Baht goes down and the Baht goes up

I well remember when the Baht collapsed in the late nineties. One week I was getting 35 baht for every pound sterling I proffered to the bank. The following week I was getting 70.

At the time I was staying in the Shangri-La, to me still Bangkok’s finest five-star hotel, in a modest room, if there is such a thing there. As soon as the Baht collapsed I was able to move to a Suite on the top floor and it worked out cheaper than I had been paying for the modest room, because of the currency devaluation.

I was also able to buy a condominium which, because of the crisis, was reduced in price by 50 per cent, never mind the additional gain on the currency. Heady days indeed but as the wise old saying goes, “This too shall pass.”

Today it has well and truly passed and the pound sterling is heading back from 46 baht to the pound at the time of writing, towards the late nineties valuation of 35.

I suppose I could live my life in fear and trepidation but another wise saying says “Live in faith not in fear.”

Should I tighten my belt and stop eating at good restaurants and start eating again at the many excellent noodle stalls throughout the country. I could always cancel my annual vacation and tell the wife to stop her yoga lessons and cancel her golf club membership. I could keep my car for an extra year and cancel my subscription to True television and the internet (If no Premier League this year I will anyway) All of these actions would be fear inspired and a classic case of reacting rather than acting.

This type of behavior though would be typical of an expat who keeps all his savings in a bank account. His or her reasoning for keeping their money there is they are afraid of a stock market collapse which would devastate their lifestyle. Well guess what?

Their worst fears have been realized. Powerless over the small interest their savings are accruing in a “safe” bank deposit their lifestyle has suddenly suffered a huge setback by the revalued Baht and the effects on their portfolio are worse than a market collapse.

It will probably take years for the Baht to reverse and start devaluing again.

Another huge problem is that even Ben Bernanke, chairman of the Federal Reserve, has publicly stated the plan is to keep interest rates low for the foreseeable future. What that means for bank deposits is that they make pace with inflation in the West but it will be impossible for them to grow at a pace to outstrip currency revaluation.

One of the most common questions I get is, ”Why is the Baht so strong?”

I don’t know the answer to that question but what I can tell you is that once your lifestyle begins to be influenced by circumstances beyond your control it is time to take stock of where you stand. This may sound like Anthony Robbins speak but it’s time for you to start acting instead of reacting.

If you think about it logically after the biggest market collapse in living memory in the past few years, it is not surprising that over the past year many emerging market stocks have grown at over 100 per cent in the past twelve months.

It is possible but much more likely that anyone who has a little courage moves away at least a healthy portion of their savings into a balanced portfolio will prosper in the months and years to come.

You may not realize it but once you select half a dozen funds within a bond your selection is not written in stone. If you get nervous you can sell your selection and hold your cash on deposit to buy again when you think the worst is over.

People are fond of telling me that the bank guarantees their capital. I have to say that it gives me a little pleasure to tell them that bank deposits will guarantee to really hurt their lifestyle.

Wake up and smell the daisies