily since then.

There is nothing, anywhere, to indicate a change in the trend in the next few years.

I welcome reading any knowledgable counter claims.

And, thank you, Ricardo, for starting a topic which will become increasingly important to all of us with an interest in Thailand

.

[chownah]

Perhaps in ancient Rome and in today's Bangkok a fixed amount of gold would/will buy a set of clothes but IF the value of that gold had been invested in ancient Rome and IF it gave even only a one percent annual return you could buy dozens of suits today.

[blondino]

The sky is not gonna to fall but be very careful about the inflation for the next years. It will be absolutely uncontrollable. All the guys who are just living with their small save account coud be surprised. We are just at the beginning of the process. Just keep in mind that the inflation is not going to stop at all. By the way, it's not specific to thailand but worldwide.

[Carmine6]

...

As a naive farang, I would expect the tsunami-effect (on tourism) and the oil-price-hike (on transport-costs & economic-confidence) to be negative, and the boost to consumer-spending from handing out loans to every village-headman to be running out of steam (and central-funds).

So IS a serious crisis near, for the Thai economy, and what are the signs to watch for ?

What do you think ?? 

<{POST_SNAPBACK}>

Just recently, a business channel in the US had a report that tourism to Southeast Asia was up about 2% even after the Tsunami. On top of that, I can say that I see way more people going to Thailand in movies and TV shows, etc. Especially in reality TV, travel shows, food shows, etc. There is just more of a willingness to go to more exotic places than the usual Europe, Caribean, etc. than ever before.

Other good news is that the Japanese economy seems to have turned the corner which will help most of of Asia, and the Chinese are more willing to travel for vacations. And with Asia as a business destination more and more, that'll definitely spill over into tourist travel.

So I don't think tourism will let the economy down, unless something like bird flu took hold.

But, when you hear things like how long the new airport has been in progress, it's a crap shoot. It's hard to factor in graft and things like that.

[Nam Kao]

The US economy is set to tank in 06. In march the Fed will stop releasing the

M3 numbers, fireworks soon to follow.

i'll check my sources on Thai, i dont trade the the SET

nam

[ilyushin]

george 2005-07-08 10:48:04 Post #1

Thai baht weakest in 10 months

BANGKOK: -- The Thai currency depreciated to its weakest level in 10 months on Thursday due to hefty selling out by foreign investors.

The Thai baht closed at Bt41.68-41.71 a US dollar yesterday after opening at Bt41.58-41.62 in the morning, according to financial executives.

"The 10-month weakest record of the Thai currency was due to hefty selling out by foreign investors who feared that risk factors, including continuing oil price hikes, could affect Thailand's economic prospects and performances of listed firms on the Stock Exchange of Thailand (SET)", they pointed out.

However, the depreciation of the Thai baht was in line with other currencies in the region, including the Japanese yen, the commercial banks' executives disclosed.

"It is possible that the Thai currency could weaken to Bt42 a US dollar", they said.

--TNA 2005-07-08

One baht on the dollar on large transactions makes a big difference.

[Heng]

Of course it's "possible," I'd like to know how many said analysts/executives are really betting on that though. I've love it to go to 42 or even 50 as most of my revenue is based in US$.

[gnode]

The exchange rate has very little to do with the price of gold, which is set internationally. 5 years ago the Thai baht was trading at just a little bit higher (42 to 43 baht to one $US) than it is now, but the price of gold was nearly half what it is now. While in that period that baht has fluctuated in value, the price of gold had continually risen.

[Carmine6]

Of course it's "possible," I'd like to know how many said analysts/executives are really betting on that though.    I've love it to go to 42 or even 50 as most of my revenue is based in US$.

<{POST_SNAPBACK}>

Yeah, they were really going out on a limb there. But that's an old story and it firmed up a bit since then. I wouldn't mind a few more Baht per $, but not if it's due to a weaker Thai economy.

If they could get the new airport running smoothly and then get the rail connection to the city, that place could boom. I know more and more people who are going to India for business reasons and it's been a 2 stop trip from the US. I think Thai Air could do a one stop now, but there are few flights. And Don Muang isn't the greatest airport to kill time in. But make a nice connector airport and there'd be a lot of new jobs around.

[johnnyk]

BANGKOK, Dec 30 Asia Pulse - The US dollar was trading at 41.075 baht at 4.28 p.m. Friday, up from 40.945 baht at 4.42 p.m. Thursday.

ASIA PULSE

More to come.

<{POST_SNAPBACK}>

normal fluctuation, kind of like a pulse rate.

[Heng]

Of course it's "possible," I'd like to know how many said analysts/executives are really betting on that though.    I've love it to go to 42 or even 50 as most of my revenue is based in US$.

Yeah, they were really going out on a limb there. But that's an old story and it firmed up a bit since then. I wouldn't mind a few more Baht per $, but not if it's due to a weaker Thai economy.

If they could get the new airport running smoothly and then get the rail connection to the city, that place could boom. I know more and more people who are going to India for business reasons and it's been a 2 stop trip from the US. I think Thai Air could do a one stop now, but there are few flights. And Don Muang isn't the greatest airport to kill time in. But make a nice connector airport and there'd be a lot of new jobs around.

