What's Up With The Thai Baht?

[NeverSure]

I fail to see how US food prices affect Thai food prices.

It's not as if there is competition for food resources between the two countries.

Thailand produced so much excess food that it has warehouses full of rotting rice that it can't sell to anyone at any price.

(I believe beer Chang is made from rice, but would be happy to stand corrected)

Or is my thinking faulty?

It's not just the US, it's all Western countries which have inflation. Obviously, anything imported costs more.

It's not the US food prices. It's the creation of money and deficit spending that allows all of the farangs and even other Asian people to visit or move to Thailand that drives Thai prices up. Again, most of the farangs in Thailand are drawing some kind of government pension or other "entitlement." They spend that money in Thailand. There is therefore more competition for the Thai products.

Farangs typically have more money than some Thais, and buy more goods and services, per person. All of this money is coming from the West where much of it is generated by deficits. If all of the expats stopped getting their Western government money, many would have to go home. So would the tourists.

Much of the inflation in LOS in real estate and other commodities is caused by foreign investment and spending by foreigners. Thais are competing for goods and services with foreigners who bring their fiat money. More money is chasing a fixed amount of goods in LOS and that always causes inflation.

Just to correct your first line "Obviously anything imported will cost less" (with the exchange rate so Baht strong)

I don't believe there are a significant amount of western foreigners in Thailand that could possibly affect anything.

Foreigners income and where it comes from is irrelevant to the Thai economy.

Foreigners don't compete with Thais for anything, they can't buy land, they can only buy condos sold to them (and built for them) at a "special price".

Inflation in LOS is mainly dependent on the Thai government (corrupt economic) policies and profiteering by those in power.

To believe that you, as a foreigner, affect anything in Thailand is just hubris.

("you" as all foreigners, not you in particular)

Thailand claims it has something like 22 million tourists each year. That in a country with a population of 60 million. That doesn't compete with Thais for goods and services? Do you really think that a condo or a meal in a restaurant would cost what it does if it weren't for foreigners?

[mccw]

Personally I'm leaning more to the Thailand investment idea. Chiang Mai specificity. I think this city has a lot more growth left in it yet. The areas next to the new malls for long term rentals and city centre for holiday rents. At least if the bht goes up or down its still bht and I can use it here where I need it. Regulations and legal hoops are minimal. Plus my guess is that Thailand is embarking on a strong bht higher debt trajectory for the next decades, compared to the devaluation policy of west, I think this longer term trend can be ridden and swapped out of 10 or 20 years from now.

I also keep gold and silver as an alternative currency reserve with a view to pay down debts or change up in the event of great opportunity.

I would by a nice little Italian villa if they pulled out of the euro and let the lira drop. Such a chaotic break up of the EU would bring alsorts of opportunities and probably be accompanied be a good up tick in the PM prices. Could be enough to break the manipulators backs

You would be swapping the known legal status of your UK property for the more uncertain legal status of any Thailand property held outside of condos. Do you feel comfortable with that?

Property prices are becoming quite reasonable in the USA, Spain and Cyprus. Why just look at Italy?

Italy just happens to be one of my favourite places to spend a prolonged period of time. I like Spain also. Not been to Cyprus.

Regards value. The prices might be down a bit from peak but not anything like what they should be in my opinion, and not anything like what they would be if a switch back to independent currency took place. Even if remaining in the EU- if the euro devalues (relative to my PMs or Bht holdings) which I think will happen over the next decade or so in a significant way, then I can buy at a much "cheaper", comparatively speaking, price.

I think there is a good chance of an EU break up though. With that chance I can not invest in any med country. If it happens then happy to jump in. I don't loose anything by waiting

Edited April 15, 2013 by mccw

[NeverSure]

The problem is that if the house goes up double but the dollar halves in value then I've not made any capital gain and my income is worth half what it could be invested elsewhere. Plus I have no use for dollars

But isn't that the reason to buy assets which will keep pace with inflation? If I keep my fiat currency from any country, it could fall to 1/2 value. Isn't holding assets that will keep pace with inflation the whole idea in an inflationary environment?

I don't believe that countries can create massive amounts of fiat currency to pay bills and especially to give to people to spend without eventually causing inflation. My definition of inflation is that the currency loses value.

