Thb vs. GBP/ USD redux

[mogandave]

I am sorry for the confusion, but I did not say the risk was great, nor did I make a recommendation on how others should or should not be invested.

 

If I thought the risk was great, I would not hold any Baht beyond what was in my pocket at any given moment.

 

if I knew how the markets were going to move, I would not be grunting out a living at a hot-a** manufacturing facility in Thailand. 

[Craig krup]

17 hours ago, chiang mai said:

 

You have that supposed education in economics and the best rebuttal you can come up with is to grammatical error and recommend a book by a fiction writer, that's interesting and speaks volumes!

 

Your statement that the Baht is ludicrously overvalued against the Pound is based on what, fundamentals, debt, potential, a passing thought late one night! BOT spends more of its foreign currency reserves trying to keep the lid on the Baht than on any other single activity and has been doing so for the past six or more years - governement debt levels (expressed any way you wish) are low, it continually runs a current account surplus, unemployment is very low, bank NPL's are low, there is a readily available workforce, governement is not burdened by costly social welfare programs or unions and foreign currency reserves are higher than most countries around the world. The UK economy on the other hand is the exact opposite of all of those things, no matter that GDP per capita is far higher, the Baht could easily become sub 40 to the Pound within twelve/twenty four months, as sure as eggs is eggs it isn't going back to 50, 60 or 70 so I suggest strongly that if you have an economic interest in Thailand you act accordingly. Here read up on the Thai economy: 

 

http://www.tradingeconomics.com/thailand/indicators

 

There will no charge on this occasion for filling in the gaps in your economics education.

 

 

I didn't recommend a book by a fiction writer because it was an alternative to Dornbusch, Fischer and Begg, I recommended it because it's a mirror: it allows a personality type to see themselves. The world's full of people who have exactly the problem Bellow describes.

 

I notice you don't may any heed to purchasing power parity in your account. As I say, it's the key driver. Show me what you can buy in Thailand with 44 baht and I'll show you what you can buy in the UK with a pound. That's the measure. Incidentally, you don't spend foreign currency to keep yours down, you spend it to keep yours up. Unemployment in Thailand is horrific: sitting at the side of the road in Nong Khai "selling" three bottles of petrol a day isn't a job. A country without welfare can declare its "unemployment rate" to be anything it likes. 

 

To say that GDP per capita in the UK is higher than in Thailand is like saying World War 2 caused more damage than a standard British cat fight at a wedding. 

 

But, hey, whatever: I'm sure you're right. I won't be betting in either direction. Currency markets are where mug punters swap money and the "bank" takes a slice and cheers them. 

[Craig krup]

11 hours ago, YeahSiam said:

 

I'll take the opinions of spreadbetters and trading experts with real world life experience over that of a bunch of green academics with economics degrees right up the wazoo whose forecasts are so consistently proven wide of the mark that many consider them to be contrarian indicators.

 

 

 

Nearly 90% lose money over any time period. It's so bad the UK has brought in new regulations. Advertisements on CNBC and Bloomberg are aimed at people whose main qualification is a massive chip on their shoulder. 

[Craig krup]

12 hours ago, mogandave said:

 

I thought you were making an agument that the Baht was over valued due to purchasing power, yet gold is the same price in GB, TH or US, using any currency. 

 

It is my position that currency valuation is determined by market perception, and for that reason, it is not possible for a currency to be over or under valued.

 

Gold is the same price, but think about it. The baht - as far as I'm aware - isn't fully convertible. Thailand has massive import duties, purchase taxes and other devices to fund the state where imposing a meaningful income tax is nearly impossible. Can I set up a business in Thailand quickly and easily, sell my superior services or goods to the locals for Baht, turn that Baht into pounds or dollars at low cost in any quantity I like, and use this currency to buy what I please in the world? Can I hell as like. Thailand is configured to prevent the Baht finding its true level. The entire O-A visa programme, and the mooted new rules, are nothing more than an attempt to earn hard currency. Note how easy it is to hand over £20 Bank of England notes, and hear them purr as they count them. Try to turn 1,000 Baht back into £20 and watch the palaver. 

