Vol. ^ No. 4 Waiting for Godot

What a way to end the week…on a Thursday no less! Will it be a Good Friday tomorrow? At least there is no risk of the market tanking tomorrow after a lackluster day today. In light of this, TB thought it might be a good time to share his, and some thoughts of others he knows, both professionally and justly concerned friends on their feelings on the markets.

Nobody is diving back in: TB was heavily in cash before the virus broke out due to not liking the market. No one he knows was anywhere near fully invested. In a rout cash is king and as far as he knows nob.

Despite the pundits who think that new highs imply a bull market, Ed Easterling of Crestmont Research (which TB highly recommends and it is free: www.crestmontresearch.com .There is more information there than you will find anywhere else on the Web…have been using it for more than a decade. It is possible to be in a secular bull market inside a secular BEAR market and this secular bear began in 2000!

This is the third or fourth of these events since 1929 and the secular bear can last as long 20 years!  TB hasn’t believed in the rally since the night of the 2016 election. Why? First, much of the rally was done through stock buybacks and much of that with loans. That is what pushed P/E’s to nosebleed levels  At the beginning of the selloff, the average p/e of the S&P500 was 25x, contrast that with the long term average of 15x, or over 60%. That understates it however given p/e’s of the mega-caps that overweight the index.  Not to pick on Amazon (AMZN) but despite the selloff it remains at a p/e multiple of 89x earnings. Wait, how can that happen? First, look at the forward p/e which is 51x – moving in the right direction and from their move to the PEG rate (p/e/growth rate), which is 2.74x projected earnings. Therein lies the rub: projected . Companies haven’t revised down their estimates yet but it is safe to say the earnings will be significantly lower than projected for most if not all stocks, given COVAD-17. Worse, we have no idea what the outcome will be but people TB talks to and those he hears on Bloomberg, etc. are not projecting anything close to what it was. Furthermore, new companies that have significant sales growth may not be making a profit but it is projected to make these stocks priced right…but will it come to fruition. Look what happened to AirBnB this week. Still not public they went to investors and asked for $1 billion in loans…the rate 10%+! This is not the time to borrow from a venture capitalist unless you can’t do it elsewhere….consider how they have been burned over the past month or so!

The point is: if you decide to enter the water, wade in slowly, diversify your stocks and instead of buying round lots, buy 50, 25, even 10 shares depending on price…and hope you are right! Remember most brokerages led by Schwab in the race to zero fees, so a round lot for a small investor is a luxury and there is no penalty for trading odd-lot shares…not even in price!  Maintain at a minimum, 75% cash.

Remember we are in uncharted territory and every aspect of our lives could potentially change as it has now and in ways we haven’t imagined. God Bless the United States of America…and the world!

Now on to a more pleasant topic: WINE

Wine, as TB discussed yesterday, is arising from the ashes of weakening demand along with hard alcohol and beeeer (as SOTUS Justice Brett Kavanaugh proclaimed at his confirmation hearings). Already, warnings are being issued about the increased consumption of alcohol and effect on the body, especially the heart. Go easy!

Along with Constellation Brands, and Gallo, which were discussed yesterday, Treasury Wine Estates is the next largest company. The big guys mentioned first are trying to reduce their $10 and under wines, while TWE is going to sell off its premier holding: Penfelds, a famed Australian vintner. With shifting demographics , and now the virus, it is difficult to determine which will prove to be the right strategy.

Stay tuned and don’t let your cellar go untouched but don’t run out of wine either.  Well, with tomorrow being Good Friday, TB is going to take the weekend off….hope you can find something fun to do too.


©traderbillonwine.com 2020

Vol. 6 No. 3 I’ll have a Corona; hold the virus!

Readers note: this combines both my former market blog and resurrects my wine blog. The opinions expressed are my own and disregard any you don’t agree with. Thank you for reading!


I’ll have a Corona…hold the virus!

Another day, another boring press conference. Don’t know what happened to Trump in the last 24 hours but his press conference was awful. He stumbled through his notes, blamed the WHO for the failure to warn us (?), and then threatened to withdraw our support. All this while spouting disinformation on the number of tests completed. The station I was listening to (CBS) cut out to there scheduled programming before it was even over…a relief for TB who was starting to feel like HE had the virus! Too harsh? TB doesn’t think so! This the same day that his “Acting” Secretary of the Navy, Modly, who TB discussed in yesterday’s column, resigned rather than be fired, making him the second Secretary of the Navy to do so, the other following Trump’s tantrum about the Navy SEAL who was convicted, and then overturned by the Dumpster…oops, Trumpster.