So, in at least part of my portfolio, I want something that generates income to justify the investment, with inflation protection as a potential bonus.

If the value of the home doubles in price due to inflation, then the money is worth 1/2 what it was. But I have the home which has protected me against that, while all of the time giving me income.

I can tell you that it would already cost twice as much to build that home in Wyoming, right now, as they are asking for it. I believe I can read a lot into those tea leaves.

Why would I rather buy a condo in LOS, where my residency is tenuous, I can't own the land, rents are cheap, vacancies are rampant, the prices have run up to far beyond a reasonable replacement cost, and even farm land is selling for multiples of what it should bring based on its income potential?

Don't we consider buying after a crash rather than when prices have run up and up and are way up?

[mccw]

The problem is that if the house goes up double but the dollar halves in value then I've not made any capital gain and my income is worth half what it could be invested elsewhere. Plus I have no use for dollars

But isn't that the reason to buy assets which will keep pace with inflation? If I keep my fiat currency from any country, it could fall to 1/2 value. Isn't holding assets that will keep pace with inflation the whole idea in an inflationary environment?

I don't believe that countries can create massive amounts of fiat currency to pay bills and especially to give to people to spend without eventually causing inflation. My definition of inflation is that the currency loses value.

So, in at least part of my portfolio, I want something that generates income to justify the investment, with inflation protection as a potential bonus.

If the value of the home doubles in price due to inflation, then the money is worth 1/2 what it was. But I have the home which has protected me against that, while all of the time giving me income.

I can tell you that it would already cost twice as much to build that home in Wyoming, right now, as they are asking for it. I believe I can read a lot into those tea leaves.

Why would I rather buy a condo in LOS, where my residency is tenuous, I can't own the land, rents are cheap, vacancies are rampant, the prices have run up to far beyond a reasonable replacement cost, and even farm land is selling for multiples of what it should bring based on its income potential?

Don't we consider buying after a crash rather than when prices have run up and up and are way up?

I largely agree with you in principle but its all relative.

I'm looking at a new decades long cycle of asian growth and western stagflation couple with devaluation. A blip down in Thai property markets would be like a dip in UK house prices in the early 90s which then goes on another uptick, a blip down, up again, exceeding by multiples up the blips down every 6 years or so. The point being a house bought for 10 or 20,000 pounds in the 70s could now easily fetch a quarter or half a million or even more depending on areas, like Nottinghill is millions from very cheap buildings.

I agree the rental returns are not great on new built condos and they are likely over built and over priced. But the returns on new built UK homes are rubbish also, about 3-4%, so it about choosing the right plays in the market rather than just blindly sticking money in it. Personally I'm more interested in land and houses in strategic locations but just out side the current top priced zones. Condos I'm looking at older big ones in good locations to renovate and either flip or rent a while. Rental yields I do not accept less than 7%; it is achievable and better possible.

[mccw]

Another relativity thing is

in Chiang Mai prices have rocketed for land undoubtably. So for locals is looking top of the boom. But for the Chinese, Russians, Singaporeans Chiang Mai is only just getting going. Plus Thais are looking to retire from Bangkok or the south Mmy opinion is this is just at the start of the trend for international attention and looking like a bargain compared to the saturated and high cost markets of Bangkok, Puket, Samui, hua hin and the like. Another thing is that land does not crash in price like other countries.

I asked this question to my wife about how can farm land prices in middle nowhere keep rising and rising when the income from the land will be so terrible % return; she explained that is my western business thinking and it doesn't apply to Thais. She explained that the more money and wealth there is amongst the population then the higher the prices will go and the % return is meaningless. Its not investment for farming business return. It is all about status and security. The land cannot be stolen like gold. It can alway produce food, give some income and be lived on/ off no matter what happens to the economy. The sacti Naa system is still present in the social concience and if people own a lot of land they feel bigger and richer than having millions in stocks or bank accounts. Also land- they're not making anymore of it, so the more money chasing less land is very bullish. The same effect like the UK tight planning laws and increasing incomes/ nation wealth - but in UK houses worked nice, but Thai no real planning restrictions, so its the land that will do best.

