Event: Stashaway Academy - Market Outlook 2019

A Wednesday evening talk at the newly-completed Frasers Tower on Cecil Street.

As I approached the ground floor lobby, the public announcement system played a pre-recorded message that the cause for a fire alarm (presumably triggered just a few moments before) was being investigated. For office workers at the end of their workday, there was no cause for panic, and an intermittent trickle exited the building, headed in various directions, no different from a typical workday routine.

Alas, a long line had formed at the security counter, with more than 20 people waiting to obtain a visitor pass. My guess was that most people were here for the same event. I joined the line. Progress was excruciatingly slow, but I still had full intention of attending this talk which I signed up for a while ago. My patience was worn gradually as ten minutes of waiting in line only yielded a few metres of forward movement in the human queue. One of the event organisers apologetically appealed to the participants for their patience, and his frustration was palpable from his comment to the effect that this was likely the first and last time they would use this space for any of their events.

Finally, there was some executive intervention - presumably some negotiations with building security that playing it by the book wasn't working out very well, and that something had to be done to remedy the unacceptable situation. We were allowed to enter the barrier gates leading to the lift landing area, where batches of us were then ushered into commodious high-ceiling elevators bound for The Executive Centre, a mixed-use space on the 17th floor of the building.

At risk of sounding slightly quixotic, it was perhaps an apt metaphor of an investment paradigm that would be pointedly relevant to the subsequent talk -- the fire alarm representing the constant barrage of media claiming to foretell the impending arrival of the next big recession and absolute financial apocalypse; the slow exodus of tired office workers being those who experience the misfortune and jadedness associated with selling low after buying high, figuratively coming back down to the ground (and literally as well, from their lofty offices high above).

The metaphor flows easily into the time spent waiting in line for security -- this represents the patience demanded of all who seek to be contrarian investors, the minority group who look to enter the building (investment opportunities) when everyone is being told by the fire alarm (the media) to leave. And when the time was right, the gates opened, the bulls came charging in (you got that), and all of us went up, up and up ... to level 17, where we were rewarded for our patience and willingness to stick to earlier convictions with a good sharing session in how to look at 2019 by Stashaway.

It serves little purpose for me to regurgitate what Freddy Lim, Stashway's co-founder and Chief Investment Officer, had to say, given that I've already painted the picture of the paradigm with the preceding paragraphs (double score for alliteration), but I'll leave you with three quick thoughts:

Unlike what you might be led to believe if you follow the media closely, we're not in a recession. Not yet, at least. I'm intending to follow the Conference Board's Leading Economic Index closely through 2019, and for the latest update the trend points towards continued positive growth, albeit much-curtailed from the earlier half of 2018 as well as much of 2017. Key takeaway: (my own, and not something mentioned by Freddy) Reading news to get an idea of what is going on is NOT the right way to do it; instead, read news with a strict goal of formulating your own opinion of what is taking place.

Understand your risk and your needs. This is super difficult to determine, since each of us have individual goals and financial situations. It's tedious, bothersome, and often under-appreciated (somewhat like going for a regular health check-up), but it's something all of us should do on a regular basis. Unlike a health check-up, it's difficult to find resources (people as well as information) to help you formulate an assessment of your risk and needs. Too many purported financial advisories are marketing and sales people in disguise, and good-quality financial advice is often not available or practical to those of us who don't have multi-million dollar portfolios to manage. My advice: read widely, start practicing (you could set up a paper trading account if you feel that helps you understand how investment things work in general), and draw lessons. Being clear of your goals will help you be cognizant of your risk appetite, and should guide your investment decisions.

The future is, ultimately, unpredictable. This was a point that Freddy brought across - that this evening's session was not about forecasting or predictions. Instead, he guided the audience towards a way of thinking, which I feel is quite difficult to hone in an age where there is constant media attention on just about everything. Freddy did have one slide showing the federal funds rate curve, from today out to around late 2021 (if I recall correctly). While the slide was used to illustrate a different point, it did strike me that we have nary a clue if the federal funds rate in 2021 was really going to be anywhere close to projection A or B or C or D. Heck, as at 9 January 2019, we hardly know how many rate hikes there are going to be in 2019 itself - the last we heard was probably two hikes, and then now we hear that there may be scope for a pause (or not?) Even in late 2018, there was uncertainty over whether there would/wouldn't be a final hike for the year. Come 2021, will it still be Jerome Powell as Fed Chair, Donald Trump as US President? Okay, we can be sure of one thing: President Xi in China, but other than that, really everything is anyone's guess, and everyone can guess can anything.

So it's much more useful to spend one's finite mental energies developing a way of thinking, than developing fine-grained predictions. When I picture that federal funds rate curve, the only part of the curve that really matters to me is the next 12 months or so. Beginning from the second half of this subset (i.e. around 6 months out), the line widens out into a triangular-shaped area, representing a cone of possibilities. The future is likely to lie somewhere within this cone, but as we go further (two or three years from now), that cone funnels out wider and wider, covering an increasingly larger vertical span of the entire graph, such that by the end of three years, the cone is so wide that it's practically useless for any kind of point-precision projections (which is precisely the point - oh, some word play there), but it's intuitively useful to illustrate the instructive uncertainty surrounding any kind of longer time horizon projection.

And I'll leave you with these thoughts for now, cheers and out!

Right to the end

You know how they say, the game ain't over till the fat lady sings?

The previous post on 20 December 2018 could be a good example of that.

Portfolio sank into the red (!) almost right after the post, and was almost 6% down for the year, until a brief recovery in the last moments - literally between Christmas and New Year's Eve, pushed it back up into the green.

Whew!