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Tuesday, October 21, 2008 - Vol. 10, No. 251
Today's Trade Brings Us to Thailand, Where "Instability" Is Bringing the Economy to Its Knees - FREE - "Big Game Hunting" Webinar Shows You How to Profit - View It Now.
Today's comment is the third in a special six-part series on emerging market opportunities written by Currency Experts, Jack & John Ross Crooks.
The major stock indexes are in the red again today, following a spate of poor earnings reports. And while no one has officially called "recession" yet, if we're not in it already, it's only a matter of time.
However, if you're a trader, you can turn this bad news into serious profits - without risky short selling or buying put options. That's because the overwhelmingly bearish trend for the global economy is creating some high-probability trades in the emerging markets. In fact, in the last two months, we've made a total of six trades in the currencies of these countries, with a 100% success rate and average gains of 775%.
I do not say that to brag. We don't expect to always bat a thousand. We'll definitely have our share of losses and when they happen we'll do our best to use risk-management strategies to minimize them. However, the reversal and decline of the emerging economies is such a pronounced trend right now that it represents one of the best trading opportunities we've seen in our lifetimes.
So far this week, we've looked at opportunities in Poland and the Czech Republic and seen how their weakening currencies have already given us significant gains of 940% and 1,010%. Today, we're going to look at the single best trading opportunity for exotic currencies in Asia. Specifically, we're going to see why the Thai baht is in trouble and could provide some very significant profits for savvy traders.
Damaging Mix of Economic and Political Problems
Will Send Investors Running Out of Thailand
You know by now that emerging market currencies are like bodybuilders on steroids.
When they get their fix of liquidity (capital flowing in) they are very powerful and outperform the major currency block by a wide margin. But if their source dries up, just like a junkie, they quickly lose strength and can crash and burn.
Among emerging Asian currencies, the Thai baht appears most exposed to global market conditions, most vulnerable to the crash-and-burn scenario. Keep in mind, Thailand was ground zero for the Asian Financial Crisis back in 1997-98. It has history. And history is bound to repeat itself!
As recession digs in across the developed world, demand is swooning. This trend is already being reflected in the price of commodities. Crude oil, specifically, has plunged like a refrigerator off a high-dive. And demand in the developed world is set to taper off even further.
Simply put: Sinking demand is very bad news for the emerging market world, especially Thailand where 70% of their gross domestic product flows from exports.
And if you're wondering what country is the largest single importer of Thai exports, look no further than the United States. It's safe to say Thailand is as tied into the global slowdown as anyone.
Estimates had been calling for export growth, in dollar terms, of 15-19% in 2009. But wait - scratch that. The Thai Chamber of Commerce now expects only single-digit export growth next year. Annual export growth collapsed from July to August, falling from 43.9% to 15.5%.
And that's just the beginning of the story for Thailand...
Instability Bringing Thailand to Its Knees
Until lately Thailand had been suffering from surging inflation and a central bank scared to take action. Annual price growth ran as fast as 9.2% in June.
But since global demand has self-destructed and crude oil prices have sunk considerably in recent months, the inflation rate in Thailand has eased to the 6% range.
Still, that's not so healthy. But the fact that core inflation is moving down towards more comfortable levels for the central bank means their focus is shifting towards maintaining growth. The impact of the global credit crisis on Thailand's economy remains to be seen. But it's no stretch to expect disappointing numbers once the dust settles on this global meltdown.
But falling growth will exacerbate already high political tensions, and vice versa.
Protests between supporters of the previously ousted government and its opponents have already prompted a State of Emergency. It has since been lifted, but the government can only hope the situation doesn't escalate again.
We just learned that the previous Prime Minister, Thaksin Sinawatra, was sentenced to two years in prison for fraud. What this does is bolster protestors' attempts to oust the current government, the People Power Party.
If government officials are preoccupied with the growing political crisis, then they will be distracted from mounting economic pressures. And oddly, mounting economic woes have a way of increasing political tensions because people naturally seek scapegoats for their problems.
Needless to say, the thought of yet another change of government is reason enough for foreign investors to flee Thailand. Mix it with a deteriorating export market and you're shaving at least a percentage point off of GDP, possibly more.
Can you say capital flight? We think it comes soon.
Our sole Thai baht trade has produced 220% gains in about 2 ½ months. We expect many more profitable trades on the baht as the crushing reality of a global recession weighs on the export-dependent currency like a boulder.
Tomorrow, we'll be traveling south to the emerging-market of South Africa - but more specifically - we'll discuss the economic factors responsible for recently handing us an 890% gain on the rand.
But in the meantime...
Discover the Advanced Strategies Necessary
To Hunt Financial Mammoths!
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You see, it sickens me to see how many hard-working folks let their retirement be held hostage, at the fate of the stock market...or worse...unethical executives amidst the worst financial crisis in the last 100 years. But, that's the beauty of "exotic" currencies - recessions, terrorist attacks, market crashes, bank failures, bailouts, and so on only provide opportunity for bigger and faster gains.
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Pretty impressive, right?
Well, yes it is, but what's even more impressive - thanks to the recent breakthroughs on the topic of "predictability" - is the fact that these gains were made on just their FIRST six trades (all winners )...360% ...220% ...940% ...890% ...1010% ...1230%!
While this kind of profit flies well outside of most people's "comfort zone"...those who consider themselves "Big Game Hunters" should absolutely consider implementing these strategies.
You can join me for the "Big Game Hunting" for Traders Webinar by clicking here right now.
But please, this invitation is not for everyone.
God knows, everyone deserves the opportunity to make gains like these, but this is the REAL world...and no matter how unfair...I believe these strategies are not for the beginner just looking to get started.
This will be a one-time ONLY event - not to be repeated - where true "Big Game Hunters" will learn the necessary details to hunt "financial mammoths!"
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Trade Smart,
JACK CROOKS, Co-Editor / Exotic FX Alert
P.S. This will be a real "eye-opener" for anyone who thought it was impossible to amass 4,650% worth of gains in just 71 days - yes, in this market! But we can only give you access to this video for a limited time, so view it now, to ensure you don't miss out!
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