Westerners and Their Money

[Dodger]

I see the U.S. dollar (one of the strongest currencies) strengthening incrementally against the Thai baht (one of the weakest currencies) over the next 3 years.

Thailand hasn't been invaded by anyone for the past 80 years, although tens of billions of baht are being funneled to the generals in the military. At the same time, the cost-of-living has increased significantly due to higher taxes placed on utilities and gasoline which is shrinking an already microscopic middle-class. Two percent of Thailand's population control over 85% of the money, and foreign investors aren't fooled into thinking that the recent elections in Thailand resulted in the return of democracy. Manufacturing industries, trade export and tourism will unfortunately all take a hit.

I hope to see an exchange rate of U.S. $1 to 35 Thai baht in the not too distant future.

[Jun]

That's one view on the THB-USD pair. Here is another.

The Thai economy has been growing steadily under the generals, the balance of trade is very positive & the baht has been strengthening. There is some government borrowing, but quite a bit of it is to fund infrastructure projects and the accumulated debt is under 60% of a growing GDP. The kind of ratio many western governments long ago gave up trying to keep to.

The other half is the US, borrowing like hell under an idiot president who doesn't seem to worry about insolvency. Current accumulated debt is about 105% of GDP. The balance of trade is significantly negative. The talk is of the Fed cutting interest rates, which tends to weaken currencies. The gold price has been rising, as central banks are now more inclined to buy gold than hold USD.

Short term, IF there were some kind of geopolitical event, not doubt the USD might strengthen as it's the reserve currency and still seen by some as a safe haven. Long term, with all the debt and deficits, I would not be confident on the USD. [ditto GBP]

Caveats:
1 If any of us (including me) had unique insights into predicting currency movements, we should be already so rich that we shouldn't need to worry about it. I am not confident in any view I may have on currencies.

2 It is unwise to rely on hoped for exchange rates or our personal exchange rate predictions.

Those relying on personal savings, investments and self managed pensions can de-risk things to an extent by diversifying where the money is invested. For example, matching the currency profile of your investments to that of your expenditure profile, or in my case, anticipated expenditure profile. Since I am too risk averse to putting a high proportion into Thailand, instead I have a high proportion in Asia. Near 50%.
Incidentally, many Asian stock markets are on a lower PE ratio than the US.

Those living almost entirely on a nice safe indexed pension from their home country have a different scenario. Whilst the pension is nominally more secure and less likely to be affected by stock market moves, the currency risk is enormous. If this were me, I would be aiming to build a little nest egg, invested in Asian assets to dampen out the movements.

Finally, despite all the risks, most of us have had it really good. Compare where we are now, with, for example, living in Poland in 1939. Or Venezuela right now.

[Undaunted]

I see the U.S. dollar (one of the strongest currencies) strengthening incrementally against the Thai baht (one of the weakest currencies) over the next 3 years.

Not sure where you got your info on the baht, it has in fact been rather stellar against most Asian currencies and is positioned to stay that way.
When I first moved to L.O.S. the exchange rate against the dollar fluctuated between 38-39 and during my time here went as low as 28.....All things considered I see no reason for the baht to weaken as its strength seems to have had virtually no affect on growth. I am not am economist but I see no reason for the dollar...GBP....or Euro to appreciate against the baht at least for the foreseeable future and one way to evaluate what will happen to the dollar is its relation to the price of gold (gold up dollar down) and at the moment gold is about 2,250 the highest I’ve ever seen it. I think in the next few years there is no reason for the dollar to strengthen and it wouldn’t surprise me if the dollar breaks the low of 28 to the baht.

[Dodger]

Jun and Undaunted,

The points you make certainly make sense.

I am, by no stretch of the imagination, a financial expert or economist. Conversely, I have received no formal education beyond grammar school and have never have seen the inside of a high school let alone a university. I went to work full time at age 14...am self-taught...learned a lot of what I know on the streets...and don't pretend to be anything different. Having said that, please take my comments on subjects like this with a grain of salt.