So how did the markets fare? Uh, not well even with a continuation of the VIX decline, albeit modest. They started out strong, following a rally in the overnight markets that was fading, reversed the slippage and then made a U-shaped top, sliding into the close. Oops!

Which stocks did the worst? How about any stock that has been in favor but still lacks positive earnings? This was especially true in internet stocks like information technology. Negative earnings, even with positive growth combined with high or infinite multiples were losers along with real estate and lodging stocks, which like their companion REITS opened up, then caved all the way into the close, ending with modest gains but still within inches of their 52 week lows. Anyone hear a fat lady singing? Not TB!

Early on we heard that AirBnB had secured $1 billion in funding…later we learned that they had to pay 10%+ for it! Ouch! Can’t blame the VC’s though as they have been handed their lunch by the market. No way TB would consider staying in one even after the virus has passed not knowing how much cleaning was done. Only a gambler would touch the travel and leisure industry here.

How about Warren?…Buffett that is? The Oracle of Omaha is going to have problems, yet everyone keeps turning to him for advice. I’ll give him integrity based on my prior experience. When TB left his old firm to start his own RIA business he decided to reallocate his 401(k). Never having the timing right, he had never owned Berkshire Hathaway so it was one of the first stocks he bought…seemed safe enough. The year was 2004 and unbeknownst to TB Warren decide to place a $1 billion bet against the dollar! When this was announced, after the stock had tumbled, TB decided the Oracle’s run had ended like so many other ‘gurus’ in TB’s 45 year career. To his credit, in his yearend letter, Buffett praised every one of his managers for hitting their marks but that it was his bet that cost them money. Wasn’t it Warren who said, “if you can’t explain to me in five minutes why I should buy a stock, I won’t”? Guess he didn’t try to explain his reasons for making a $1 billion bet against the dollar. Since then however the stock has performed well but anything could have since March 2009, right? Till recently that is! TB bought it in March at $63 and sold out in November at $56 and remember that BRK doesn’t pay dividends

Just last week it was announced that he was pumping money into Occidental Petroleum whose stock has imploded since the Russians slashed the price of oil. Good money after bad? Time will tell.

Okay, here’s your choice: AirBnB or OXY…choose carefully and wisely…TB? He’ll just avoid both!


Size isn’t Everything

Who knows who the top two wine companies in the world are? Hint; the first is private, the other is publicly held and both are in California!

Gallo is the largest wine company in the world and still family owned. Their premium brand, named Gallo because that was the only way Gina Gallo’s dad would fund it, has proven to be a success. They are far and away the biggest wine producer in the world and provided quality in whichever price range their wines were in. TB used to say, “dollar for dollar Gallo is the best wine in the world.” You may not like it but in each category they appeal to their market.

Number two is Constellation Brands which appeared on the scene in 2004 when it bought out Robert Mondavi winery! The question was who were they? Nobody knew of them but their one and only ‘brand’ at that time was My Wild Irish Rose, a hit with the skid row denizens. To their credit it has been a success story although it has peaked. But here’s the thing: they have been selling off many of their brands and guess who is the big buyer? GALLO!!!

Recently, TB learned that Constellation (STZ not STD) is in talks to purchase Gallo! Now think about that for a minute: they sold many of their brands to the Gallo’s and now are buying them back. Smart?

Despite the success of STZ stock, in 2017 they made an investment in Canopy, a Canadian cannabis company, and the largest in the sector. Subsequently, all the hype turned into a huge glut of marijuana in the market and STZ had invested $190 million in the company for a 9.9% stake! Then they added an additional $4 billion a year ago. They are now trying to buy Canopy outright and produce cannibus infused drinks and now are considering medical marijuana…er cannabis! You see, even though marijuana is legal in most states in the U.S. it is not legal at the federal level. The exception would be medical cannibus.

Will buying Gallo be a success or a loser? Will buying Canopy be just a way to cover their mistake in investing in the company in the first place? Time will tell…always does!

Here are a few of the wines TB has been sampling while being a shut-in”

Epicuro 2015 Nero d’Avola available exclusively at Trader Joe’s for the princely price of $4.99 and to TB the best value under $10 and it doesn’t taste like it is in that price range.

