Are the inflation buggs going mad?
Subject: RE: Questioning the inflation bulls!
"Incidentally, by how much has your cost of living in Thailand risen in the last five years in USD???" Marc Faber.
Dear Mr. Faber, You asked me, how much my cost of living has gone up here in the past 5 years. Actually that is a good question. The answer is, they have dropped.
Some core Examples.
1) I just bought a new Camry Car and the price is the same as 5 years ago, except its a much better car now -and with many more options besides better fuel economy. Example, like A/C blown right through the seats and much more. The Toyota dealership is "begging" me to finance it at 3.55% annual percentage cost, or half the rate on my high yielding Thai dividend stocks and at a lower rate then I ever remember having the option to finance a car.
2) We just had 6 window A/C's installed in our 2nd Villa here, remote control Samsung. Wall top units at 16,900 Baht each, a year ago it used to cost over 19,600 and 5 years ago they used more electric and cost close to 28,000 Baht. These are better now, with plasma cluster and silent compressors.
3) We just bought a twin door refrigerator for 39,000 Baht, this used to cost 99,000 or much more. Refrigerators have become immensely so more energy efficient over the past 5-10 years.
4) Mobile telephones, wow, these have dropped by a lot. Today for 5000 Baht I can get one with the same features as 4-5 years ago for 20,000, or more. Similar for the per minute calling cost, I can now call USA, CH or anywhere for half of what it used to cost, and on SKYPE, its free! Similar with flat screen TV's and computer monitors, which are 1/3 the price, omit less radiation and heat and use less energy. The price of any computer laptop is way down, the price of energy saving light bulbs, (neon 7 to 18 watts and they seem to last forever), or how about these new LED lights, which are guaranteed for 50,000 hours at 2 watts, they cost only 260 Baht each. Get some for around your Chiang Mai Thai style home, you will see they are fantastic and consume near no electric at all. The price of many & various consumer items, from toasters, grills, to ovens to washing machines and most tools have dropped considerably and most are better made. All mostly because of the China factor. From drinking glasses to eye glasses, are all lower or at similar prices as compared to 5 years ago.
5) BKK Taxi fares, (to go see all these listed companies & people I visit), are no more expensive today then 4-5 years ago, despite the price of oil being way up. Same with my BKK hotel fare, not a big luxury one, which is only up 7% as compared to 5 years ago, but now they include a free breakfast. My Air Fair trips to BKK are often less then before as I dare take one of the many new discount travel Airlines. (Sometimes they are delayed but then I just switch instantly to Thai Airways, which has gone up 25%).
6) Running my web site, in year 2000 the world was full of "IT dictators" charging fat fees. Today I can upgrade to the new "Post Nuke publishing" version for less then 400 US$, or 1/4 of what I used to cost. I now pay 1/4 to run our web site here, of what it used to. Besides have total control and more features….a better site then ever at 1/4 or less the costs.
7) The school fee of our daughter, is the same as it was when she entered high school, 4 years ago. There is a premium price for the English language section she is in; it has not gone up in price since the start in year 2001. My own Thai visa fees have dropped -and all is better streamlined and more efficient then ever before.
8) I like oranges and bananas, as fruit. The bananas are now free as they grow amply here on our 4 Rai of land. The price of oranges used to be 40 to 70 Baht a Kilo, now we regularly get them at 25 to 35. Even a massage at a favorite place in Phuket-town, when I have time, is the same as it was 4-5 years ago, at less then Baht for 2 hours.
9) Yes eggs and sugar prices have gone up, but they are not so healthy so I stay away. :) I like Comfiture from France, "Bonne Mama", I can get them cheaper there then in France. As I can dark 72% cocoa chocolate.
10) The price of energy and electric has gone up, but its less then 5-7% of our budget here, so is near meaningless. Especially since home appliances, car and A/C run with less electric use. Other then our maid, which just got a salary raise, I just cannot think of anything major to me, which is far more expensive today, then say 5 years ago in Baht currency. Yes, in US dollar terms things don't look so favorably -but I am not in US dollars terms here -and never believed the "experts of the West" whom kept telling us all regularly about currency risk in Baht. Au contraire the Baht has risen in value against the Swiss Frank and US$, along with Thai smaller cap value shares, which I know and so can say, way outperformed your favored investment, Gold.
It is currently in vogue in gnome loaded cities around the developed world to have bought into the self feeding commodities super-cycle theory. Indeed more then a few have bought into this super-cycle thesis, hook line and sinker -and so this is feeding a classic self fulfilling prophecy. Clearly only *investment demand for Gold*, as just one prominent example, is the single most important variable affecting its price upward. I recently examined price trends of important non-metal commodities from cotton to wheat, corn and soybeans. Cotton being the primary fiber used in clothing the world over, its price is not much higher today then 20 years ago, in US$.
And corn, wheat and soybeans are by far among the largest agricultural crops in the world and combined are by far the major source of nutrition throughout history, as they are today. If you look at the long term 20-30 year graphs it is convincing that, in US dollar terms and especially if adjusted for inflation during this time, that all these are no higher today then say a quarter of a century ago. One recent exception might be grains which just this year have seen some hefty price increases due to droughts in China and Australia -and both perhaps becoming grain importers for some years?
On the ohter hand, it just might well be, an over the years regulary witnessed temporary aberration, relative to the longer term reality. My point of all this being that the nouveau inflation bugs are on a theme which seems exaggerated and not the reality when you look at the various price pressures and in many cases recent price drops on vast services and products, coming out of China and India and other developing countries.
By the way... The one thing which has as well not gone up, are the security valuation of smaller cap, high growing Thai value shares. These are on a p/e, price to book and dividend yield -as cheap as ever here, even while interest rates remain lower here then in a very, very long time. (Maybe before I was born. :)
Still they have been an enormous wealth building story here, for many years. The only "problem" is, you can't invest millions of Dollars per selection.
Best Regards,
Paul Renaud.
Thaistocks.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Paul A. Renaud. - from Morgan Stanley, USA - to over 19 years on location,
analyzing the Thai Stock Market. -
E-mail: paulren@thaistocks.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
