Vol.2 No. 28 – are today’s wine prices sustainable?

Building on the theme of ‘good wine forcing out bad, globally’, there is far too much wine out there to allow prices on premium wines ($30+) to be sustainable (not to be confused with organic, sustainable, biodynamic).

Why? Consider that last year for the first time the biggest growing segment shifted from the $10 and under bracket (dominated by Two Buck Chuck), to the $10-20 range. As before, there was little to know growth in each level above $20!

therein lies the rub: more and more wines, aided and abetted by 90+ ratings are trying to price their, often unknown label with ‘comparable’ wines, of the same varietal and region, even though those wines have spent years establishing themselves. I have never seen so many new labels from so many regions that get a high rating (remember TB is opposed to paying attention to ratings since they may not be the same as you look for in a wine).

As a result, more and more labels are being seen on the internet, most notably at www.wtso.com, where you get great value, especially if you buy the number of bottles required (usually 3-4 depending on price), and no sales tax outside of New Jersey. They will even store your purchases for you in their temperature controlled warehouse for up to a year! But, while the savings are very good they are distorted by the ‘comparable value’ shown. Often these are not wineries at all but buyers of ‘sourced’ fruit, albeit often from name vineyards. But that also tells you something: why would someone who owns say the Bien Nacido vineyard sell it elsewhere IF they could sell all they produce?

Since 2008, high priced wines (except Bordeaux shipped to China, Burgundy’s and a few others), have seen declines in wine club membership…and don’t fool yourself, those are seeing it too….yes, even the $300 wines and higher…names you would recognize.

So, what is the solution, without cutting price and having a wine merchant, mainly a big box store, sell it for much less? Once that happens and the word gets out they cannot increase their prices…their future is cooked.

Enter China, and despite risks of copyright protection, at least no one in the U.S. knows what they are selling for, and the lack of transparency means that they will still be thought to be cult wines. Oops!

I will not tell the names of some of these cult wines but you would recognize many of them. Remember, a winery is about cashflow and storage costs eat heavily into that. TB’s advice: think hard before you get on the list of a highend cult wine. Also, keep looking in that $20-30 range for the best values. As TB has said before, once you get above $50, most people would not be able to perceive the quality.

Well, safely above my goal of averaging two issues a month (average), this will be the last issue for 2016. Best wishes for the New Year!

P.S. my wife stumbled upon  a non-alcoholic wine label, FRE. Correction, “alcohol-removed wine”. Hmmm, I found out the label is owned by Trinchero Family, behind Gallo, the second largest family owned wine business in the world. Contrasting to all the other ‘stuff’ out there, FRE, makes a Brut, and several others, including still wines. We bought it so we could celebrate the New Year with our grandson’s. Price: $5.50. Think of this: now you can have wine with dinner with friends who don’t drink alcoh9l for religious or other reasons. Will give you feedback, and hope you will do the same!

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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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