Vol. 1 No. 23 something wine and beer are increasingly having in common (adding mea culpa)

Mea Culpa: TB had details of the SAB/Miller – AB ImBev were wrong and have been corrected. In the same sectionit was Heineken, not Stella Artois that purchased 50% of Lagunitas Brewing. Mea maxima culpa.

Also note that TB welcomes your comments both positive and negative – just make them constructive.

The Management aka TB

First, let me make it clear that TB favors small wineries, especially family wineries. That is not to say that bigger ones are bad but the more people who become involved, the less the passion, and passion is a key element in doing everything to make a remarkable wine. What TB loathes is corporate ownership of wineries. You cannot run a winery like a typical division of a corporation, yet it is done all the time and there are different time horizons: longer term for a family owned winery; short-term for a corporation. In addition to wineries, I find similar comparisons with small wine shops (these focus mainly on wine although they may carry hard liquor too), and the chains which can be as big as Beverages & More, and Total Wines.

A new concern is online wine sellers. Why? Because they may be clearing out someones stale inventory and thus able to sell it at a low price, yet because they bought it at a distress price, make a very large profit…and don’t forget shipping costs! But the important thing is they sell either on a rating (with so many out there far too many are getting 90 ratings and even if it is deserved you might not like it). Remember, you are your own best wine critic! What Robert Parker or Trader Bill thinks is irrelevant…unless you are speculating in wine, something else TB loathes as it drives the cost up to you, the consumer.

Now I will give you three examples of family-owned contrasted to corporate-owned:

Taylor Wine Company, one of the oldest in the U.S. and located in Hammondsport, New York. Originally it used native American grapes such as Catawba and Concord. When other growers had success by bringing in the vinifera grapes from Europe, eventually they decided to do likewise. Then they were bought out by Coca-Cola, who apparently didn’t understand the lead time between planting new vines and getting the production from them to be profitable. In the end, Coke filed bankruptcy for the winery, one with a very long tradition even if you didn’t care for the style.

Robert Mondavi Winery, founded in 1966, became the benchmark for large producer California wines until it was surpassed by…yep…smaller family-owned vineyards. In addition to the joint venture on Opus with Baron Phillipe Rothschild, they began partnering and buying out old family owned wineries in Italy with great reputations for quality. Ironically, the film Mondovino showed them in a bad light, having deviated from their roots. Produced in 2004, it was about the time the Mondavi empire peaked and eventually was bought out by a corporation, Constellation Brands, now a powerhouse but before that famous for one wine My Wild Irish Rose…need TB say more?

TB is not gloating about what happened to Mondavi since it was the first winery he visited the year he and his wife were married, 1969. TB had a vertical collection of their Cabernet Sauvignon from inception, 1966, with at least two bottles from each year (the 1966 was purchased for $4.50!). After the sale, interest was lost and one vertical case was donated to the University of Nevada for an auction, and later the other sold at a Butterfield auction. Because of the corporate ownership, TB has not purchased a bottle from the winery since.

Lastly, what the title of the blog is about. How many of you remember the original Samuel Adams? A true craft beer, but IT grew until it and Yuengling became the two biggest selling craft beers in America…if you can still call them that…TB can’t, not at 4 million barrels a year each! Same goes for Stella Artois one of TB’s favorite’s and now available on tap in most restaurants and bars in America. Is that what a true beer drinker wants to see? By the way, if you want to read what one bar owner has to say about them go to Open letter to Sam Adams

Now to the point: do you recall when Miller Brewing was sold to SAB (Stella Artois), and later Anheuser-Busch was bought by the Dutch company AmBev? Frankly, I never cared much for either Miller or Bud, but they were very popular among the masses and that is what counts, right? Well, if you own the company it is.

A couple of months ago it was announced that Heineken bought a 50% interest in Lagunitas brewery, a beer TB thoroughly enjoyed and still likes, however, several people have said, and TB felt, that it doesn’t taste as good as it once did. Furthermore. both Heineken and Beck’s suffered when they began bottling in the U.S. and thus increased production. Big production will do that. But the big issue now is the AB ImBev – SAB/Miller buyout for $106 billion, yes, billion! In addition, the breakup premium is $3 billion, meaning if, for any reason, the deal doesn’t go through, AB ImBev is out that much! This smells to me like there is something assuring them that it will go through despite them being the #1 and #2 beer producers in the world. Some legislators here have voiced concerns or even dissent, but it is the EU that will decide. What this means for consumers should it happen, and TB will bet it does, is control over beer prices globally, something the Sherman-Antitrust Act was supposed to prevent and the EU has fined some of the large U.S. tech companies for their practices, yet here are two in their own backyard and hardly a peep.

This is what TB does not want to see in the wine industry, Gallo, and Franzia Wines (two-buck Chuck), have a huge monopoly on wines but not on premium wines. Fred Franzia says “never pay more than $10 for a bottle of wine.” Are we to take it that the price may go to somewhere above the $5 it is already at?