 

In one sense you're right. Your currency is worth what someone will pay for it, in the same way that your house or car is. But Thailand imposes massive import duties, which protect domestic manufacture. It doesn't allow the free movement of capital into and out of the country. It isn't an open economy in the way that the UK is. If Big Eddie told everyone that failure to buy a car from his lot would result in broken legs then the price of his cars would be the market price, and his cars would compete with near substitutes: bus passes, motorcycles and bikes. But the price of his cars would be above the real market price. If Thailand allowed Australia and New Zealand to export into the country without let or hindrance large parts of the economy would be blown clean out of the water: or rich, red Isaan soil. 

 

You can't set up shop in Thailand, earn Baht and turn it into hard currency. Thailand uses capital controls. We're not in a position to know the real value of the Baht if it was to be hawked freely around the world, because they don't have the confidence to try it. 

Edited December 29, 2016 by Craig krup
Typo - i instead of I

[mogandave]

I think gold is a good measure of valuation.

 

I can buy two kilos of great pineapple for forty Baht, what would that cost in London?

 

I can buy a Bentley for two or three hundred pounds in London, what would that cost in Bangkok?

 

 

 

[chiang mai]

11 hours ago, Craig krup said:

 

Gold is the same price, but think about it. The baht - as far as I'm aware - isn't fully convertible. Thailand has massive import duties, purchase taxes and other devices to fund the state where imposing a meaningful income tax is nearly impossible. Can I set up a business in Thailand quickly and easily, sell my superior services or goods to the locals for Baht, turn that Baht into pounds or dollars at low cost in any quantity I like, and use this currency to buy what I please in the world? Can I hell as like. Thailand is configured to prevent the Baht finding its true level. The entire O-A visa programme, and the mooted new rules, are nothing more than an attempt to earn hard currency. Note how easy it is to hand over £20 Bank of England notes, and hear them purr as they count them. Try to turn 1,000 Baht back into £20 and watch the palaver. 

 

In one sense you're right. Your currency is worth what someone will pay for it, in the same way that your house or car is. But Thailand imposes massive import duties, which protect domestic manufacture. It doesn't allow the free movement of capital into and out of the country. It isn't an open economy in the way that the UK is. If Big Eddie told everyone that failure to buy a car from his lot would result in broken legs then the price of his cars would be the market price, and his cars would compete with near substitutes: bus passes, motorcycles and bikes. But the price of his cars would be above the real market price. If Thailand allowed Australia and New Zealand to export into the country without let or hindrance large parts of the economy would be blown clean out of the water: or rich, red Isaan soil. 

 

You can't set up shop in Thailand, earn Baht and turn it into hard currency. Thailand uses capital controls. We're not in a position to know the real value of the Baht if it was to be hawked freely around the world, because they don't have the confidence to try it. 

 

I'm sorry to disagree with you yet again but what you've written is only partially true. It's correct to say that BOT has currency controls in place but they are not unduly onerous, money bought into the country can be easily repatriated as can the profit from investments and property sales. And overseas banks are allowed to hold THB in amounts not greater than (I believe) 300 million baht. So whilst being restricted the currency is not totally restricted and from experience it's quite easy to transfer funds out of the country.

 

Now, the upside of currency controls is that overseas brokers and banks are unable to easily take a position against THB which I think adds to the stability of the currency and of the economy and as long as the managed float remains intact there'll be no repeat of 1997.

Edited December 30, 2016 by chiang mai

[mogandave]

11 hours ago, Craig krup said:

 

Gold is the same price, but think about it. The baht - as far as I'm aware - isn't fully convertible. Thailand has massive import duties, purchase taxes and other devices to fund the state where imposing a meaningful income tax is nearly impossible. Can I set up a business in Thailand quickly and easily, sell my superior services or goods to the locals for Baht, turn that Baht into pounds or dollars at low cost in any quantity I like, and use this currency to buy what I please in the world? Can I hell as like. Thailand is configured to prevent the Baht finding its true level. The entire O-A visa programme, and the mooted new rules, are nothing more than an attempt to earn hard currency. Note how easy it is to hand over £20 Bank of England notes, and hear them purr as they count them. Try to turn 1,000 Baht back into £20 and watch the palaver. 