[NeverSure]

The problem is that if the house goes up double but the dollar halves in value then I've not made any capital gain and my income is worth half what it could be invested elsewhere. Plus I have no use for dollars

But isn't that the reason to buy assets which will keep pace with inflation? If I keep my fiat currency from any country, it could fall to 1/2 value. Isn't holding assets that will keep pace with inflation the whole idea in an inflationary environment?

I don't believe that countries can create massive amounts of fiat currency to pay bills and especially to give to people to spend without eventually causing inflation. My definition of inflation is that the currency loses value.

So, in at least part of my portfolio, I want something that generates income to justify the investment, with inflation protection as a potential bonus.

If the value of the home doubles in price due to inflation, then the money is worth 1/2 what it was. But I have the home which has protected me against that, while all of the time giving me income.

I can tell you that it would already cost twice as much to build that home in Wyoming, right now, as they are asking for it. I believe I can read a lot into those tea leaves.

Why would I rather buy a condo in LOS, where my residency is tenuous, I can't own the land, rents are cheap, vacancies are rampant, the prices have run up to far beyond a reasonable replacement cost, and even farm land is selling for multiples of what it should bring based on its income potential?

Don't we consider buying after a crash rather than when prices have run up and up and are way up?

I largely agree with you in principle but its all relative.

I'm looking at a new decades long cycle of asian growth and western stagflation couple with devaluation. A blip down in Thai property markets would be like a dip in UK house prices in the early 90s which then goes on another uptick, a blip down, up again, exceeding by multiples up the blips down every 6 years or so. The point being a house bought for 10 or 20,000 pounds in the 70s could now easily fetch a quarter or half a million or even more depending on areas, like Nottinghill is millions from very cheap buildings.

I agree the rental returns are not great on new built condos and they are likely over built and over priced. But the returns on new built UK homes are rubbish also, about 3-4%, so it about choosing the right plays in the market rather than just blindly sticking money in it. Personally I'm more interested in land and houses in strategic locations but just out side the current top priced zones. Condos I'm looking at older big ones in good locations to renovate and either flip or rent a while. Rental yields I do not accept less than 7%; it is achievable and better possible.

This I truly don't understand. First, you believe that there will be decades of growth in the Asian markets while I see a major crash coming. I've never seen such excesses in public and private spending, government and private debt, nor such over building and euphoric spending in my life, including just before the crash of the US housing market, Wall Street, and banks. Even China is guilty.

Asia lives off exports to the West. Don't kid yourself. That's what brought China to where it is today. Yes, they export to Asia, but all of Asia depends on exports to the West. Any crash in Asia will be systemic just as it was in '97. Thailand wasn't the only Asian country to crash. It's just the one we talk about.

Thailand is running up national and personal debt as if there were no tomorrow. China needs a hard look by any investor. They have been using stimulus internally for some time now, and that includes building their high speed rail system. Have you read about and seen the massive empty cities they have built? The money for those is owed by private investors to Chinese banks. This is exactly what brought down Wall Street and the banks and the real estate market in the US. Exactly.

Irrational exuberance. Building things far beyond demand on borrowed money from banks too stupid to see the bubble. Everyone wanting a piece of all the money everyone else had been making. People buying more than one home, and as many as they could get financing on because, after all, real estate always goes up and you'd better get in before it goes up more, right? Wrong. Very, very wrong and it broke banks, Wall Street, and main street.

The US government had to cough up almost a trillion dollars in new bogus money to bail out the banks and Wall Street or the whole country would have crashed.

Why can't people see the same irrational exuberance in Asia? What makes Asia exempt from the consequences of the very same behavior?

Asia's boom is built on debt and cheap labor. Cheap labor is evaporating and the West can compete with better efficiency in manufacturing. Many companies are building auto factories in the US now, and that includes Honda, Toyota, Mercedes and others. They are doing it because it is cheaper to manufacture in the US than it is to manufacture in Germany or Japan. Thailand would be cheaper yet due only to cheap labor, but the shit they build couldn't meet Western safety standards. The same goes for China's shit.

Everything goes in cycles, and Asia is next.