San Felice, Chianti Classico, 2016, one of TB’s favorite small towns in Tuscany and a beautiful one to the southeast of Sienna.

Domaine Romy, Veilles Vignes, Les Pierres Dorëess 2017, fine single-vineyard Gamay from sourhtern Burgundy.

Turch Syrah, 2006! From Santa Barbara County.Passo Robles. I forgot about this wine and opened it thinking it was way over the hill…it was still fantastic! Can’t find the winery anymore, just Torch?


My remembrance of 9/11/01 – a day of infamy

At 9:06am EDT on 9/11/01, the first plane flew into the North Tower of the World Trade Center. I had come into the office early on the West Coast and a trader said that a plane had flown into the North Tower. I said it had to be a private plane as no planes are allowed to fly over Manhattan. She had heard from Cantor Fitzgeralds’s office in L.A. and that it definitely was a commercial jet. In disbelief, I switched my screen to Bloomberg TV. Almost immediately, I saw the second plane bank and come around and into the South Tower. It was horrifying and mesmerizing.

Later, we heard about the Pennsylvania crash thanks to the heroics of a few passengers, and then the one that hit the Pentagon. It was a horrifying day. I watched a trading screen go blank and a woman who covered me from the firm was not heard from for two weeks. Unlike Cantor, on the 102nd floor, that lost 658 people that day, TradeWeb lost none due to being lower in the building and a manager who told them to leave immediately. She said she could see the building from her apartment and it was a beautiful day which ended with her walking home across the Brooklyn Bridge with the WTC behind her. Every morning she had to look at the rubble of a once beautiful skyline. She was suffering from PTSD.

Last Sunday, I heard a man saying he and his family were on the way to Windows On The World for breakfast and close to going in the building. He could hardly finish his statement.  Last year, I had breakfast with Kevin Zraly who managed WOTW. He was late to work that day and arrived shortly after the plane struck. He was in charge of the wine cellar and is one of the most knowledgeable people I know on wine. He suffered PTSD from his guilt that all of his employees died that day and he should have been with them. It took years of therapy during which he couldn’t even look at a glass of wine. He is better now but still has flashbacks.

This is one of the events I remember vividly. I also remember JFK’s assassination, then watching Jack Ruby assassinate Lee Harvey Oswald while in custody, the assassination of Bobby Kennedy. Some things just stick with you…sadly.

Make the most of each day…it might be your last!

Trader Bill

Copyright 9/11/19

He is not dead but sleepeth

First, my sincere apologies to my readers (honk, if you’re still here!), for my lack of writing. A lot has been going on and I have been focusing on my book project, Wine and Passion. The book is not so much a wine book as a look at the passion of the winemakers I  have met over the past five centuries…oops, decades! I would hope that people consider them rather than the critics ratings but that is up to you, dear reader.

I also must admit to writer’s block and the evil: procrastination. But there was one more event that sidetracked me from mid-July to late August: our 50th anniversary (yes, it coincides with my serious interest in wine!), which consisted of a 5,000 mile driving trip to Portland (mostly along Hwy 12: the Lewis and Clark Trail; then down to Southern Oregon where, along the way we drove right through a forest fire on I-5, halfway to Jacksonville; then down to Reno where we lived for five years in the late 70’s and early ’80’s. Hot August Nights, the largest street car show in the country was going on! From there we drove to Lake Tahoe and stayed at a friends place at Fallen Leaf Lake, at the southern end of Tahoe. There we celebrated our 50th along with most of our relatives.

Driving back we drove across Nevada on I-80 stopping at Wells. We had planned on staying in Wendover on the Utah border but room rates were $200-300 a night! In Wendover? You have to be kidding, right? Wrong, it was the beginning of Bonneville Speed Week, so we stayed in a very nice ’50’s style motel in beautiful downtown Wells.

The next day we stopped at Bonneville then drove across the beautiful mountains of Utah and finally stopped in Gillette, Wyoming, and after a long 700 mile drive home to Excelsior, MN, on beautiful Lake Minnetonka, the next day. Four days and three nights out and three days and two nights home.

Our drive on scenic Hwy 12, the only road maintained by several states that is funded by the federal government, reminded us of how we have lost something in an era of 70-80 mile speed limits on the interstate where the goal is simply to get from point A to point B as fast as possible. Think about that the next time you take a trip and take at least a few side roads.