Sure, a new airport would be nice, and would be super convenient for me (as my main family base is on Sukapibal 3), but I don't think the local economy is on the make or break tightrope that the naysayers like to say it is. Even in the last "crash" (this is only one example, I know), we didn't even lay off one single employee (whether factory jobs or managers). The the most earth shaking thing that happened was that we reduced three shifts to two shifts. Our other busineses: pawn shops, pharmacies, orchid/plant export, pet fish export did business as briskly (and for the export side: better) as usual. As for our rentals, I don't even remember an increase in late rent payments. If that's a "crash," then I think the naysayers need to redefine their terms or at least get a better understanding of the local economy.

True, you have pikers living on credit. But then you have those (the 10-15% of the society that controls 80% of Thailand's assets/economy/wealth/etc.) who hold the reins here who have high savings rates and who can manage their lives AND the lives of those who work for them well enough to weather just about any economic storm.

[Plus]

So you saying that 1997 crash wasn't that big. I guess it's the matter of perspective and perhaps your family wouldn't even notice the crash at half strenght of that one but this is what other people call "crash". You are just moving goalposts.

I remember newspapers briefly mentioned that the governement ordered to print 80 bil baht last year because it had run out of money. I'd love to know more about that one but with the tight control of the "bad" news here I don't expect much.

[jumbo]

Hi Mr. Dave

can you explain me what I detect in seeing ALL currencies around 40% lower in value towards GOLD as per today???

I think your story below is nice but basically means nothing unless all countries are in the same deep,deep as Thailand???

The Baht sinking? Source?

<{POST_SNAPBACK}>

Wise question.

Source is the front window of every gold shop in Thailand.

For thousands of years, gold has been a steady, reliable, store of value.

In ancient Rome, a common gold coin could buy a nice toga.

In Bangkok today, a similar weight of gold will buy a nice suit.

Most people look at gold prices and think, "The price of gold is going up."

That's exactly wrong.

The value of the counter-currency is going down.

So it takes more currency (baht, euro, dollar, yen, peso), to buy the same amount of gold.

If you wish to look at details, here is one source . . . http://www.oanda.com/convert/fxhistory

I went back to 1999.

The Thai baht has been sinking steadily since then.

There is nothing, anywhere, to indicate a change in the trend in the next few years.

I welcome reading any knowledgable counter claims.

And, thank you, Ricardo, for starting a topic which will become increasingly important to all of us with an interest in Thailand

.

<{POST_SNAPBACK}>

[Storekeeper]

I sure hope the exchange rate isn't lower than 40 baht to the dollar this time next year. Need it to stay right around there, or better, for what I was planning to spend on a Chevy Colorado and a nice little bungalow.

[Heng]

So you saying that 1997 crash wasn't that big. I guess it's the matter of perspective and perhaps your family wouldn't even notice the crash at half strenght of that one but this is what other people call "crash". You are just moving goalposts.

As mentioned, not just my family, but also for the hundreds of commoners we employ. In most "crashes" unemployment and companies going under usually are a part of the turmoil. I don't recall any of our employees starving to death or getting put in jail for trying to rob people because they were so desperate either.

In fact... I don't recall any mass layoffs by any large company (other than those related to finance) or small family type business with a few dozen to several hundred employees, not just by my family.

I suppose you have similar anecdotal evidence of widespread suffering in the crash?

[Carmine6]

Of ....

<{POST_SNAPBACK}>

...

<{POST_SNAPBACK}>

Sure, a new airport would be nice, and would be super convenient for me (as my main family base is on Sukapibal 3), but I don't think the local economy is on the make or break tightrope that the naysayers like to say it is. Even in the last "crash" (this is only one example, I know), we didn't even lay off one single employee (whether factory jobs or managers). The the most earth shaking thing that happened was that we reduced three shifts to two shifts. Our other busineses: pawn shops, pharmacies, orchid/plant export, pet fish export did business as briskly (and for the export side: better) as usual. As for our rentals, I don't even remember an increase in late rent payments. If that's a "crash," then I think the naysayers need to redefine their terms or at least get a better understanding of the local economy.

True, you have pikers living on credit. But then you have those (the 10-15% of the society that controls 80% of Thailand's assets/economy/wealth/etc.) who hold the reins here who have high savings rates and who can manage their lives AND the lives of those who work for them well enough to weather just about any economic storm.

<{POST_SNAPBACK}>

Yeah, I don't buy the doom and gloom forecasts either. I have some long term money invested in Southeast Asian equities, and I think that region will continue growing. I know every time I go over there I see new, busy shops downtown and even in my girlfriend's hometown in the northeast, a new factory started up last year.

I have no knowledge of how travel from Europe has changed recently, but I guarantee awareness of Thailand in the US has never been higher. All kinds of shows have gone over there - food shows, travel shows, reality tv, movies, etc. Before 2 years ago I knew one person who had been to Thailand and then out of nowhere, I knew 9. And 4 of those 9 were there for business reasons. I think the number of US brand upscale resorts there now isn't an accident.