[NeverSure]

Another relativity thing is

in Chiang Mai prices have rocketed for land undoubtably. So for locals is looking top of the boom. But for the Chinese, Russians, Singaporeans Chiang Mai is only just getting going. Plus Thais are looking to retire from Bangkok or the south Mmy opinion is this is just at the start of the trend for international attention and looking like a bargain compared to the saturated and high cost markets of Bangkok, Puket, Samui, hua hin and the like. Another thing is that land does not crash in price like other countries.

I asked this question to my wife about how can farm land prices in middle nowhere keep rising and rising when the income from the land will be so terrible % return; she explained that is my western business thinking and it doesn't apply to Thais. She explained that the more money and wealth there is amongst the population then the higher the prices will go and the % return is meaningless. Its not investment for farming business return. It is all about status and security. The land cannot be stolen like gold. It can alway produce food, give some income and be lived on/ off no matter what happens to the economy. The sacti Naa system is still present in the social concience and if people own a lot of land they feel bigger and richer than having millions in stocks or bank accounts. Also land- they're not making anymore of it, so the more money chasing less land is very bullish. The same effect like the UK tight planning laws and increasing incomes/ nation wealth - but in UK houses worked nice, but Thai no real planning restrictions, so its the land that will do best.

With all due respect, virtually no one has more good farm land that the US. Return is not meaningless.

Return is meaningless only during a cycle of irrational exuberance.

I have seen the return from irrational exuberance to sanity, and it's painful. LOS is next.

Anyway, you can't own land in LOS so it's moot for farangs unless you want to gamble on a corporation that's largely held by Thais, or hold it in your "wife's" name. Many Thai ladies would like to be your "wife" for such a purpose, and many farangs have gone home broke and broken as a result of it.

Edited April 15, 2013 by NeverSure

[NeverSure]

I'm outta here. I've read the posts and I've said what I believe. After this, it would all be redundant. Everyone has an opinion, and each will do as he believes.

It's not my purpose to try to change anyone. It's just an internet discussion and there's no paper to even say it isn't worth the paper it's written on.

Each of us has his reasons for his own investments, and they rightfully vary by the nature of his home country.

Thank all of you for a nice and polite discussion. The politeness is refreshing.

[mccw]

Never sure.

My wife is happy to hold it yes £ . Total Thai holdings on her name will equal roughly a third of our total assets maybe half. We have built our wealth together during our marriage do its a fair situation. We are business partners aswell as lovers and parents. Perhapse a different situation to the "wives" you are referring to where a rich falang turns up with cash and hands most of it over to dear wifey to hold land. Not smart I agree. I'm in a lucky situation. All my uk property is on my sole name due to finance complications if she were included.

[mccw]

I'm outta here. I've read the posts and I've said what I believe. After this, it would all be redundant. Everyone has an opinion, and each will do as he believes.

It's not my purpose to try to change anyone. It's just an internet discussion and there's no paper to even say it isn't worth the paper it's written on.

Each of us has his reasons for his own investments, and they rightfully vary by the nature of his home country.

Thank all of you for a nice and polite discussion. The politeness is refreshing.

Yes; nice sensible polite and reasoned discussion. Thank you. I respect your points of view and agree with your concerns largely but have a differing long term opinion. I could be wrong of course which is why I maintain UK investments and income also + plus the PMs in reserve. Just my personal plan. To each their own. I was seriously looking in to US due to the half build cost values but just decided against it for the stated reasons. Maybe if I were American I would feel differently and not be at all in to the UK probably. Similarly if German I would think different also.

Chock dee

Edited April 15, 2013 by mccw

[Naam]

I'm outta here. I've read the posts and I've said what I believe. After this, it would all be redundant. Everyone has an opinion, and each will do as he believes.

It's not my purpose to try to change anyone. It's just an internet discussion and there's no paper to even say it isn't worth the paper it's written on.

Each of us has his reasons for his own investments, and they rightfully vary by the nature of his home country.

Thank all of you for a nice and polite discussion. The politeness is refreshing.

there... there... stay and play nicely NeverSure. isn't it fun?

[StreetCowboy]

Never sure.

