Chart, bank deposits : alert… businesses under cash flow stress ?

(Source Bank Of Thailand, table FI_CB_012_S3)

Let’s have a look at the deposits (in commercial banks) of businesses : outstanding values in billions THB per month and % of growth year on year.

Deposits = time deposits, saving deposits and demand deposits.

We can see a clear (and worrying in my opinion) pattern on the last 3 months (june, july, august)… decline of the total and drop of the % of growth y-o-y.

I see only 2 possible explanations :

-1-businesses are euphoric about their current situation and their perspectives, therefore they’re not afraid to invest, even by using their cash on hand… πŸ˜‰

-2-businesses face a cash flow stress… because the economic conditions are worsening : they sell less and/or their costs increase and/or banks cut their credit lines and/or they face defaults in payment from their own customers…

No need to tell you which hypothesis I prefer…

I should add that credit to businesses (outstanding balance) continues to grow (I’ll post later a chart about credits), at least until august (last datas available).

And personnaly, on the field, I see more and more businesses asking for longer credit terms… because of the worsening economic situation.

Add to this, the local political crisis and of course the striking global financial crisis (it’s now impossible to compute all the astonishing news we get every day)… it’s lead to only one outcome : we are running toward the wall, at speed light.

The lovers of the boiler room, the cheerleaders, the blissfully ignorants and all the other morons… can eat their hat. The party is about to end.

8 Responses to “Chart, bank deposits : alert… businesses under cash flow stress ?”

  1. 1 Gloomy Observer 11 October 2008 at 3:41 pm

    Separate issue but do you have any idea why the THB is not dropping vs. the USD like other currencies? Other than it is Asian, I see no value in it…exports are falling, no government, and interest rates are going to be cut very soon….any views?

  2. 2 FDL 12 October 2008 at 1:38 am

    TC I like that part when you said “it’s now impossible to compute all the astonishing news we get every day”. Maybe it is because first we are told the US financial mess was in the billions; then it grew into a global crisis in the trillions. No wonder people are zeroes-dazed by the news.

    Here are two more figures to drive anyone to the zeroes-insanity asylum:

    Total derivatives contracts outstanding according to the IMF is US$1.125 guadrillion. Quadrillion! (we will need all the toes and fingers of the whole world to figure out how many zeroes Quadrillion means!)

    Total world GDP however is only US$54 trillion.

    Bill Gross at PIMCO did a simple calculation in January 2008 at his famous article “Pyramid Crumbling”. The total amount of CDS (credit default swaps of today’s notoriety) contracts was at $45 trillion (at that time). The historical default rate is 1.25%, or $500B CDS contracts will be in default. Assuming a recovery rate of 50%, the resulting loss is $250B alone. (VERY OPTIMISTIC loss and recovery estimates at that time when housing/financial market were not so wobbly yet).

    One financial editor named Bill Lindo wrote: “Putting a number to the size of the derivatives market is virtually impossible, but putting a number to the value of the derivatives market is easy β€” ZERO!”

    (During the 1930’s depression lots of bankers and Wall Street speculators were jumping from skyscrapers to cure their stress. It is not very unlikely that we will see a repeat . . . not of the depression but of the jumpers.)

  3. 3 thaichris 12 October 2008 at 3:16 am

    FDL – derivative contracts are casino games. They don’t add any real capipital to the revenue creating industries (except the financial). And like in any casino, only the casino owner (the finacial institutes) win.

    The industry will not loose any money, the professional gamblers from the banking industry will be payed with tax money and the middle class in Europe and USA (n absolute minority compared to the worlds population) will suffer.

    I think, this crisis ight speed up the the switch from Euro-American dominance of the market to an asian dominated economy.

  4. 4 ThaiCrisis 12 October 2008 at 5:43 am

    Indeed, the issue of the THB valuation is… baffling.

    Here is my theory, with one reminder : exchange rates are not absolute. Everything is relative.

    -since the coup, Thailand is “on the side”. The hot money was careful to avoid the THB. Small country, small currency, inane gvt, lunatic generals, capital controls in december 2006… so why taking risks to play with THB when you could play with AUD, NZD with a 100 % success rate ?

    -meanwhile, AUD, NZD, EUR went to the roof (for different reasons).

    -Those were sure bets… But THB was a no bet at all. πŸ˜‰

    -So now, the situation is changing because we have entered into deleveraging times, bubbles are exploding.

    -So mechanically, we see AUD, NZD, EUR falling versus THB.

    -but we shall remember : it’s not a sign of love and confidence for the THB.

  5. 5 Bkk Businessman 16 October 2008 at 1:57 pm

    It’s worthwhile to bear in mind that for the last few months (about 5 or 6) banks have been offering considerably better rates of interest on deposits held in individuals’ accounts than on deposits held in corporate accounts. This might well account for the apparent considerable reduction in cash deposits held by companies. Would not a prudent businessman simply switch cash from his business account to his personal account?

  6. 6 ThaiCrisis 17 October 2008 at 1:25 am

    I should have put online the other charts… for individuals. I will do it next week.
    You’ll see that deposits for individuals didn’t increase a lot.

    I should add that for companies it’s rather difficult to switch money, at will, from business to personal accounts. πŸ˜‰

    I mean we do have some rules to follow, right ?

  7. 7 Bkk Businessman 18 October 2008 at 2:19 am

    What rule forbids a business lending it’s director or shareholders money? Provided it has the consent of the directors of course. I agree that for listed companies that is a different matter, but even then in Thailand there are some funny goings on.

    It would be interesting to establish what percentage of value-added in the economy is attributable to listed companies, but I don’t believe one could obtain a reliable figure given that so much of Thailand’s economy is black/grey which is not picked up in GDP figures.

  8. 8 Stratacus 27 December 2008 at 7:58 pm

    There’s no argument that at the end of the day the house wins! When individuals, not committees have full spectrum of financial power to make decisions with a person’s lifetime investments at the drop of a hat, you must expect the possibility of a disastrous outcome.

    Case in point, the present situation, particular individuals were given tremendous latitude to place bet’s with (OPM) other people’s money. When you board a commercial aircraft and go on vacation or a business trip you expect that the airline carefully selected and trained the pilot’s flying a plane full of 300 plus human beings.

    It’s comes down to risk volatility– If you want better odds checkout Vegas, at least what happens in Vegas stay’s in Vegas. We’re taught to believe mutual fund managers seek our best interest’s, but seriously– when an ETF gives back returns of 30-50% I would imagine no one had complained. First you get the money, then you get the power, then you get the woman. . .

    Hey, visit my web blog it’ll be a blast! Have a great New Year!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

%d bloggers like this: