For the last few months, I have been going after work (that is for me around 3 am in the morning) to a rather unique place in the world, which to my knowledge only exists in Chiang Mai. It is the Muay Thai Loikroh Boxing Stadium, which consist of an elevated boxing ring that is not surrounded by ascending spectator galleries, which are common everywhere else in the world, but by a large number of bars.
The venues are all extremely casual and consists of bars, girls (and other species), a pool table, and tiny toilets, which are used by everyone irrespective of sex or other criteria. Smoking (including Cannabis) is permitted everywhere and the atmosphere is totally relaxed with no one caring what other people do. The girls tend to be excellent pool players and, therefore, lots of people come and enjoy games of pool with female companions. The girls supplement their incomes by going out with their customers to watch the moon.
By law, bars in Chiang Mai must close between midnight and 1 am, but because the stadium belongs to one of Thailand’s richest men the Muay Thai Boxing Stadium stays open for as long as its bars have customers (usually until 5 am).
The reason I am bringing up this unique stadium is that in no advanced economy it would be permitted because it would fail to satisfy the parameters of every single government agency involved in the leisure, sport, entertainment, and hospitality industry. Not to mention all sorts of hypocritical human rights organizations and useless left-leaning NGOs. [If you think that the government’s bureaucrats are useless, you should meet some of the NGOs’ staff.]
Most girls do not receive any salary but they are paid commissions on the drinks they manage to obtain (extort) from the patrons (usually around 50% of the lady drink’s price). A girl I happen to know who is actually a very nice person when sober, managed to extract from her customers 46 drinks in one night, believe it or not. This is actually the absolute record I have heard of. Lately, business has been very slow and many girls ‘sadly’ do not even get a single drink in one night.
In the July report, I mentioned that I hold a Thai share portfolio because I lived in Thailand. I noted that whenever, even I could not see how the economy of a country could improve, a noticeable improvement was usually just around the corner. Therefore, I forced myself to add to some Thai stock positions including TTW Public Company (TTW TB), WHA Utilities and Power (WHAUP TB), Siam City Cement (SCCC TB see Figure 7), SCB X Public Company (formerly Siam Commercial Bank – SCB TB), TMBThanachart Bank (TTB TB), Kiatnakin Phatra Bank (KKP TB), and Bangkok Bank (BBL TB).
Since July we got a new government (the opportunistic and business friendly Thaksin clan), a few favorable corporate developments, a flurry of extremely negative research reports by foreign brokerage firms (I absolutely love this negativity), but at the same time, we had a sharp advance among bank stocks with a huge increase in trading activity.
As I explained in earlier reports, I consider an improvement in financial stocks to be a precondition for a bull market. Noteworthy as well, is the fact that there has been a sudden meaningful improvement in the performance of financial stocks in other emerging economies including banks in Malaysia, Indonesia, Brazil, Chile, etc.
I continue to hold precious metals and actually added to my positions, however, without much enthusiasm. I am saying this because gold shares have most recently performed horribly, considering that the gold price is close to an all-time high. I am expressing this opinion as a large holder of physical gold, and also – albeit to a lesser extent - of mining companies. My expectation is that fund managers whose strategy is nowadays mostly based on momentum generated by the traditional and social media, will one day wake up from their slumber of delusions and realize how undervalued gold assets are relative to financial assets.
As I mentioned before, I am deeply concerned about the current asset inflation coming to a bitter end, with painful consequences for the real economy. I outlined the reasons for my pessimism in the July and August reports entitled Stock Markets climb to the highest Peak but cannot dwell there Long and Multiple Turning Points in Asset Markets!
My preferred asset class remains precious metals, whereby I am mindful of the words of our late friend Leon Levy whom I am paraphrasing: “For most people, the most dangerous self-delusion is that falling asset markets will not affect their specific asset, which they bought out of a canny understanding of value.”
Once investors wake up from slumber of complacency and the dreams of getting rich quick, they will need a lot of booze and tobacco to calm them down. I am, therefore, increasing my positions in Philip Morris (PMI), Altria (MO), British American Tobacco (BATS LN), Imperial Brands (IMB LN), Diageo (DGE LN), Thai Beverage (THBEV SP), Budweiser Brewing Company APAC (1876 HK), and Tsingtao Brewery Company (168 HK).
Finally, with respect to the expected fed fund rate cuts by Mr. Powell, my readers should remember the words of Ludwig von Mises who observed in Human Action (1949), that:
“True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression.” In the same Magnum Opus he noted that, “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
I hope my readers had an enjoyable summer. The next few months are likely to be less enjoyable, I am afraid.
With kind regards
Yours sincerely
Marc Faber
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