Thailand's bubble economy is heading for a 1997-style crash

[Berkshire]

I've been sitting on piles of cash waiting for the US market to crash (or suffer a major correction) and I'm still waiting. The "experts" will probably be right eventually, but in the mean time, the market hits new record highs practically every day.

So Thailand is a bubble economy...well isn't everybody? It seems that pretty much every economy (save maybe Germany) is in some sort of bubble. Maybe everyone should just print money and pay off all their debt at the same time. Wonder what that would do?

[midas]

The bust in Ireland was specifically precipitated by the main banks essentially going bust through appallingly loose practices, overjuicy interest rates offered to raise funds by Anglo Irish for one (from which many posters here benefited), and typified by fraudulent self-lending.

Have we any specific data which predicts this is happening here?or will e.g. house and condo sales merely stagnate for a while until the slack gets taken up again?

It is no more doom and gloom than if you take the hypodermic syringe away from the heroin addict or you take the dummy out of the baby's mouth. It's reality. The party has to end some time.

Just like Mephistopheles in end came knocking on the door of Faust to claim the soul he was promised we will need to accept that the lifestyle that we have been enjoying for decades has been an illusion based on borrowed money by governments and individuals that we cant pay back.

Has Thailand's soul been sold with a GND of GNP/2?

A Faustian pact? Hardly.

BTW the party often doesn't end it just cycles up and down as growth and inflation reduce effective debt..the question being are we for some measurable reason going beyond that?

(ps: Don't think for a moment I'm in favour of recent childishly incompetent "schemes" which have brought about the debt.)

So the author of the article and the three Thai tycoons are wrong? Let the party continue

The author isn't necessarily correct and the 3 businessmen disagree with him. So what's your point?

Aw I guess my point is that Thailand does not exist within a bubble and there are similar conditions in other parts of the world. If people are now admitting there are even bigger bubbles in some bigger places. then a number of bubbles bursting simultaneously could lead to an awful mess

Or is the author of EconMatters also " not necessarily correct "

http://www.econmatters.com/2013/11/bubble-that-everyone-admits-is-bubble.html

Well the point was it could be a collapse like 97. I disagree that the situation is completely different, as do the businessmen.

If a crisis comes it won't be like 97.

So let's start a new academic thread. "If a crash comes what form will it take", and let's start again.

" So let's start a new academic thread. "If a crash comes what form will it take", and let's start again. "

I would like to propose a small amendment to your question from "If a crash comes what form will it take", to "If a crisis comes what form will it take" ? Because yes there may not be a crash. It may be more like air slowly escaping from a tyre.......but the end result will be the same...........a lower standard of living for many people.

The following website provides a strong hint as to the size of the problem (and not only for Thailand) because you can't spend money endlessly that you don't have and without

any real of paying it back i.e. real incomes are falling at the same time as debt is rising

http://www.economist.com/content/global_debt_clock

[David48]

Forbes' credential are beyond reproach.

The author's however ...

Every recent article written by the Author has the word 'Bubble' in it ...

.

"Forbes' credential are beyond reproach"

Similar to:

Chrysler?

Arthur Anderson?

Enron?

CIT Group?

General Motors?

Lehman Brothers?

Etc………………………………………………………………………………………………………………………………………………………?

Just curious :-)

Just curious how you can compare Forbes, a business magazine reporting and analysing events to actual companies ...

[Asiantravel]

Or is the author of EconMatters also " not necessarily correct "

http://www.econmatters.com/2013/11/bubble-that-everyone-admits-is-bubble.html

Bubble That Everyone Admits is a Bubble

By EconMatters

This is one of the few times where the benefactors or professionals who benefit from the bubbles, in this case created by the Federal Reserve, fully and openly acknowledge that stock prices and certain other asset classes are completely divorced from fundamental valuations.

Fully and openly acknowledge? refs please?

Completely divorced from fundamental valuations?

……..Like price to book?

price to earnings?

so, completely divorced from fundamental valuations?

……judge for yourself.

ps:

1. Note the levels at which the the P/E reversed

2. Note carefully what happened to the market price level after each reversal (clue: $$$)

3. P/E now 19.38

"Don't rely on further blow-off - but don't be shocked - risk dominates... Hold Tight."

Edited November 9, 2013 by Asiantravel

[William Osborne]

... so the author was predicting the financial crash early in 2004, yet it happened in 2008... only 4 years off

could have made a fortune during that period if you had stop losses on !!

[Thai at Heart]

The bust in Ireland was specifically precipitated by the main banks essentially going bust through appallingly loose practices, overjuicy interest rates offered to raise funds by Anglo Irish for one (from which many posters here benefited), and typified by fraudulent self-lending.

Have we any specific data which predicts this is happening here?or will e.g. house and condo sales merely stagnate for a while until the slack gets taken up again?

It is no more doom and gloom than if you take the hypodermic syringe away from the heroin addict or you take the dummy out of the baby's mouth. It's reality. The party has to end some time.

Just like Mephistopheles in end came knocking on the door of Faust to claim the soul he was promised we will need to accept that the lifestyle that we have been enjoying for decades has been an illusion based on borrowed money by governments and individuals that we cant pay back.