A local fellow blogger doesn’t believe you should pay more than $20 for a wine, and despite his self-admission that he has never taken a wine class, he rates them and then deducts for every dollar above ten. By that test, wouldn’t everyone buy a Chevy rather than a Porsche? TB’s just sayin’…

So here is what TB thinks: the aforementioned blogger is correct that people can not drink a $25, $30, or more every night of the week. So buy something cheap to drink during the week that you like. But be adventuresome on weekends and try some better wines…preferably with the help of a small wine shop that is knowledgeable and listens to what you like in a wine.

There is very little bad wine being sold today as good wine is forcing it out and people are becoming more aware of what they like. France, converted something like three million gallons of wine into ethanol last year. Why? Because they couldn’t sell it, obviously. There is a message there. TB’s message to you is if everyone tried to consume $10 wine, or even up to $20 and would never pay more, there would still be plenty of wine around, but the wines of character would be gone. At least you could just go and pick up any bottle as they would all taste the same. Fine…that is, if you don’t want a really good bottle of wine.

Perhaps it is like the younger generation: they have recording artists they love but they don’t pay for the music. See the similarity?

Off to have a glass of good wine…

TB

©Copyright 2015 TBOW, all rights reserved.

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traderbill

How did Trader Bill originate? It was conceived by me as a way of providing information summaries of global financial markets so that friends and associates could bring themselves up to speed on events and changing market conditions upon their arrival at work. In addition, it provides information on speakers and economic releases that day with consensus estimates and level of last release so that the reader is prepared to react, or knows how the market might react upon the release of information. Who is Trader Bill? Initially any reference to me was as ‘i’. This is to remove the aura of ego and to suggest that i am but a humble reporter, albeit with 35 years of investment experience. Investments are demanding of ego, however, or one would not feel that he was qualified to manage someone else’s money in the first instance. Therefore i needed an ‘alter-ego’. Like Winchell and Mahoney, Edgar Bergen and Charlie McCarthy and especially Trader Vic and Mai Tai’s! Why Trader Vic? Because he was a likeable man who delivered pleasure to his customers and knew exactly what their desires were. The reason for the alter ego became obvious once I introduced Trader Bill into my commentaries: people started asking what Trader Bill thought. They had never asked me what I thought before, but suddenly they wanted to know what TB thought! Now mind you they KNEW that I was Trader Bill but for some reason he became bigger than life. Maybe it was the small ‘I’? What does Trader Bill try to do?His goal is to educate from his years of experience. Consider that most of the traders and people managing investments weren’t even around in 1987 for the crash! Consider that Graham and Dodd, and even Warren Buffet are not relevant to them, too old hat. Their historical perceptions of markets and fundamentals (earnings, price/earnings ratios, bonds, debt service coverage) are irrelevant in this fast moving world. This is the NEW ECONOMY, or is it? How did your style originate?Years ago i found that i had a knack and talent for writing. In addition, i developed an ability to analyze market news about 15 years ago. It took the Crash of ‘87. Prior to that i was just listening to what others said about the economy. But bond yields had been soaring in ‘87 yet the stock market just kept hitting new highs. That was when i began to learn about markets. i have both a dry and witty sense of humor (some call it inane!). Therefore i attempt to make even the worst news somewhat amusing: whether it is the absurdity of an economic release, or the comments of a CEO. This is trading desk humor (or gallows humor). It isn’t politically correct but it does ease tension. Ironically, it is seeing the light at the end of the tunnel (in the Navy they say: it’s always darkest before it’s pitch black!), that allows you to be more objective in your analysis, as bad as a situation is there will still be a tomorrow! You will see that i practice three-dot journalism, a style made famous by San Francisco reporter Herb Caen, whom i idolized. At least to me it is effective. What is so special about your analysis?Frankly, i don’t know that it is special, but at least it beats “the market closed down today on profit taking.” What i do know is that most of what you read is spat out without considering whether or not it is rational, like the above statement. Is it right? Sometimes yes and sometimes no, and that is the key to what is different about my analysis: it is meant to make you think. Is Dan Rather right or is Trader Bill right? If it causes you to stop and think about it, regardless of whether you agree, i win! Because THAT is my goal…not to have you think i am a guru, got that? Bet you never heard that ANYWHERE before in my business! Instead they want you to think just how smart they are but remember in this business if you are right 60% of the time you ARE a genius! Another thing that is different is when i am wrong on an analysis i will tell you, not hope you forget what i said. So now you have the tools to do what the speculators and hedge funds do: challenge authority, and if you make money it is because YOU did it not me. i was just a tool, your flunky to do the grunt work and let you decide…course you could be wrong too but at least you looked at the big picture. But the goal is also to have fun! This shouldn’t be a business of hushed tones and grim faces. It is a living, breathing thing and nowhere else in the world do you have the odds as much in your favor as here. Just beware of the guy who wants to put his arm around you and tell you he is your friend. So there you have it. I hope you select me as one of your sources for market information. If you do I promise to work my best for your financial success. Trader Bill

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