Grapes and Good Values

Last night reminded me of our off site team retreat at Chateau Élan just outside of Atlanta last year.   We took a private tour of the winery and our guide was a very well-spoken gentleman in his thirties who was extremely knowledgeable and personable.  During our tasting we were all asking him what line of work he used to be in and he told us that he used to be a financial advisor.  Everyone in the group starting having a little fun at my expense inquiring about my possible early retirement.  I related that I really do not plan to ever retire, just slow down over time in that I can’t think of anything to do that I enjoy more in that my avocation is my vocation.

We had a great time at the ladies wine tasting last night sampling wines from all over the world.  We hit a bit of a snag late in the game when our sommelier was not able to make it and I had to fill in.  It was not as difficult to provide color on the wines in that I was very familiar with most of the ones we were tasting. We tried more expensive whites and reds as well as some others that we could consider value wines.

Choosing a great wine is much like choosing a great investment.  We typically do not want to skimp on quality because that could ruin the experience.  As long as we always choose top quality wines and investments there is much less that could go wrong.

The key factor is the price we pay.  As the ladies found out last night, many great wines are much less expensive that you may think.  We can also find great investments for much less than you think they should be selling for.  We always like finding these great values and like to enjoy them as long as they remain great values.

I shared my favorite wine, a red zinfandel from Lodi California.  Unfortunately this wine is no longer as good a value as it used to be in that the price has crept up over the years and it costs about twice as much as it used to.  I am always on the lookout for a less expensive wine that I like better, but have not found one yet.

It was also interesting to note that the best quality wines at the best prices can be found all over the world.  If we restrict ourselves to just one area, we greatly diminish both the quality and the value that can be found from a wide variety of both wines and investments.

I plan on keeping my regular job, but it was fun to try my hand at wine instruction.  Please do not try to call on me for any future wine events to do anything other than taste however.

Last week the only stock indices that were positive were the Nasdaq and non-US Stocks.  The Dow hit an all-time high on Tuesday, but then fell back and finished the week lower than where it started. Reits and gold continue to outperform other types of investments with bonds also continuing to make gains, making up for last year’s under-performance.

The yield on a 10-year treasury note is now close to breaking below 2.5%.  The last time we were at these levels was last October during the government shut down.  The stock markets hate uncertainty, but the Treasury market tends to benefit from it.  We are heading into somewhat uncertain territory for the summer months and the elections in November.  We’ll have to see what transpires.


One of our contemporaries in Washington D.C. brought this research to our attention a few days ago.

The Leuthold Group, out of Minneapolis, Minnesota, looked at the performance of small-cap stocks over the past 35 years and found that a double-digit drop from its intra-year high was actually fairly common.  Based on their findings, the Russell 2000 fell by more than 10.0% in 15 straight years between 1998 and 2012.

You might want to read that again. That’s 15 consecutive years where small-cap stocks experienced a ten percent correction.

Stocks don’t move in a straight line, so if you had a strong enough stomach to sit through European debt crisis of 2010 and the U.S. credit rating downgrade of 2011, then you can weather this pullback as well.

Some of us have taken to reducing portfolio volatility by getting more conservative during these summer months.  We reduced our exposure primarily to small companies and emerging market equities a few weeks back.  We have been holding on to the larger companies in our portfolios but remain cautious.  If the danger signals start flashing for these larger companies, we may start paring back here as well.

Just a little food for thought to go with your wine.

Our Women’s Wine Tasting pictures have made it to facebook, feel free to check them out here.

Joe D. Franklin, CFP is Founder and President of Franklin Wealth Management, and CEO of Innovative Advisory Partners, a registered investment advisory firm in Hixson, Tennessee. A 20+year industry veteran, he contributes guest articles for Money Magazine and authors the Franklin Backstage Pass blog. Joe has also been featured in the Wall Street Journal, Kiplinger’s Magazine, USA Today and other publications.

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