To my surprise, the Bangkok Post published in early May 2024 a reader’s letter entitled A failed State? The letter to the editor of the Post referred to a column written by a professor entitled: “Thai police graft highlights bigger issues.”
The failed State letter to the editor stated that, “The characteristics of a failed state include, but are not limited to, the presence of an insurgency, extreme political corruption, overwhelming crime rates suggestive of an incapacitated police force, an impenetrable and ineffective bureaucracy, judicial ineffectiveness, military interference in politics, and consolidation of power by regional actors such that it rivals or eliminates the influence of national authorities........Measuring up Thailand against these defining characteristics leads to a litany of despair........According to these metrics our beloved country is in urgent need of a radical makeover” (emphasis added in each case).
MF: I mentioned above that this the letter to the editor was published to “my surprise” because strong criticism of the government would normally not be published in a failed state. Furthermore, as a resident of Thailand for more than 20 years, and although I agree with much of the content of the letter, I find the criticism to be in some cases overly harsh. The author writes about “extreme political corruption.” I agree that Thailand is likely to be more corrupt than any of the least corrupt countries in the world (Denmark, Finland, New Zealand, Norway, Singapore, Switzerland, Sweden), but it seems to be in good company among emerging economies by being rated to be slightly less corrupt than Indonesia, the Philippines, Turkey, and Mexico. As an aside, the most corrupt countries in the world are in ascending order according to Transparency International: Haiti, Nicaragua, Equatorial Guinea, North Korea, Yemen, Syria, Venezuela, South Sudan, and Somalia.
Currently, I feel uncomfortable about the US equity market and I believe a substantial downward rerating of equities could occur as both the economy and corporate profits are likely to disappoint. Furthermore, I suspect that value could outperform growth, that foreign equity markets could begin to outperform the US, and that foreign currencies and precious metals could, following a correction, increase relative to the US dollar. At the same time, because of more pronounced economic weakness, it is possible that equities (with few exceptions) underperform US Treasuries.
I still feel that Hong Kong and Chinese stocks offer excellent value. According to Augur Labs, “underscoring the degree of undervaluation, the Hang Seng Index hit a Cyclically Adjusted P/E (CAPE) of just 10 earlier this year. That is a level at which major bottoms have occurred for a host of stock markets, including the U.S. in 1974 and 1982.”
In my opinion, the global financial system is extremely fragile and will require far more money creation. At the same time, our Woke society will inadvertently create more inflation with unproductive regulatory measures and fiscal deficits, which will increase as far as the eye can see. This, all at a time when international tensions are likely to increase and lead to additional economic and military confrontations, which will boost the demand for commodities and precious metals. I regard precious metals and large mining companies to be an excellent hedge against further military actions around the world.
Lastly, my readers should remember the words of the renowned fund manager Bruce Berkowitz who opined:
“Difficult markets help us succeed as investors. While claiming no predictive ability to recognise or time the next recession, we are not afraid of periods of slow business and weaker markets. Only in adverse environments do owner-orientated companies with proven track records and strong balance sheets sell at bargain prices. Tough times allow the prepared to attractively deploy capital, setting the stage for future growth.”
With kind regards
Yours sincerely
Marc Faber
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