The one big concern I have is things like the new airport taking over a decade to finish or whatever it's been. There's either corruption or lack of funds or bad planning or some other big problem when projects like that stumble along. It won't take the new airport to keep the economy growning, but I think it'd help the economy whether growing or not.

But, I'd still like a few more Baht when I go to the ATM.

[chownah]

So you saying that 1997 crash wasn't that big. I guess it's the matter of perspective and perhaps your family wouldn't even notice the crash at half strenght of that one but this is what other people call "crash". You are just moving goalposts.

<{POST_SNAPBACK}>

As mentioned, not just my family, but also for the hundreds of commoners we employ. In most "crashes" unemployment and companies going under usually are a part of the turmoil. I don't recall any of our employees starving to death or getting put in jail for trying to rob people because they were so desperate either.

In fact... I don't recall any mass layoffs by any large company (other than those related to finance) or small family type business with a few dozen to several hundred employees, not just by my family.

I suppose you have similar anecdotal evidence of widespread suffering in the crash?

What are these "commoners" that you employ. Are you an aristocrat of some sort? Commoner is a term which is usually used by people who think that they are intrinscally better than "commoners".

[Heng]

So you saying that 1997 crash wasn't that big. I guess it's the matter of perspective and perhaps your family wouldn't even notice the crash at half strenght of that one but this is what other people call "crash". You are just moving goalposts.

As mentioned, not just my family, but also for the hundreds of commoners we employ. In most "crashes" unemployment and companies going under usually are a part of the turmoil. I don't recall any of our employees starving to death or getting put in jail for trying to rob people because they were so desperate either.

In fact... I don't recall any mass layoffs by any large company (other than those related to finance) or small family type business with a few dozen to several hundred employees, not just by my family.

I suppose you have similar anecdotal evidence of widespread suffering in the crash?

What are these "commoners" that you employ. Are you an aristocrat of some sort? Commoner is a term which is usually used by people who think that they are intrinscally better than "commoners".

Regular folks. Tongue in cheek differentiation for those who assume I only employ well off relatives and poor cousins.

[expatinasia]

You're absolutely right. Less than a year ago, the baht-to-dollar was 38.5:1, and there was the same sort of "the sky is falling" nonsense. Whatever happens, there are doomsayers, and it is so much fun to look at their predictions a few months later. Some people live their lives in anesthetizing boredom, and there's nothing else for them to do.

[Ricardo]

I suggest that the reason this topic comes up regularly, is not because investors are doom-and-gloom merchants, but just that one regularly checks how an investment-portfolio is doing, and what the latest forcasts for the markets are. The end of the calendar-year being one (of several possible) popular time to do this.

The OP was partly to suggest that, when there seemed to be a rash of assertions that everything was hunky-dory, this might in itself be cause for concern. Methinks they do protest too much ! Cynical - perhaps

While it's good to learn from Heng that some people/businesses were not affected by the last crash, this certainly was not the case with some of my wife's family, where I had to supply emergency-funding to prevent foreclosure, and which was only recently fully repaid. Family stick together in hard times.

And I have personal knowledge of an (essentially) bankrupt group being kept going, by their banks, because they did not want to write-off the (real) bad-debts. The boss being a local poo-yai, and not wanting to embarrass him, were contributing factors. I do have concerns about the underlying soundness of most Thai banks - were not many of them nationalised & guaranteed by the government, and understandably so, to avoid a general banking-collapse ? How far are they now back to normal trading ?

[Heng]

I suggest that the reason this topic comes up regularly, is not because investors are doom-and-gloom merchants, but just that one regularly checks how an investment-portfolio is doing, and what the latest forcasts for the markets are. The end of the calendar-year being one (of several possible) popular time to do this.

The OP was partly to suggest that, when there seemed to be a rash of assertions that everything was hunky-dory, this might in itself be cause for concern. Methinks they do protest too much ! Cynical - perhaps

While it's good to learn from Heng that some people/businesses were not affected by the last crash, this certainly was not the case with some of my wife's family, where I had to supply emergency-funding to prevent foreclosure, and which was only recently fully repaid. Family stick together in hard times.

And I have personal knowledge of an (essentially) bankrupt group being kept going, by their banks, because they did not want to write-off the (real) bad-debts. The boss being a local poo-yai, and not wanting to embarrass him, were contributing factors. I do have concerns about the underlying soundness of most Thai banks - were not many of them nationalised & guaranteed by the government, and understandably so, to avoid a general banking-collapse ? How far are they now back to normal trading ?

Of course. And I naturally wasn't suggesting the crash was some along the lines of some kind of "the moonlanding was fake" claim. More like an economic slowdown. Those who were overextended or in unfortunate situation were of course hurt, as would be expected....

As for banking, most of the NPLs and crap assets were lumped into one bank and became Bank Thai. Any banks that had foreign banks come in were also in trouble and may or may not be back to "normal trading" even now. The top 5-6 banks (BBL, TFB/KBank, SCB, Krung Thai, BOA/Krungsri, and TMB) have been trading normally for most of their history, crashes and coups included.