Marc Faber Limited May 26, 2003
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THE GLOOM, BOOM & DOOM REPORT ISSN 1017-1371 A PUBLICATION OF MARC FABER LIMITED MAY 26, 2003 Do Great Investment Opportunities Knock on Your Door Only Once??? It is much more easy to have sympathy with suffering than it is to have sympathy with thought. Accordingly, with admirable, though misdirected intentions, they very seriously and very sentimentally set themselves to the task of remedying the evils that they see. But their remedies do not cure the disease: they merely prolong it. Indeed, their remedies are part of the disease. Oscar Wilde, The Soul of Man under Socialism (1890) INTRODUCTION from the list of most livable cities. people’s homes. The danger in According to a survey conducted by Thailand isn’t violence, but poor As some of my readers may know, Mercer Human Resources driving. Most drivers in the north almost three years ago I moved my Consulting, Zurich has the world’s don’t observe road rules, and few family to Chiangmai, where we have highest quality of life, ahead of even have a driver’s licence. Each remodelled an old Thai house by the Vancouver and Vienna. In the US, year during Sonkran (the week-long river that runs through the city. Now, San Francisco was the top-rated city Thai New Year’s festival during my office building is also 99% (placed number 18), while New York which people throw water at each completed (in Thailand, nothing is was rated number 44 and Los Angeles other, and which is actually a lot of ever 100% finished) and this is the 53. (African cities occupied 17 of the fun in Chiangmai), around 600 first newsletter I have written from 20 bottom spots, with Congo’s people are killed in road accidents — this new office. (See the photo on my Brazzaville having the worst quality more than the total number of SARS website, www.gloomboomdoom.com.) of life (though I am told that its fatalities worldwide! I ride I still maintain a small office in Hong nightlife holds some promise). I motorcycles, so it’s rather dangerous Kong, but since I wanted to mention this in case some of our to have a bucketful of water, concentrate on reading, studying and readers in the US have decided to complete with ice cubes, thrown in writing, I decided that, when not move to another country that offers a my face while riding my bike during travelling, I would spend more time better quality of life, lower living the festival. in the north of Thailand. costs, more security, and, possibly, “So, why don’t you drive a car?”, Chiangmai is Thailand’s second- even a stronger currency (see below). some readers, concerned for my largest city and is famous for its In terms of personal security, health, might wonder. Well, one beauty, since the old town is full of Luxemburg scored the highest in a night a few weeks ago, my wife was colourful temples. The old and related survey by Mercer, followed driving home from a party. She was picturesque city is located in a closely by Bern (the old capital of on a highway heading into the city quadrant, whose sides are about a Switzerland where people are reputed centre and driving at about 50 miles mile long and surrounded by a canal. to be extremely slow), Geneva, an hour. A car came at high speed Chiangmai has a far more pleasant Helsinki, Singapore, and Zurich. from behind her and crashed into her climate than the south, since it is Incidentally, Chiangmai seems to be car. And who was the driver? A situated in the mountainous part of rather safe as well, as long as one totally drunk senior police officer, the country. In summer it is hot, but doesn’t do any local business or have who not only didn’t pay for the relatively dry and cool at night. (I confrontations with one’s business damage he’d caused, but wasn’t even never use air-conditioning.) From associates. Because food is so reprimanded by the police officers September until March the weather abundant and inexpensive in the who came to the scene or by his is similar to Southern California. north of Thailand, the people are all superiors. (I advised my wife not to Granted, Chiangmai is unlikely ever well-fed and rather comfortable, and pursue the case even though she had to displace Zurich, where I grew up, probably too lazy to break into other some “influential connections”, since it doesn’t pay to have any enemies in virtually being given away. My wife, interesting, not only because of the a country where the law is rather to whom I have been married for 22 magnitude of the price decline vague.) years, recently came home with 50 (Tokyo real estate prices have The climate and beauty of the city roses, which she had bought for just declined every year since 1992 — aside (and the traffic, which is rather $1 from a place next to the hospital altogether by around 70% — with challenging and certainly not where she works. Dinner for two in a the fastest decline in a decade boring), what attracted me most to Thai restaurant with two large bottles occurring last year), but also because Chiangmai was its low price level of beer costs about $12, and you can if a property declines by so much in following the Asian crisis of 1997/98. get a decent room in a pleasant hotel price, even the most tenacious The property that we now own came for about $15 a night. (First-class “Liebhaber” homeowner will be on to the market in a forced sale at hotels in the city, however, cost tempted to walk away from his that time. We bought the about $50 a night; and the luxurious property and let the bank repossess it! approximately 8,000 square metres of Regent, located relatively far outside This is something that real estate land and the three old Thai houses the city, charges about $300.) A lenders should consider when they that were on the land, which is in the friend from London, who recently lend close to, or even more than, city centre, for about US$250,000. visited with us, bought an entire 100% of the property value to We then had to spend some money container-load of furniture, which he homeowners and homebuyers in the on redoing the old house, following shipped to Marbella in Spain, belief that prices will always go up which I built the office (which is because prices in Chiangmai were and never decline. In this respect, I around 25 metres in height) for about about a quarter of what they were in recall an occasion in 1996 when a US$300,000. (Half the cost was for Spain. According to The Economist’s real estate developer in Manila, teak pillars and floors, as termites Hamburger Index, a Big Mac in where I was delivering a presentation, don’t eat teakwood.) A similar piece Thailand costs US$1.37, compared to invited me to his house for dinner. of land (size and location) with a $4.52 in Switzerland and $2.71 in the After dinner he took me aside and home and office would cost at least US. (Other low-cost countries as told me “between you and me” and 20 times that in any developed measured by this index were: China: “in strictest confidence” a “little country or in Hong Kong, Singapore, $1.20, the Philippines: $1.23, Russia: secret”, as he called it. According to Tokyo, Taipei or Seoul. $1.31, Malaysia: $1.33, Egypt $1.38, him, property prices in the To give our readers an idea of the Argentina: 1.40, and Hong Kong: Philippines would always go up. Well, current price level in Thailand, let’s $1.47.) as I mentioned above, they are now compare Bangkok office occupancy Healthcare in Thailand is also very the cheapest in Asia and my real costs with those in London. inexpensive. A friend of mine had to estate “friend” is no longer in According to a recent survey by CB have a minor operation on his hand. business… Richard Ellis, which covered 159 In Thailand the operation cost 85% An important reason for the low cities, Bangkok’s total occupancy less than in Hong Kong and was price level in Chiangmai is that it is costs — including service charges and carried out to his full satisfaction. (We not as popular a holiday destination local property taxes — were US$3.37 still like the stock of Bangkok Dusit as Phuket, located in the south of the per square metre per month. This was Medical Services — BGH TB.) country. Moreover, most foreigners one of the cheapest in the world in The reason for the low price level prefer to have a holiday residence on 2002, despite a 7.3% increase over in Thailand, and in most other Asian the beachfront in the south of the the previous 12 months. (Manila’s countries, is quite simple. Thailand country. This accounts for the office occupancy costs were Asia’s experienced a collapse in its property relatively high prices one finds in most inexpensive, at US$3.34 per market after 1997 and the Thai baht Phuket. There, even medium-quality square metre.) By contrast, the West lost almost half of its value at the homes (not beachfront properties) End of London was the world’s most time. Consider the following. A sell for around US$500,000.