Has Thailand's soul been sold with a GND of GNP/2?

A Faustian pact? Hardly.

BTW the party often doesn't end it just cycles up and down as growth and inflation reduce effective debt..the question being are we for some measurable reason going beyond that?

(ps: Don't think for a moment I'm in favour of recent childishly incompetent "schemes" which have brought about the debt.)

So the author of the article and the three Thai tycoons are wrong? Let the party continue

The author isn't necessarily correct and the 3 businessmen disagree with him. So what's your point?

Aw I guess my point is that Thailand does not exist within a bubble and there are similar conditions in other parts of the world. If people are now admitting there are even bigger bubbles in some bigger places. then a number of bubbles bursting simultaneously could lead to an awful mess

Or is the author of EconMatters also " not necessarily correct "

http://www.econmatters.com/2013/11/bubble-that-everyone-admits-is-bubble.html

Well the point was it could be a collapse like 97. I disagree that the situation is completely different, as do the businessmen.

If a crisis comes it won't be like 97.

So let's start a new academic thread. "If a crash comes what form will it take", and let's start again.

" So let's start a new academic thread. "If a crash comes what form will it take", and let's start again. "

I would like to propose a small amendment to your question from "If a crash comes what form will it take", to "If a crisis comes what form will it take" ? Because yes there may not be a crash. It may be more like air slowly escaping from a tyre.......but the end result will be the same...........a lower standard of living for many people.

The following website provides a strong hint as to the size of the problem (and not only for Thailand) because you can't spend money endlessly that you don't have and without

any real of paying it back i.e. real incomes are falling at the same time as debt is rising

http://www.economist.com/content/global_debt_clock

Well maybe. As I said, there may or may not be a problem,, I just wish they would start by explaining where, and how it will happen properly, because it isn't going to be the same as 97.

Even in these articles, it gets contradicted. Ooooh, it will be like 97. Well no it won't because the conditions are completely different. I read the economist religiously, and if the problem comes it won't manifest in the same way with varying levels of problems and results.

[BruceSmith]

Forbes' credential are beyond reproach.

The author's however ...

Every recent article written by the Author has the word 'Bubble' in it ...

.

"Forbes' credential are beyond reproach"

Similar to:

Chrysler?

Arthur Anderson?

Enron?

CIT Group?

General Motors?

Lehman Brothers?

Etc………………………………………………………………………………………………………………………………………………………?

Just curious :-)

Just curious how you can compare Forbes, a business magazine reporting and analysing events to actual companies ...

The link is the word credentials.

If that is combined with hidden agendas, things really start moving.

[Zao]

[Edit: I mistakenly posted this comment as a new thread, and move it here just for continuity. I've seen the article just now. Sorry to subject you guys to yet more.]

Here's my 2 pence on the article.

The only fault with the article is the lame-ass conclusion. I guess the author was exhausted by that point. I submitted a couple of papers like that in school, I think!

In the final section "How Thailand's Bubble Economy Will Pop", after exhaustive analysis of not exactly easy to collect data and some fairly incisive points, he wraps up with a gaping waffle:

"Thailand’s bubble will most likely pop when China’s economic bubble pops."

C'mon! What a cop out. Give your prose some balls.

His wimp out continues with "and/or as global and local interest rates continue to rise, which are what caused the country’s credit and asset bubble in the first place."

What does that even mean? Global interest rates dropping (plus QE) encouraged the flood of money into Thailand. They are now rising. But the credit and asset bubbles were caused by low global interest rates. Further, local interest rates are falling, not rising. 2013 saw two rate cuts in Thailand - June and November - to the lowest in three years, and this year should see BOT make one more cut.

To be fair, what he was trying to say is that as QE tapering once again builds momentum, BOT may - at some point - have to raise rates to attract foreign capital. Indeed, IMO, a rate rise in late 2014 would not be a surprise.

Further, Thailand has lower inflation than other Asians. This means "real interest rates" - I'm about to nod off - had been rising. Other economies - India, Indonesia - have been raising rates to combat inflation and attract foreign funds, because US bond yields have been trending higher. (US bond yields rise as QE falls. Zzzzz.) To attract foreign capital away from "safe" US bonds, Thailand will have to raise rates, once the economy firms up. But anything higher than 3% (they had hit 5% briefly in 2006) will be quite a ways off: Thailand has a lot of excess capacity to use up before economic growth can kick in.

Ok. Now I'm sleeping.

Still, aside from blaming the Chinese gorilla - kind of like blaming McDonalds for the world's fat people: easy to do, but tough to link - I don't think he's made a case for how Thailand's Bubble Will Pop.

Anybody have any thoughts? How might Thailand's bubble pop?

Clearly the key will be something that brings consumer and public debt crashing in on itself. This occurred in Japan in the late 1980s, but the situation is different. Or is it? What triggers an asset class crash? What holds the key for the Thai economy's future? Or is all this talk of a bubble simply rubbish?

I've got my own guess on this. I'll add it in a later post.