My wife is happy to hold it yes £ . Total Thai holdings on her name will equal roughly a third of our total assets maybe half. We have built our wealth together during our marriage do its a fair situation. We are business partners aswell as lovers and parents. Perhapse a different situation to the "wives" you are referring to where a rich falang turns up with cash and hands most of it over to dear wifey to hold land. Not smart I agree. I'm in a lucky situation. All my uk property is on my sole name due to finance complications if she were included.

I had intended to take the last property in joint names, but because of legislation to protect the disadvantaged, it was too complicated, and it was easier to just buy it in my name.

SC

[AnotherOneAmerican]

Thailand claims it has something like 22 million tourists each year. That in a country with a population of 60 million. That doesn't compete with Thais for goods and services? Do you really think that a condo or a meal in a restaurant would cost what it does if it weren't for foreigners?

Mainly

Thais don't buy condos aimed at the foreign market, no competition.

Thais don't eat in the same restaurants as foreign tourists, no competition.

[yoshiwara]

I'm outta here. I've read the posts and I've said what I believe. After this, it would all be redundant. Everyone has an opinion, and each will do as he believes.

It's not my purpose to try to change anyone. It's just an internet discussion and there's no paper to even say it isn't worth the paper it's written on.

Each of us has his reasons for his own investments, and they rightfully vary by the nature of his home country.

Thank all of you for a nice and polite discussion. The politeness is refreshing.

there... there... stay and play nicely NeverSure. isn't it fun?

[mccw]

Thailand claims it has something like 22 million tourists each year. That in a country with a population of 60 million. That doesn't compete with Thais for goods and services? Do you really think that a condo or a meal in a restaurant would cost what it does if it weren't for foreigners?

Mainly

Thais don't buy condos aimed at the foreign market, no competition.

Thais don't eat in the same restaurants as foreign tourists, no competition.

But they are buying the building materials, labour, vegetable etc from the same pool.

Plus inputs I mentioned previously.

At least naam has the good sense to just keep quiet when he knows he's beat mostly,,,, well in this case anyway, haha

[Naam]

Thailand claims it has something like 22 million tourists each year. That in a country with a population of 60 million. That doesn't compete with Thais for goods and services? Do you really think that a condo or a meal in a restaurant would cost what it does if it weren't for foreigners?

Mainly

Thais don't buy condos aimed at the foreign market, no competition.

Thais don't eat in the same restaurants as foreign tourists, no competition.

But they are buying the building materials, labour, vegetable etc from the same pool.

Plus inputs I mentioned previously.

At least naam has the good sense to just keep quiet when he knows he's beat mostly,,,, well in this case anyway, haha

financially unlucky in real estate deals seems to be my karma. on the other hand i have always been comfortable and happy in the homes i planned, built and lived. karma balanced!

[yoshiwara]

Thailand claims it has something like 22 million tourists each year. That in a country with a population of 60 million. That doesn't compete with Thais for goods and services? Do you really think that a condo or a meal in a restaurant would cost what it does if it weren't for foreigners?

Mainly

Thais don't buy condos aimed at the foreign market, no competition.

Thais don't eat in the same restaurants as foreign tourists, no competition.

But they are buying the building materials, labour, vegetable etc from the same pool.

Plus inputs I mentioned previously.

At least naam has the good sense to just keep quiet when he knows he's beat mostly,,,, well in this case anyway, haha

financially unlucky in real estate deals seems to be my karma. on the other hand i have always been comfortable and happy in the homes i planned, built and lived. karma balanced!

Property is primarily an emotional purchase for most but on a practical level many of those who bought in Thailand after the Asian crash at the very worst have got their money back and the benefit of over 10 years rent-free accommodation. And with the appreciation of the Thai baht they could even take a sale loss in baht and still come out ahead. I should kick myself really.

[phitsanulokjohn]

Watch what happens when the US withdraws from it's QE program.Benny Baldy Bernake only threatened it 3-4 weeks back and the Baht fell quite sharply,until he changed his mind then it began to rise again.As of today it's very slightly under 50 for pound notes and very slightly over 50 for T/T.A much improved situation to a few months back,but still a long way short of the dizzy heights of 75 which i managed to build my 2 properties on a few years back.I wonder if we'll ever see those lovely figures again? One can only hope.

