Unless you are long in the tooth like me, few will remember the 1992 movie A Few Good Men. For those who do, they might remember Tom Cruise and Demi Moore respectively in their dashing uniforms as US Navy lawyers.
However, the actor who stole the show was Jack Nicholson who played US Marine colonel Nathan Jessup and screamed the memorable line, “You can’t handle the truth!” at Cruise who outwitted him into admitting to a crime.
Was the colonel really the villain in the movie? Was he merely trying to reach the same objectives but with different methods? Or was he simply upholding old values and virtues that were no longer relevant?
Regardless, many of us reminiscing about the good old days through rose-tinted glasses always seemed to think things were hunky-dory once when, in fact, for each period and generation, there were trials and tribulations that we somehow overcome — more often with luck than skill.
This September marks the first year of this column. The three-parter started with “Whose fault is it anyway?” which tried to explain why the local capital market was seen to be in the doldrums. And why we needed just a bit of self-belief to see the opportunities that exist all around.
This column then morphed into a cocktail of explanations of the bigger world (including the metaverse). It tried to widen the perspective of investors and market watchers and challenge highly risky postulations of forward market views from time to time (fortunately mostly correct). It too called to question conventional wisdom and the herd mentality and emotions that often drive investment decisions that we come to regret.
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A healthy dose of scepticism underpinned with recognition of the motivations of the actors behind it, temperance of the Fomo greed, and a strong sense of personal responsibility are the foundations of these rants. Even if they have not made anyone a penny, I hope they have helped folks avoid losing pounds.
A gathering of Dragons
Last week, thanks to a friend and ex-colleague who is now a crypto custodian, I joined a gathering of the living legends of mostly retired stockbrokers who are CEOs and executive directors of firms past and present. We were hosted to a private dinner at one of the homes that just got sold for a rumoured five times the purchase price.
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There we reminisced about days of yore and moaned about the regulators (I can do that now since I retired last year). At some point, the evening descended into a meeting of the Stockbrokers Association of Singapore (SAS), given how, among the attendees, there were chairs and vice-chairs of various vintage.
No minutes were taken of the meeting and this column is unlikely to spill any beans. But what struck me was that for the mostly retired folks and a couple still in their seats, the passion for the local stock market remains as strong as the blood flowing through their veins.
Collectively, our time in the industry probably exceeded two centuries. But none of them looked their age, perhaps because they have all also been co-conspirators with me in charitable pursuits. Time and again, I have asked and they have obliged, whether it was the SGX Bull Charge or other mental health charities that I had chaired, or even in my present new responsibility as chairman of the Community Chest.
Our respective market biases were all on display. There was the traditional trader providing liquidity, the internet trading pioneer, the niche retail broker, the high-rolling masters of the local penny stock market, the corporate financier of equity capital for generations of companies through the years, and the market operator. Inevitably, the conversations about the world we live in were juxtaposed with what to do with investing now.
The way of the Dragon
At one end of the spectrum was a sagely titan who mostly lives on his yacht. In the heady days of super bull runs, he has already found his proverbial pot of gold at the end of the rainbow. He was also old enough to remember Paul Volker, the inflation-slaying US Federal Reserve chairman who served between 1979 to 1987. In recent years, he has grown sceptical about the easy cash and inflation of what he dubs “nonsensical assets”. Inflation is now back at multi-decade highs and economies are again tottering. Given the potential economic travails, he is trying to figure out if his assets parked with a large European Bank will be safe from the risk of rehypothecation.
Although the markets suffered from a correction in the first half of the year, the likes of Jeremey Grantham expect them to continue expanding until a “superbubble” is formed before bursting in an “epic finale”. Similarly, as this column had noted in August, this summer’s S&P500 recovery from June’s nadir by 16%, which confounded experts, was in fact a bear rally. Cryptos, which rallied some 40% from June, have also settled back down. All this while, the US Fed is not done raising interest rates, as it prioritises fighting inflation over markets and jobs.
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Where then do you park your cash if you are not nursing the bruises of paper losses in more speculative assets despite our warnings? Since they can call their private bankers, none of the gentlemen gathered could be found queuing at Standard Chartered or UOB last weekend to open new accounts for fixed deposits.
Real estate appears to remain a bedrock. As inflation and rates rise, real assets, especially in good locations in well-governed countries (like Singapore) seem a good bet. A particular Blackstone US property fund, which was up 30% in the last year including dividends and USD appreciation, seemed to be a common holding among a few. Although REITs are beaten down as rates rise, there are gems among the 40 or so to choose from.
Meanwhile, mid-range collectibles like Rolex watches seemed to have lost ground as demand fuelled by nouveau riche crypto millionaires disappeared, given how their digital paper and NFTs became “byte-sized”, to pardon the pun.
However, niche collectibles like classic cars and high-end wine, continue to accrete. In the case of wine, one could always drink it, even if tokenisation on licensed digital asset platforms may make these more accessible. It is worth reiterating that if going into exotics, stick to regulated platforms or risk getting scammed from deals which sound too good to be true.
Discounting doubts
When all were said about macro, geopolitical and interest rate risks, or whether Xi Jinping would lurch to the left after October, with one even declaring Singapore faces an existential risk, the few good men in the room had one thing in common. They all like a good discount and are actively looking for value. The strategy of overweight Singapore continues to pay as the Straits Times Index stubbornly holds up for the year, although the rest of the world struggle with volatility and a net downward bias.
While investors in US markets stayed up late and suffered from anxiety attacks, local companies, big and small, continue to make headlines on M&A, privatisation and — in recent weeks — divestment. Sembcorp Industries’ one-year return has almost doubled as they divested brownfield assets in India and continued defying market gravity as they greenfield. Meanwhile, The Straits Trading Co continues to unlock value by distributing $0.50 of its ESR holding shares in specie.
These few good men aside, there are a couple of truths that many cannot handle. First, time in the market is important. But what is more important is staying invested as timing the market is impossible. Remember always: Buy when everyone is selling, especially at discounted prices to asset or cash value. That leaves the only question — when your payday is arriving?
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s lifetime achievement award. He serves as chairman of the Community Chest Singapore
