Strong baht may finally weaken, according to Bloomberg

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gera
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Re: Strong baht may finally weaken, according to Bloomberg

Post by gera » Wed Jan 01, 2020 4:18 pm

Jun wrote:
Tue Dec 31, 2019 7:50 pm
there is always the option of investing the spare income in Asia
What does it mean investing the spare income in Asia? If it means investing in Asian stock markets, there is much higher risk in dropping 30-50 percent of Asian stock markets than one's own currency ( unless your currency Iranian pound or Venezuelan bolivar). The only true investment strategy is maximal possible diversification of assets.

Current drop of US dollar versus Thai baht was very sharp and I believe temporal. But whether I am correct or not my reaction will be to temporarily stop spending US dollars in Thailand (including using US credit cards in safe places like supermarkets). I have plenty of other options including the simplest one:drawing funds from my Thai bank account.

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Jun
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Re: Strong baht may finally weaken, according to Bloomberg

Post by Jun » Wed Jan 01, 2020 10:51 pm

gera wrote:
Wed Jan 01, 2020 4:18 pm
Jun wrote:
Tue Dec 31, 2019 7:50 pm
there is always the option of investing the spare income in Asia
What does it mean investing the spare income in Asia? If it means investing in Asian stock markets, there is much higher risk in dropping 30-50 percent of Asian stock markets than one's own currency ( unless your currency Iranian pound or Venezuelan bolivar). The only true investment strategy is maximal possible diversification of assets.

Current drop of US dollar versus Thai baht was very sharp and I believe temporal. But whether I am correct or not my reaction will be to temporarily stop spending US dollars in Thailand (including using US credit cards in safe places like supermarkets). I have plenty of other options including the simplest one:drawing funds from my Thai bank account.
That is a matter of opinion.
Also, frankly I couldn't care less if the markets dropped 30-50%. Often when that happens, the loss is recovered very quickly. What I'm interested in is expected returns over the next decade, after ignoring short term volatility. Due to current high valuations in the US -high PE and high CAPE, some of the expert analysts I follow are predicting higher returns for Asia and EMs over the next 7 years.
For example:
https://www.gmo.com/asia-pacific/resear ... mber-2019/

As for the hedging, with 45% of my portfolio in Asia plus good proportions in other markets, when the pound fell sharply in 2016, the value of my portfolio measured in pounds went up sharply, therefore preserving my purchasing power in Asia. That's how It's supposed to work.

Also, with some western leaders borrowing excessively and building unsustainable debt piles, I think diversification reduces my risk.

Of course if anyone prefers to spend most of their money in baht, whilst choosing to invest solely in another country, that's their choice. They just have a big unhedged exposure to exchange rates.

Incidentally, there are some Asian funds and trusts that pay dividends of 3-5% approximately. For all the stock price volatility, the dividend payments have just kept on growing.

For anyone who can choose where their assets are invested, options exist.

For anyone whose main asset is a traditional government or company backed defined benefit pension, that's usually a high quality lower risk asset, but with less opportunity to protect against currency fluctuations.

I presume there are some board members in each category ?

gera
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Re: Strong baht may finally weaken, according to Bloomberg

Post by gera » Thu Jan 02, 2020 8:18 pm

If one keeps almost all his assets in stocks, there is a good chance to lose everything and never recover. This actually happened with a lot of people in 2008. They simply needed to liquidate what was left of their portfolio to survive and could not wait another five years to recover. Very bad strategy for a retiree.
By the way, dollar did recover somewhat and now above 30 baht again.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by Jun » Thu Jan 02, 2020 9:07 pm

gera wrote:
Thu Jan 02, 2020 8:18 pm
If one keeps almost all his assets in stocks, there is a good chance to lose everything and never recover.
I agree to an extent. Which is why I have a proportion of assets in cash (3 currencies, 2 of which are Asian), gold, platinum and short term US treasuries.
Along with most other members, I am old enough to have seen a few bear markets. Liquidating the stocks is the last thing I want to do then.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by rocket » Fri Jan 03, 2020 12:44 pm

That’s probably what happened to some who cashed out their stocks during the 2009 crash. They might not have had to but we’re so worried and swore they would never get back in again. I feel bad for them because they would have doubled their money if they just held.

Markets usually recover their loses over time, even over 50% drops. But will the next crash be different? Stocks climb the “wall of worry” all the time, always seems like something to be concerned about. The big concern for Americans should be the loss of control of the World Reserve Currency. The buying power drop would be enormous. The market is breaking out now and with the re-election of Trump almost assured were heading higher. But stocks are expensive by all measures. Diversity into Asian markets would seem smart.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by Jun » Fri Jan 03, 2020 4:05 pm

rocket wrote:
Fri Jan 03, 2020 12:44 pm
The big concern for Americans should be the loss of control of the World Reserve Currency. The buying power drop would be enormous. The market is breaking out now and with the re-election of Trump almost assured were heading higher. But stocks are expensive by all measures. Diversity into Asian markets would seem smart.
Agreed on all points, with caveats.
The end of the dollar as the reserve currency is something to keep in mind, even if I suspect It's not imminent. Historically, global reserve currencies have eventually been replaced and there is no reason to believe the USD is the exception. The US government keeps borrowing excessively and creating more dollars. Some countries have therefore been buying gold instead of dollars.
However, at present, there is no obvious successor. Top on the list is the Chinese RMB, but they have currency controls which rules it out for now. The Euro has a fundamental structural flaw, as one currency for a collection of diverse economies. Eventually a country like Greece or Italy will leave the Euro and reprice all debt in a local currency. Then the precedent is set.

I agree that the US stockmarket look expensive. The best performers have been some of the big tech stocks. However, historically out of the 10 largest cap companies in the world, most are not in the top 10 a decade later.

Under such circumstances diversifying into Asian markets is attractive. Particularly for anyone with expenses in Asian currencies.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by Dodger » Wed Jan 22, 2020 4:25 pm

Looks like Bloomberg was right.

The baht weakened to 29.99 to the U.S. dollar today.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by 2lz2p » Wed Jan 22, 2020 7:20 pm

I sent funds by Transferwise this morning - the exchange rate was 30.41 to US$1. Also, I sent transfer around 9am and it arrived at 2pm - first time it hasn't taken at least 1 day to arrive - usually 2 or 3.

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Re: Strong baht may finally weaken, according to Bloomberg

Post by Jun » Wed Jan 22, 2020 10:29 pm

I was reading in the Bangkok Post that one of the banks is expecting the baht to strengthen this year. All complete nonsense, since the current exchange rate is already representing a consensus view of market participants. So for every participant expecting a stronger baht, there will be one expecting a weaker baht.

Well, that's a slight simplification, since Goldman Sachs taking a view will probably move the rate more than 2LZ2P making his Transferwise transaction. I really mean the money betting on a stronger baht should be balanced by the money betting on a weaker baht.

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