Thailand: An Extraordinary Story of Stability

I'm not going to pretend to have all the answers, but there are some things I can say. First, the Thai political system has an extraordinary underlying stability that may be unmatched in all of Asia.

Thailand was the only Asian country never invaded, occupied, or colonized. The 20th century, so wretched and bloody for so many countries, was very good to Thailand. They sent a few soldiers to the Allied side in World War I. They saw no fighting, but got Thailand a seat for the Versailles Treaty. In World War II, the Japanese respected Thai sovereignty — up to a point. The Japanese Emperor had ties of respect to the long-serving Thai monarchy.

The Japanese did demand that Thailand declare war on the U.S. But what happened immediately afterwards speaks volumes about how Thailand works.

The Thai government duly sent a cable to its ambassador in Washington ordering him to declare war. But the palace quietly ordered the ambassador to go to the teletype machine, tear the message off before anyone else saw it, lock it in his desk and proclaim to anyone in Washington who asked about the rumor that something so absurd as a Thai declaration of war on the U.S. could never happen.

Indeed, ties between the U.S. and Thailand go back very far. Formal relations were established in the Jefferson administration. American trading ships were assured a safe harbor in Thai waters at a time when most other Asian ports were closed to them.

During the Civil War, the King of Siam (as Thailand was called until 1932) sent President Lincoln some war elephants. They may not have been used, but Lincoln very much appreciated the gesture as his official correspondence shows. In 1862, Lincoln was a man who needed all the foreign friends he could get.

This King, Rama IV, was the one immortalized in the movie The King and I. He is a much-beloved king and even today his picture is found everywhere in Thailand. Incidentally, we stayed at the seaside villa of one of the descendants of this king — on the left-handed side (Rama had one “official” wife but many others). This descendant, Mom Tri (or Prince Tri) three years ago turned his villa in Phuket into a stunningly beautiful small hotel (27 suites). It's the kind of place you almost don't want to tell anyone about, but you can find out more about it at www.villaroyalephuket.com.

In any event, even though the bloodless revolution of 1932 took absolute power away from the monarchy, the present king (who was born in the US and has reigned since 1946) is by far the most important and beloved figure in Thailand. Moreover, many times he has exercised real power behind the scenes. You may have heard that Thailand recently had a military coup that toppled the elected president. This sounds bad on the face of it. But the more you understand Thailand, the more sense it makes.

First, this president, a telecom billionaire who in effect bought his position, had been seen to set himself up as a kind of co-king taking upon himself duties that traditionally had been the monarch's. This did not sit well with many Thais.

More importantly, he had been acting to stir up delicate national and religious differences in the country. Back in 1902 Thailand annexed land in its extreme south that had been a Malay sultanate. It was and is an Islamic area, while the rest of Thailand is Buddhist and Thai (as opposed to Malay). If you ask me, this was a mistake, but no one asked me. In any event, there have been separatist uprisings in this area that have become quite bloody, with almost 2,000 dying in the past few years. The deposed Thai president had sought to stir up race and religious hatred toward this region to the extent that the whole area threatened to explode.

The Thai military, with the almost certain assistance of the king, decided that this president was bad for Thailand and had to go. It was a completely bloodless coup done when the president was addressing the UN in New York a few weeks ago. He was allowed to keep his money, but is not able to return to Thailand.

The military has taken over, but a visitor would never notice it. In fact, the effect of this change has been to signal to the Thai-Malays that their concerns will now be listened to. They are “ruling” with a light hand and have set up a political government more in keeping with traditional Thai values.

The fact is that both the stock and currency markets have realized this. Money continues to pour into the country. The currency has been rising so fast that the central bank has been trying to talk it down.

Thailand is still a cheap country, but it is now much more expensive than its southern neighbor Malaysia. The fact that the Thai baht has risen strongly when other Asian currencies have not is a cause for concern. Most countries want to have a cheap currency policy — this is one reason why I am bullish on gold over the longer term — and don't want their currencies to become too strong.

However, it is not clear what the Thais can do to make their currency fall. They have a historically open economy, again unlike all of its neighbors.

For these reasons of stability, openness, and cheapness, I remain long-term bullish on Thailand.

Regards,

Chris Weber

Editor’s note: Starting at 16, Chris Weber turned $650 earned from his paper route into $1.8 million in cash within a decade through a series of remarkable investments. Since then, he’s parlayed that wealth into a multimillion-dollar fortune, thanks to his ability to recognize developing trends and make timely investments.

He records his thoughts on life and investing through his personal newsletter,The Weber Global Opportunities Report. You can learn more about Chris’ travels, investments, and newsletter by clicking here.