Dear Members, Hindsight is always 20/20. Paul Tudor Jones, a famed hedge fund protagonist in a recent interview sighted that “All roads lead to Inflation” referring to currency debasement as the only solution to the quandary of exceedingly high levels of debt globally. There are also studies telling us that the purchasing power of the USD has seen a 30% diminution since the pandemic and whether we like it or not, the USD is still the King currency, the least dirty shirt in a basket of soiled laundry. Hindsight also tells us that Gold has appreciated against the Ringgit by 50 times in 50 years and that trend has already accelerated. Gold is a constant. It is the Ringgit and most other FIAT (paper) currencies that have depreciated. Regardless, the two liquid insurance policies against inflation and currency debasement; Gold and Bitcoin continue to signal a more inflationary future ahead.
So, how is this all relevant to our Club. We have cash reserves of circa RM400m. How do we protect the purchasing power of our precious money? I was previously of the view that we didn’t need to because the appreciating value of our portfolio of non-golf course land would provide that hedge. Afterall, isn’t desirable land the ultimate hard asset? The Companies Act 2016 introduced guidelines that imposes conditions for Companies Limited by Guarantee (CLBG) like ours. These constraints could limit our flexibility on any dealings relating to our real estate portfolio. The Committee has sought legal counsel to navigate this issue.
So, how else can we preserve our purchasing power. The first is to ensure that we put a cap on our recurring operational expenses and deficits. It becomes almost impossible to cut back once an expense has been “institutionalized”. Headcount is a case in point. Hiring and firing is both legally difficult and demoralizing on our team. To this end, The Committee has capped budgeted headcount for 2025 at the same level approved by the floor for Budget 2024. It’s a fine balancing game keeping expenses in check but ensuring a better club experience for members.
According to REHDA, construction material prices increased by some 10% in 2023. Reports sight sand, glass and concrete inflating at 13-15% in H1 2024. Aluminum, timber and steel are similarly affected. New minimum wage, EPF policies and subsidy rationalization will not help
The second way to hedge is to front load as many of our capital projects as possible. If we believe that upgrading our golf course, renovating the poolside, building Paddle Tennis or more Pickleball courts, creating a world class gymnasium and improving our F&B infrastructure will benefit members then we should proceed without delay. Hindsight from the covered tennis courts is a lesson on how such delays and cost increases deliver sub optimal projects despite the best efforts of Committees past. The product we see today bears only a passing resemblance to what was presented to members in 2017. I believe we are now facing the same cost pressures for our Golf Course upgrading. For any of our current or future projects, if it takes 6 months to find a 5% saving, that’s essentially wiped out by the cost of waiting. Wavering to deliver the perfect project will only deliver a sub standard one. We don’t need Paul Tudor Jones to tell us what to expect. We have already seen that movie. Hindsight is always 20/20. We need to learn and learn quickly. Speed really is of the essence.
Raymond Yeoh
Captain