Finally, what wine did we have for our 50th? First, I brought over a case of wine with us but the gem was a magnum of Bonny Doon 2012 Le Cigare Volante by my friend and one who will be featured in the book, Randall Grahm, one of the great California winemakers! It was fantastic and enjoyed by all.

Well, tomorrow is 9/11 and I will have a different kind of column for it.

Until then, go drink some wine!

Trader Bill

Copyright, September 10, 2019

Vol. 4 No. 10 My wine resolutions for 2019

I run across lots of stories and facts while working on my book project: Wine and Passion. So, in keeping with that theme, I will share some thoughts I have about what wine to buy, where to buy it, and some shocking data. Here goes:

For the past five years or so, the only price group for wine that is growing is the $10-20 range. If I had a winery and it was economically feasible I would set a list price of $19.95. According to website Morning Consult, and reported on Wine Industry Insight, 62% of Americans spend between $8 and$15 on a bottle of wine and only 6% spend more than $21!!! It breaks down this way: 18% spend $3-8; 35%  $8-12; 27% spend $12-15%; 15% $16-20; and only 6% spend more than $21. Think about that. One of my tips is this: one night a week if you are drinking Two Buck Chuck, try a $10 bottle of wine; if you like it better start drinking that, and now try a $20 bottle of wine. Again, if you like it more, make that your regular wine, but next try a $30 wine, and so on. My guess is you will max out around $35 and if you can get one of those on sale for say $25 Voila!!!

Why not more? Mainly because over 80% of wines are consumed with 48 hours of purchase! So you won’t get the higher quality you are paying for without letting it at least ‘rest’ for a month or so before drinking, and the highest priced wines are made to be cellared (temperature controlled or at least a stable passive), for a year or more.

I discussed this with Kevin Zraly, author of The Windows on the World Complete Wine Course and he shared his formula with me: I want to drink a $10 bottle of wine that tastes like a $25 bottle; a $25 bottle that tastes like a $50 bottle; and a $50 bottle that tastes like a $100 bottle. It can be done!

There is also a saying: we drink white wines too cold and red wines too warm. It’s true! A cold rather than chilled white will not release its aromatics fully. That is why it is generally recommended that you chill them for no more than twenty minutes. As for reds where cellar temperature is normally 54 degrees, somewhere around 60 is better but they should also be decanted to let them open up. Older vintages if decanted for too long with lose most of their characteristics.

Next, is buying wine from dedicated wine shops rather than the supermarket. You have no idea how long the wine has been on the markets shelf and most people pick the varietal and then a nice label. A wine shop will have people who will listen to what you like in a wine and steer you (hopefully) towards one that you will love or at least like. You are likely to pay a little more in these shops unless they are having a sale but you will know you are getting a quality wine. Large ‘big box’ wine stores like Total Wines or Beverages and More may offer a better price but does it matter that much if you are buying a single bottle? Perhaps for a case where it might equal a free bottle, but don’t we want to support our friends and neighbors? I think so!

Then there is buying wine from a big winery that might produce 50,000-100,000 cases vs a small one that might make 15,000 or less. You may pay more but you will again be supporting a small producer who likely pays more attention to details. A corollary to this is visiting the wine country and choosing one of the big name wineries to visit. There, you will likely have a student or other part-time worker pouring as opposed to a small winery where you will meet a full-time employee who isn’t reading from a script, and you might even meet a winemaker or owner. Their passion will vastly improve your impression of the wine you are tasting.

Following that thread, consider that just two distributors (Southern Glazer Wine Distributors which represents 1,178 wineries sells and Republic National Distributing  which represents 7,581 wineries, and have revenues of $16.5 billion and $6.5 billion respectively according to Forbes Magazine and represent over 50% of all wine sold in the U.S.! Pity their small wineries who get lost in the shuffle as happened to a friend of mine’s wine. State laws are restrictive too, one of which says that you can’t ‘fire’ a distributor if he has any of your wine in inventory…so keep ONE case and you’ve got the winemaker…how unfair is that to both the winery and customers.

For this and other reasons, small wineries are trying to sell more of their wine thru wine clubs or the tasting room. Unfortunately, they have to sell to you at the retail price they listed, but at least you know the wine has been stored properly. Shipping can be expensive, even prohibitive but at times like the holidays, many offer free shipping, a way to get around the selling at retail laws. Only when a wine is in short supply and not being offered to distributors can they reduce the price to clear inventory. This is the trick with Total Wine’s ‘winery direct’ program. They buy up all of the wineries inventory of a varietal or vintage at bargain basement prices, then offer them to their customers at a low price but with a huge markup! Again, you don’t know how the wine has been stored or if it is fading (aka over the hill).