 

In one sense you're right. Your currency is worth what someone will pay for it, in the same way that your house or car is. But Thailand imposes massive import duties, which protect domestic manufacture. It doesn't allow the free movement of capital into and out of the country. It isn't an open economy in the way that the UK is. If Big Eddie told everyone that failure to buy a car from his lot would result in broken legs then the price of his cars would be the market price, and his cars would compete with near substitutes: bus passes, motorcycles and bikes. But the price of his cars would be above the real market price. If Thailand allowed Australia and New Zealand to export into the country without let or hindrance large parts of the economy would be blown clean out of the water: or rich, red Isaan soil. 

 

You can't set up shop in Thailand, earn Baht and turn it into hard currency. Thailand uses capital controls. We're not in a position to know the real value of the Baht if it was to be hawked freely around the world, because they don't have the confidence to try it. 

 

One could use the same argument to support a claim that the Baht were under-valued and that the government were suppressing it.

 

So you don't hold any Baht? 

 

What do you hold?

 

 

 

 

[YeahSiam]

13 hours ago, Craig krup said:

 

Nearly 90% lose money over any time period. It's so bad the UK has brought in new regulations. Advertisements on CNBC and Bloomberg are aimed at people whose main qualification is a massive chip on their shoulder. 

 

I wasn't referring to retail spreadbetters and traders who, as you say, are mostly mug punters losing money.

I'm talking about professional currency traders' opinions versus those of academics at the global central banks almost all of whom have atrocious track records with forecasting. Think Yellen, Kuroda, Carney.

[Berkshire]

On 12/29/2016 at 2:46 AM, chiang mai said:

 

Your statement that the Baht is ludicrously overvalued against the Pound is based on what, fundamentals, debt, potential, a passing thought late one night!

 

You're right, CK's argument isn't based on any facts or figures, but rather, wishful thinking.  Take the stock market.  When someone says Apple stock is overvalued, they're not necessarily saying it's overvalued at this moment because it's worth exactly what someone is willing to pay at the moment.  What they're doing is predicting the future movement of the stock, but they usually do so with a sound factual argument.  Those that say the THB is overvalued have zero facts to base their arguments on, only their own personal hope that the baht would weaken for the sake of their personal financial health.  Not a particularly reliable predictor.   

[mogandave]

It used to be anything with a P/E over 15 was considered overvalued, what is Apple's P/E?

 

[daveAustin]

On 12/28/2016 at 9:42 AM, hugh2121 said:

It is all thanks to ignorant people who voted Leave.

That's my opinion, if anyone disagrees then they have their opinion and I have mine.

 

You know what they say about opinions and posteriors.  I would sooner have GBP/THB at 20 than be beholden to Brussels... what makes you fellas tick?

 

I see Thai employment levels were mentioned. How many personnel does it take to fill the role of one comparable position in the West again and how many people are not paying income tax (to include hundreds and hundreds of thousands of monks)? I don't get people poo-pooing UK exports. It may be a nett importer, but it churns out a vast amount of engineering/auto products and not forgetting the financial services. I don't know a huge amount about currencies, but banking on GBP going one way is folly... it surely hasn't normalised yet. The bigger worry should be on those holding Euros - the EU is an absolute mess on all counts and and is past its sell-by date. Of Thai baht, tourism levels will only get worse the longer they keep it up (unless you believe TAT) and the country relies very heavily on tourism as it does duty.

[billd766]

On 27/12/2016 at 11:28 AM, almodeller said:

What currency exchange rate in £ sterling does immigration use to calculate the required 65,000 Thai baht needed per month?

