Making Money Recognizing Patterns by What You See in Person, and Trusting That- Why I am Shorting the Thai Baht

by | December 9, 2019

We see trends- a change in consumer direction, shifting political winds, or noticeable aberrations in a friend’s behavior, and somehow we ignore the data because it counters our bias.

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It happens to everyone.

A personal example: my friends were well well ahead of me when it came to switching to iPhone and iPads, and despite seeing them fall to Apple like dominos, because I wasn’t making the switch; I didn’t purchase Apple stock and missed the big initial run-up.

What we see on the ground, a collection of peoples’ experiences, often reflect broader trends that are taking place/ will start to emerge as more common in society.
That doesn’t mean two occurrences on the same block of garden gnome purchases will mean a sudden proliferation of ugly decorative statues around the world, and the need to immediately buy into Gollum Industries, but once we unearth a certain number of independent experiences/anecdotes, toss in some research, we can make a pretty good educated guess and anticipate the fortunes of a company/ a trend in society.

Which leads me to Thailand; where I have been residing for two of the last three years, and what I see as the likely direction of their currency.
When I was here at the end of 2016/start 2017, the US Dollar was strong and got me 36 Thai Baht to the dollar. This is at the high range of the historical range, making it very cheap for me to live in the country.
No doubt, other tourists saw what I did and started pouring in, as did businesses and bigger money interests, migrating to where their money had greater purchasing power. As demand increased for the Baht, it rose in value, meaning that my dollar purchased less.
Today it is at near the historically low range- a dollar purchases just over 30 baht.

What Does that Mean for the Country

One of the main economic drivers for Thailand is tourism, and for good reason; the place is gorgeous, safe, and the people are very friendly. (My recommended two week Thai itinerary) Right now every business from Phuket in the South. to Chiang Mai in the North (both tourist hotspots) complain they aren’t seeing the same levels of business, due to weak demand. It’s not a secret that travelers are eschewing visiting Thailand and heading to Vietnam instead.
Add in tightening visas restrictions further decreasing visitors, and the business community is reeling. (So much so that the head of the company I know that runs programs for education visas made a special trip to the Thai consulate in Laos, to inquire what the hell was going on, and try to wield some influence.)
The government here is not unresponsive to their people. There has been political unrest the past few years, and they certainly don’t want to cause any more hardship or instability than needed.
My prediction is the government will start to hear the cries of anguish and try to weaken the baht by lowering interest rates/ quantitative easing (printing of money,) which coupled with the already shifting demand, will send the baht back to historically normal levels (around 33 baht to dollar.)
I think it is a clear case of a high percentage chance the Baht goes decreases in value rather than continue its ascent.
The reality on the ground here in Thailand, the Thai baht is too strong.

The Takeaway
Regardless of my specific example, the idea is to be aware of what is going on around you, find enough data points, let’s call them dots on a page. A couple dots are just that, dots. Get enough dots on the page and it starts to form a clearer and clearer picture. Obviously the more data you have the better, but far better to act on something before it is clear to everyone else and there is universal agreement on the direction the trend will take as you always pay a high price for a clear/rosey consensus.
And while I recommend limiting exposure, don’t be afraid to take shots when you have a good educated guess/intuition on something. That’s how you’ll get ahead financially.
That’s why I am shorting (betting on a decrease in value) of the Thai Baht.

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