Your Survival Guy just finished reading Climbing the Vines in Burgundy: How an American Came to Own a Legendary Vineyard in France about Alex Gambal’s journey in the wine business. Not that he needed to do it. He wanted to. He left the family commercial real estate business and with his young family became entrenched in all things Burgundy.
It’s a detailed account but not necessarily a happy one. As with nearly all entrepreneurs, it involves sacrifice. One small comment that stood out to me was how the locals like the store-bought chicken not the much sought-after poulet de Bresse. You can read about the battle of the chickens back in the states, here.
Another takeaway is how Gambal doesn’t take wine too seriously. And that’s a treat. Like investing, keeping it simple is always a good idea. I’ve always been of the mind that the best wines are the ones you like. It reminds me of my training at Sig Sauer Academy (read here, here, and here) and how I’m often asked which guns are my favorite. “The ones you own,” I say.
Speaking of ownership, if you look inside 401(k) plans today (and I do) you’ll see two things: too much company stock, and target date funds. Here’s my take on the former. If your financial life depends on your company, why load up more on the company stock? That’s having too many eggs in one basket. I don’t like to see more than a third and preferably less in company stock.
And with target date funds, where the allocation is automatically adjusted as you get closer to retirement, the overlap in what these funds own is astounding. It’s my belief that if and when a big correction comes this will be what catches the masses off guard. That and 529 plans that do the same thing. Too much overlap.
Here’s another. Imagine as a worker you agree to be paid someday in the future. That’s at the core of stock-based compensation which has made many people a fortune. But will it continue?
I believe we’re going to see a shift where investors, not management or employees, will demand a cut of the profits in the form of dividends. That’s how investing worked for decades until the mid-80s or so. And what’s ironic is the cash needs before the 80s were enormous. Now, in a service economy cash needs are much less and yet the amount these tech companies keep from common shareholders is gluttonous and borderline arrogant. In the past almost half of a stock return was the dividend. Show us the money.
Get your fixed income house in order. Don’t let inertia prevent you from acting. We are in the midst of a generational opportunity. Will it get better? Not my concern. Take action and take the good over the perfect. Too many investors stay on the dock hoping for a perfect day. Let me know when it arrives.
Action Line: When you’re ready to talk, let’s talk.