 

The last time I went in July they used the BKK Bank rate of the day. Whichever bank rate they use, it will always be the rate at that time and that day.

[billd766]

On 28/12/2016 at 1:00 PM, chiang mai said:

 

Immigration does not do the calculation, the banks who write the letters to Immigration on behalf of visa applicant do and they use their own individual rates.

 

Every year since I have done my retirement extension at Nakhon Sawan using the income method I have provided the pension providers annual gross rate in their letter, sent that off to the British Embassy to get their letter and they don't do the forex either and taken the lot to Immigration.

 

The lady Immigration officer went through it all, then used her smart phone to go online to the BKK Bank website to get the rate at that time and that day (I did ask what the rate was that she got) and using the Embassy letter with the total income did the conversion.

 

The banks cannot really do the conversion because each bank usually has a slightly different rate unless each Immigration office is different.

[billd766]

On 28/12/2016 at 1:51 PM, chiang mai said:

 

For US citizens using the embassy letter approach: the issue of exchange rate is moot since they are able to obtain that letter on the basis of self certification and can therefore conjuror up a sufficiently high enough number to make the exchange rate irrelevant. Other nationalities must obtain the bank letter as stated earlier.

 

 

This only applies if you are using the bank deposit method.

 

I have been using the income method for the last 7 years and I have never needed to produce a bank letter yet either at Mae Sot or Nakhon Sawan.

[chiang mai]

3 hours ago, billd766 said:

 

This only applies if you are using the bank deposit method.

 

I have been using the income method for the last 7 years and I have never needed to produce a bank letter yet either at Mae Sot or Nakhon Sawan.

 

Then that's the difference between us. I use the funds on deposit method which requires a bank letter, because my account also involves foreign currency deposits the bank letter converts all my holdings into THB using their own exchange rate tables for that day.

[Craig krup]

10 hours ago, mogandave said:

 

1) One could use the same argument to support a claim that the Baht were under-valued and that the government were suppressing it.

 

2) So you don't hold any Baht? 

 

3) What do you hold?

 

 

 

 

 

1) If they're spending foreign currency to buy Baht then they're supporting the Baht - forcing it up. 

 

2) With the benefit of hindsight I wish I'd bought a ton of Baht at 56 to the pound, but then that's like saying I wish I'd put a fortune on Laughing Boy in the 3:30 at Kempton Park: it doesn't mean anything. 

 

3) All my dough is in international general investment trusts. I've got hardly any currency at all. As the dividends are earned in every imaginable currency I've gained massively in pound terms, although that evaporates as soon as I leave the UK, and I'm pretty much where I was before the shenanigans started. 

[Craig krup]

8 hours ago, YeahSiam said:

 

I wasn't referring to retail spreadbetters and traders who, as you say, are mostly mug punters losing money.

I'm talking about professional currency traders' opinions versus those of academics at the global central banks almost all of whom have atrocious track records with forecasting. Think Yellen, Kuroda, Carney.

 

Well, the professionals think - from their models - that the pound is 15% undervalued, but prices are set by the most highly leveraged marginal trader. Every clown imagines that the "trend is their friend". If you read any of books published by reasonably thoughtful financial markets participants - like "FIASCO", or "The Greatest Trade Ever" - it's obvious that most "professionals" are, consciously or unconsciously, looking for something with massive upside and massive downside, with the downside such that all will be equally guilty. The greatest piece of "equity" that a market "professional" has is their job. They're all looking for something that will 1) pay off mightily, as they gamble with other people's money but keep a slice, and 2) go wrong in a way where they won't be fired: "But nobody saw the sub-prime crash coming, boss". I wouldn't trust them as far as I could throw an Abrams tank. 

 

http://www.cnbc.com/2016/11/02/british-pound-undervalued-by-15-and-could-remain-so-for-quite-some-time-sp-warns.html

 

 

[Berkshire]

7 minutes ago, Craig krup said:

 

1) If they're spending foreign currency to buy Baht then they're supporting the Baht - forcing it up. 

 

Is this what you believe?  As we know, a strong currency helps some, hurts some.  A strong baht would hurt exports, tourism, etc.  Wouldn't make any sense.  If any government could control their currency, it would make more sense to weaken it, as China has done...but not so much anymore. 

[Craig krup]

1 minute ago, Berkshire said:

 

Is this what you believe?  As we know, a strong currency helps some, hurts some.  A strong baht would hurt exports, tourism, etc.  Wouldn't make any sense.  If any government could control their currency, it would make more sense to weaken it, as China has done...but not so much anymore. 

 

I'm not saying they're doing one or the other. Chiang Mai said, "BOT spends more of its foreign currency reserves trying to keep the lid on the Baht than on any other single activity and has been doing so for the past six or more years..."

 

I'm just pointing out that when you become the bid in the market, using pounds, euros and dollars to buy baht, you drive the baht up. If you want to drive down the baht you invent some baht and use it to buy pounds, dollars and euros, so that the person you buy the hard currency from acquires spending power in Thailand and drawing rights on the Thai central bank. The Thai central bank acquires a balance sheet of pounds, euros and dollars. I'm no expert on international banking regulations, but (basically) if you want to be part of the international banking system you can't do much of that. You are labelled a "currency manipulator". Legitimate attempts to weaken the baht include lowering interest rates, purchasing Thai government debt and reducing the capital requirements for Thai banks, facilitating lending (and probably inflation). 

 

But there are people playing at being currency experts who know the square root of fanny adams. 

[Berkshire]

24 minutes ago, Craig krup said:

 

I'm not saying they're doing one or the other. Chiang Mai said, "BOT spends more of its foreign currency reserves trying to keep the lid on the Baht than on any other single activity and has been doing so for the past six or more years..."

 

I'm just pointing out that when you become the bid in the market, using pounds, euros and dollars to buy baht, you drive the baht up. If you want to drive down the baht you invent some baht and use it to buy pounds, dollars and euros, so that the person you buy the hard currency from acquires spending power in Thailand and drawing rights on the Thai central bank. The Thai central bank acquires a balance sheet of pounds, euros and dollars. I'm no expert on international banking regulations, but (basically) if you want to be part of the international banking system you can't do much of that. You are labelled a "currency manipulator". Legitimate attempts to weaken the baht include lowering interest rates, purchasing Thai government debt and reducing the capital requirements for Thai banks, facilitating lending (and probably inflation). 

 

But there are people playing at being currency experts who know the square root of fanny adams. 

 

Understand.  I just don't believe there's any deliberate manipulation going on.  The Thai Central Bank only wants to avoid wild fluctuations, that's all.  There's no intent to move the baht either way.  The Pound and Euro is weak in the short term largely because of Brexit.  The dollar is strong because of the US economy and Feds raising interest rates.  It's market forces at work, on a macro scale. 

[chiang mai]

1 hour ago, Craig krup said:

 

I'm not saying they're doing one or the other. Chiang Mai said, "BOT spends more of its foreign currency reserves trying to keep the lid on the Baht than on any other single activity and has been doing so for the past six or more years..."

 

I'm just pointing out that when you become the bid in the market, using pounds, euros and dollars to buy baht, you drive the baht up. If you want to drive down the baht you invent some baht and use it to buy pounds, dollars and euros, so that the person you buy the hard currency from acquires spending power in Thailand and drawing rights on the Thai central bank. The Thai central bank acquires a balance sheet of pounds, euros and dollars. I'm no expert on international banking regulations, but (basically) if you want to be part of the international banking system you can't do much of that. You are labelled a "currency manipulator". Legitimate attempts to weaken the baht include lowering interest rates, purchasing Thai government debt and reducing the capital requirements for Thai banks, facilitating lending (and probably inflation). 

 

But there are people playing at being currency experts who know the square root of fanny adams. 

 

I'm warming to you, you may actually understand something about the process - have you considered volume?