Here is one last statistic for you: three big wine companies, Constellation Brands, E. and J. Gallo, and Vintage Wine Estates, represent 70% of all wine purchased in the U.S. Combine this with the price profile and the future is not bright for small producers, and that is a tragedy.

Lastly, millennials price preferences are lower than their baby boomer parents who are retiring and therefore not spending as much for a bottle of wine. 2019 will definitely be an interesting year for the wine industry.

TB wishes you all a Happy New Year and a prosperous 2019.

(c) traderbillonwine.com

Vol 4 No 9 Tarrytown and Beyond

Tarrytown sits right on the Hudson and is a quaint town but also is home to Marymount College, and the Rockefellers who have clearly left their mark. Dobbs Ferry, established in 1698 is there and from it you can see the entire Manhattan skyline and to the north the Tappan Zee Bridge. There is also a non-denominational church there, the Union Church of Pocantico Hills, a tiny church funded by the Rockefellers and built of river stone. Originally it had no windows but then they attempted to commission Henri Matisse to come and do a glass window. Due to his age (82) and health, he declined however, he did create the forms for the window in his bedroom. Those were then made into glass and shipped to Tarrytown for assembly. It isn’t an impressive window, about a three-foot oval over the altar, but Matisse died two days after finishing it. Over time, seven windows were installed in memory of various members of the Rockefeller family. All were creations of Marc Chagall, and they are magnificent.

The wedding was fantastic and held at Tarrytown Estate, just down the road from Washington Irving’s home where he wrote The Legend of Sleepy Hollow. All the streets have names that those who have read it are familiar with. As an aside, when we lived in the San Francisco Bay Area, we lived in Orinda in a section called Sleepy Hollow and even lived on the Lane of that name, and again all the streets were from the book. Tarrytown Estate is on Sunnyside Lane, coincidentally the same street the bride’s parents live on in Orinda!

The wine for the wedding was from Vietti in Barolo, Italy. They had secured a Balthazar (2400ml) of their 2015 Nebbiolo (Perbacco) – that’s 16 bottles. It was the first to be shipped! The bottle was decanted and all the guests signed it. A nice touch! Vietti is especially meaningful to me because in 2004, my son-in-law (a chef at a Northern Italian restaurant, Prima, in Walnut Creek, CA) and I took a 10-day trip to Italy visiting wineries and fine restaurants. We called it two guys, ten days, twenty meals, fifty bottles of wine. The highlight was that when we arrived at Vietti, Alfredo Currado personally gave us the tour. Normally his wife did because Alfredo didn’t speak English well, but here sister had fallen ill so he had to do it. It was amazing but troubling as he kept apologizing for his English. Finally, we saw his son, the winemaker, and told him to please have his dad stop apologizing as it was an honor similar to having Robert Mondavi give us the tour. He stopped and said, “my English is not so good but when I drink wine it get’s better.” However, when we got to the tasting room he did something every host did that we visited. He poured a taste, then filled all three glasses but never touched his again. The significance of that was that we were his guests but this was business…a nice touch. That is why the wine, which was wonderful, meant so much to me personally.

One last thing at the Estate. Over the fireplace is a painting and I was curious. It turned out that it was a portrait of Major Andre, a Brit who was captured by the patriots and although he was in civilian clothes they noted his beautiful boots. They removed them and inside were the plans to West Point that he had just received from Benedict Arnold. Both men were later hanged., Why was it there? Because when the Estate was purchased it hung there so they decided it was only proper to leave it ‘hanging’.

From there we drove down to the Greenbrier in Lexington, West Virginia (not to be confused with the town of the same name in Kentucky). The Greenbrier is a beautiful southern mansion style hotel with a golf course, but is also famous for the bunker that was built there to house members of Congress if there was a nuclear war. It is now just a museum.

The next day we ‘found’ the Bourbon Trail in Kentucky and visited one of my favorites, Woodford Reserve (would also have like to visit Pappy Van Winkle but they weren’t open that day – drat!). From there it was a long but beautiful drive home that totalled 3,650 miles, almost all of it in good weather, thankfully!

Trader Bill

(c) 2018