Last December, I asked whether ultra-low rates here would lead to bubbles abroad. I facetiously said to ask the:
- Hong Kong real estate developer who is leasing his finished space at $9000 USD per square foot
- Australian mining exec, whose company’s market cap just shot up by 200% from a Monday to a Wednesday
- Arabian sheik who has grown weary of having things dipped in platinum
- Brazilian sugar cane producer, who has run out of space for cash in his vault
- Commodities trader in London who is left with the classic dilemma of Aston Martin or Rolls Royce
- Gold mine operator in Mexico who now feels obligated by outrageous fortune to double his offerings to the church collection plate
- Shanghai investment banker who is running out of companies to take public
- Russian art-collecting oligarch who is considering a purchase of the Sistine Chapel’s ceiling, just because he can
Today we have fresh evidence of this phenomenon over at Bloomberg, courtesy of a story by William Pesek on scary IPOs coming out in Asia…
Thailand may offer the best example of a curious phenomenon: how the Federal Reserve’s ultralow interest rates are benefiting Asia more than America. Excess central-bank liquidity explains the disconnect. Asia is getting loads of it, U.S. assets are getting little.
This hot money is making waves in Asia. It’s pumping up growth, real estate and stocks and, according to many economists, breathing new life into the “Asia decoupling” narrative. Asia hasn’t decoupled from the West so much as it has mutated into a giant net catching money emanating from Washington, Frankfurt and Tokyo. The result may be huge bubbles, the next wave of which could be dodgy stock offerings.
Where there is “free money” and a Brewster’s Millions-like competition to put it to work, there will be recklessness. As surely day follows night.