[Craig krup]

2 hours ago, chiang mai said:

 

I'm warming to you, you may actually understand something about the process - have you considered volume?

 

I don't know enough about it. Knowing that you don't know is a good place to be 

 

Thailand's tourist industry is a massive foreign exchange earner. So what happens to all that hard currency? How easy it is for Thais - and Thai corporations - to have non-Baht accounts? In Argentina, Zimbabwe and many other places you can price goods and services in dollars, and hold paper currency. You might not be able to open a dollar account - it might not be wise to (see Argentina and the seizure of dollar deposits) - but nobody actually stops you pricing in dollars and receiving payment in paper currency from the tourists.

 

I don't think that would fly in Thailand.  I'm guessing that everything's priced in Baht and they wouldn't tolerate anything else. The banks and currency exchanges hand over baht for dollars, euros and pounds. All that hard currency ends up as foreign reserves in the hands of the central bank.  The commercial banks (again I'm guessing) can't advance Baht and hold hard currency deposits on their own account, speculating on future falls in the Baht. So the volume of hard currency supporting the Baht is considerable. They've massive duties preventing - or disadvantaging - imports, and an "export" economy in tourism which sidesteps the retaliatory duties on goods imposed by other countries. 

[mogandave]

Citi has dollar accounts, they offer other currencies as well but I do not know.

[01322521959]

Until our Mrs May gets on with Brexit there is just too much uncertainty in markets to make a prediction. Really buggered up my semi retirement prospects.

Sent from my i-mobile_i-STYLE_219 using Thaivisa Connect mobile app

[Craig krup]

16 hours ago, mogandave said:

Citi has dollar accounts, they offer other currencies as well but I do not know.

 

But would the government let a Thai run a business and constantly turn their nightclub, restaurant or taxi company earnings into dollars? Idi Amin apparently kicked out the Ugandan Asians (in part) for doing that. 

[mogandave]

2 hours ago, Craig krup said:

 

But would the government let a Thai run a business and constantly turn their nightclub, restaurant or taxi company earnings into dollars? Idi Amin apparently kicked out the Ugandan Asians (in part) for doing that. 

 

Idi Amin was Thai? Who knew...

 

I can't speak for all companies, but we keep a zero balance account. 

[JLCrab]

On 12/28/2016 at 1:51 PM, chiang mai said:

 

For US citizens using the embassy letter approach: the issue of exchange rate is moot since they are able to obtain that letter on the basis of self certification and can therefore conjuror up a sufficiently high enough number to make the exchange rate irrelevant. Other nationalities must obtain the bank letter as stated earlier.

 

It is US State Department policy that its Embassies and Consulates anywhere in the world will not verify the authenticity of any document submitted to it even a document issued by the US Government itself. Making a false statement to a US Government official can carry a penalty of up to 5 years in prison and substantial financial penalties. While the chances of anything like that happening today by making a false statement on an US income affidavit may be slim, that may not be true down the road should Thai Immigration ask for some corroboration to the affidavit submitted as the US Consular official will often remind those who are making a statement of income on the affidavit before the officer signs the document. 

[mogandave]

15 minutes ago, JLCrab said:

It is US State Department policy that its Embassies and Consulates anywhere in the world will not verify the authenticity of any document submitted to it even a document issued by the US Government itself. Making a false statement to a US Government official can carry a penalty of up to 5 years in prison and substantial financial penalties. While the chances of anything like that happening today by making a false statement on an US income affidavit may be slim, that may not be true down the road should Thai Immigration ask for some corroboration to the affidavit submitted as the US Consular official will often remind those who are making a statement of income on the affidavit before the officer signs the document. 

 

And once it becomes apparent that a significant portion of the affidavits are BS they will quit taking them

[JLCrab]

27 minutes ago, mogandave said:

 

And once it becomes apparent that a significant portion of the affidavits are BS they will quit taking them

They very well might but I think Immigration would start asking for the corroborating documents first as the US will not change its worldwide policy.

[Cook my sock]

At least the sterling baht rate is slightly better