[yoshiwara]

Watch what happens when the US withdraws from it's QE program.Benny Baldy Bernake only threatened it 3-4 weeks back and the Baht fell quite sharply,until he changed his mind then it began to rise again.As of today it's very slightly under 50 for pound notes and very slightly over 50 for T/T.A much improved situation to a few months back,but still a long way short of the dizzy heights of 75 which i managed to build my 2 properties on a few years back.I wonder if we'll ever see those lovely figures again? One can only hope.

His name is Bernanke. Try to get that right before attempting to make a funny.

And 'er re 'until he changed his mind', no he didn't.

PS hope is not a strategy.

[thaistocks]

Many expats wonder why among all the political turmoil the Thai Baht has not weakened more of late? This after being a relative strong currency a year ago.

Here are some reasons: The Bank of Thailand is sitting on huge Dollar reserves to the tune of 4 or more times then before the Asian Financial Crisis of 1997, Thai commercial banks -contrary to many developed countries- are rather highly profitable, have low debts and sitting on high deposits. Banks here enjoy some of the highest deposit to loan interest-rate spreads and so are in great shape. Thai listed companies for the most part are well under-leveraged and the Thai average inflation rate is barely 2.5%. While some food prices have increased, many other important prices have been stable or even dropping like oil, computers, appliances, mobile phones & international calling, cars, travel, stock trading, which has been tame or dropping for many years.

The Thai economy while slowing is still growing faster then most developed countries and the tourism sector is and remains buoyant outside of Bangkok. Markets are always forward looking and perhaps large institutional investors remain confident the current political malaise will pass in time; and not least large global currency holders which can move markets, must always compare what are their alternatives. All reasons and maybe more why the Baht has been firmer in the past few days.

[i claudius]

Many expats wonder why among all the political turmoil the Thai Baht has not weakened more of late? This after being a relative strong currency a year ago.

Here are some reasons: The Bank of Thailand is sitting on huge Dollar reserves to the tune of 4 or more times then before the Asian Financial Crisis of 1997, Thai commercial banks -contrary to many developed countries- are rather highly profitable, have low debts and sitting on high deposits. Banks here enjoy some of the highest deposit to loan interest-rate spreads and so are in great shape. Thai listed companies for the most part are well under-leveraged and the Thai average inflation rate is barely 2.5%. While some food prices have increased, many other important prices have been stable or even dropping like oil, computers, appliances, mobile phones & international calling, cars, travel, stock trading, which has been tame or dropping for many years.

The Thai economy while slowing is still growing faster then most developed countries and the tourism sector is and remains buoyant outside of Bangkok. Markets are always forward looking and perhaps large institutional investors remain confident the current political malaise will pass in time; and not least large global currency holders which can move markets, must always compare what are their alternatives. All reasons and maybe more why the Baht has been firmer in the past few days.

Spoilsport

[SheungWan]

Many expats wonder why among all the political turmoil the Thai Baht has not weakened more of late? This after being a relative strong currency a year ago.

Here are some reasons: The Bank of Thailand is sitting on huge Dollar reserves to the tune of 4 or more times then before the Asian Financial Crisis of 1997, Thai commercial banks -contrary to many developed countries- are rather highly profitable, have low debts and sitting on high deposits. Banks here enjoy some of the highest deposit to loan interest-rate spreads and so are in great shape. Thai listed companies for the most part are well under-leveraged and the Thai average inflation rate is barely 2.5%. While some food prices have increased, many other important prices have been stable or even dropping like oil, computers, appliances, mobile phones & international calling, cars, travel, stock trading, which has been tame or dropping for many years.

The Thai economy while slowing is still growing faster then most developed countries and the tourism sector is and remains buoyant outside of Bangkok. Markets are always forward looking and perhaps large institutional investors remain confident the current political malaise will pass in time; and not least large global currency holders which can move markets, must always compare what are their alternatives. All reasons and maybe more why the Baht has been firmer in the past few days.

Spoilsport

It is the continuing political uncertainty which is likely to keep the baht in check for some time, but since the currency exchange rate works in pairs there are other things going on and the small weakening of the USD against the baht plus the small recovery of the AUS are the other sides of the baht story.