What I see is that Thailand has opened too many doors too quickly to the Chinese without considering the long-term risk. I believe this will have a backlash effect on Thailand's economy beginning in the next new few years. The Chinese, who already control the majority of money in Thailand, run circles around the Generals on the PM's staff when it comes to complex business strategies, long-term financial planning and risk assessment, which will play strongly in China's favor and incrementally weaken the Thai baht. This is what I see happening. No logic other than what I see with my eyes.

The U.S. regardless of having a complete idiot at the helm, should see a strengthened dollar incrementally over the next few years due to the results of tough trade deals (I know what you're thinking), continued growth in the manufacturing, research and service sectors, and a resurgence of the steel industry due to higher taxes placed on foreign imports. S & P Dow stock exchange indices recorded record breaking results last week and the U.S. unemployment rate is lower than I've seen it in my lifetime. Again, I'm no financial expert, but the U.S economy appears to be strong and getting stronger.

[Undaunted]

Jun and Undaunted,

The points you make certainly make sense.

I am, by no stretch of the imagination, a financial expert or economist. Conversely, I have received no formal education beyond grammar school and have never have seen the inside of a high school let alone a university. I went to work full time at age 14...am self-taught...learned most of what I know on the streets...and don't pretend to be anything different. Having said that, please take my comments on subjects like this with a grain of salt, as my predictions when it comes to things like global finance are purely instinctive.

What I see is that Thailand has opened too many doors too quickly to the Chinese without considering the long-term risk. I believe this will have a backlash effect on Thailand's economy beginning in the next new few years. The Chinese, who already control the majority money in Thailand, run circles around the Generals on the PM's staff when it comes to complex business strategies, long-term financial planning and risk assessment, which will play in China's favor and incrementally weaken the Thai baht. This is what I see happening. No logic other than what I see with my eyes.

All things considered you’ve done very well for yourself! The only thing that I think can be very harmful to the baht is the very weak property market, as noted here before there are some 500,000 empty condo units in the kingdom and more new condos are coming on the market every day.....The banks finance the bulk of these projects, without the income from the sale of these condos the developers will be unable to pay back their loans.....Multiple this by probably thousands of projects and at some point something has to give.

[fountainhall]

I am no more an economist than you, Dodger. But I don't follow one issue in your analysis. So the Chinese control the majority of the money in Thailand. Agreed. And the likelihood is that this will increase. Agreed. That being the case, is it not in China's interests to see the baht kept at least at its present level. They surely do not want their assets to depreciate.

Unless Trump and Xi can come to some agreement on trade soon, my wonder is: what will the Chinese do with all the $1.3 trillion + of US Treasuries they hold in their $3 trillion foreign exchange reserves? I have read that they are already diversifying so that if there is a $ crash or substantial weakening, they will not lose too much. But with so much US denominated debt (only the US Federal Reserve holds more), China cannot quickly offload it without resulting in a depreciation of the US$ and/or a sharp spike in US interest rates. The former is not in their interest. Similarly if the US just continues to print money through its historically low interest rates, China again suffers unless it further reduces the value of the Yuan.

I suppose there as many answers out there as there are economists!

[Undaunted]

The only connection I can see at the moment with China is that the Thai ruling class are Thai-Chinese nothing else.

[fountainhall]

As I understood Dodger's comments, he was referring not to Chinese individual investors but more to Chinese government investments. I can understand the problems that will occur from an overheating of the property market. But in talking about Chinese officials running rings around Thai politicians and civil servants, these would hardly be individual Chinese, I expect.

[Gaybutton]

What I pay most attention to is the exchange rates. How the exchange rates got to where they are doesn't interest me very much beyond curiosity because there is nothing I can do about that anyway.

https://www.scb.co.th/en/personal-banki ... tml#fxrate

If you look at the current rates, you can see the US dollar is just slightly above 30, so we're right back where we started about 2 or 3 years ago when the rates almost dropped below 30.

These are the worst rates I've seen in a long time, and even before the rates got as lousy as they are now, for far too long they haven't been much better.

[mahjongguy]

at the moment gold is about 2,250 the highest I’ve ever seen it. I think in the next few years there is no reason for the dollar to strengthen and it wouldn’t surprise me if the dollar breaks the low of 28 to the baht.

For the record, I agree. I'm long on the THB. Holding plenty already and intending to buy more.

But, talking about the dollar, you said gold is at 2,250 when in fact it's 1,435.