BU - Bruliam

In her post on Monday, Kerith touched on the wild world of wine investments.  As a purported “investment professional”, I figured I needed to spend some time digging into the opportunity a little deeper.

On the most basic level, wine investment is about supply and demand.  There is only so much wine that Chateau Latour, for example, can produce for its first growth Bordeaux bottling – it only has so much land, growing so many tons of grapes, and fermenting and pressing those grapes into so many bottles of marketable wine.  This limited supply runs up against a level of demand that fluctuates based on macro-economic factors and the marketing/scoring machines of Robert Parker and Wine Spectator.  With the 2000 and 2005 Bordeaux vintages declared “Vintages of the Century,” the demand instantly increased and sent prices for those vintages skyrocketing. 

Much of that buyside demand in recent years has come from the so-called BRIC countries: Brazil, Russia, India, and China.  The BRIC countries, until the recent market meltdown, were flying high on commodity prices (oil, natural gas, and metals predominantly) that enabled them to generate huge amounts of cash.  That cash funneled into a number of asset classes outside their borders, including wine – specifically “trophy” wines like the first growth Bordeaux, grand cru Burgundies, and a few California cult cabs (although it is interesting to note that California cult cabs are apparently much lower down the international investment totem pole than the top tier French wines).

As an individual, there are a number of ways to invest in wine:

The most basic is the direct investment.  You buy a bottle of wine, hold it, and sell it for more money at some point in the future.  If you are fortunate enough to get first growth futures for a hot vintage or are on the mailing list for a California cult cab, you can basically flip your investment for an immediate gain.  The rest of us need to buy wines of pedigree once they are brought to market and hope that others will be willing to pay more for those wines in the future.  This type of investing is similar to buying an individual stock.  You can buy a share of Google, GE, Home Depot, etc.  Hopefully it appreciates over time and when you sell it, you can sell it for a higher price and take a profit.  Like buying an individual stock you need to be able to understand the risk/reward profile of each wine.  Some of the considerations include whether you are buying at a good price, is there a reasonable possibility that the wine will appreciate over time, is supply limited, can you store the wine in a way so as to preserve value during aging.  The direct investing method also has one additional inherent risk and reward.  The risk is that your willpower will shrink and you will open the bottle.  The reward is that if you aren’t able to sell the bottle at a reasonable profit you can drink away your sorrows with a fine aged bottle of premium wine.  To that end, I came across a very amusing video from Gary Vaynerchuk featuring Jim Cramer from CNBC where they talk about direct wine investments.  It’s on the long side, but very entertaining.  Click here for the video.  As a side note, this is particularly funny since it was filmed right before the market crash and Gary’s view on wine and Jim’s view on the stock market are both unabashedly bullish…

The second method to invest in wine is through an actively managed fund.  Like mutual funds and hedge funds, the managed wine funds enable individuals to participate in wine investments without necessarily having the knowledge, access, or facilities needed for successful direct wine investments.  Most of these funds are structured more like hedge funds.  They advertise as alternative asset class funds, require investors to meet accredited investor status (basically, a representation that you are a knowledgeable investor with sufficient assets to afford to lose your shirt if things go badly), require minimum investment amounts and lock-up provisions, and the managers of the fund are paid based on a percentage of the investment returns.  Most of these funds are domiciled and managed overseas for a variety of legal issues.  One fund I came across was the Wine Investment Fund whose motto is “Fine Returns from Fine Wines”.  And, in fact, their returns do seem “fine”, as you can see here.  While investing in an actively managed wine investment fund does take some of the guesswork out of the process, it is far from riskless.  In addition to the same supply and demand issues that affect the direct investment model is the relative illiquidity that a managed fund presents.  Most require a long lock-up period and, even when adhered to, I’d be somewhat concerned with ultimate liquidity.  After all, the fund takes your money and buys wine.  It then needs to sell that wine to provide you a cash-out return.  As many hedge funds have realized over the past year, selling assets (wine, in this case) at a price near their perceived value is often difficult, especially if the selling is taking place under time pressure or in a down market.

A third way to invest in wine is through index futures.  Yes, just as we’ve seen an explosion in index funds and their cousins, the ETFs, there is now an index investment mechanism for wine.  The Liv-ex 100 Fine Wine Index represents “the price movement of 100 of the most sought after fine wines”.  It only includes wines of 95-points or better that have a strong history of secondary market sales.  The index is weighted heavily towards red Bordeaux, although also includes smaller allocations of other French and Italian wines.  The advantage of index investing in wine is the same as index investing in the equity markets – you get a broader market approach which, in theory, creates less volatility and steadier returns, all with lower fees than a managed fund.  In this case, you also have the added benefit of greater liquidity as you are investing in an exchange traded index rather than a single bottle of wine or a portfolio of wine managed by a fund.

So, where does this leave those of you who might want to invest in wine as an asset class?  Frankly, I have no idea.  The concept is so foreign to me that I’m not sure I can render any useful advice.  I can logically understand the argument that wine, as an asset class, is sufficiently uncorrelated to the equity markets as to provide a true alternative investment opportunity.

But, in order to properly view any asset as an investment vehicle, you have to be able to remove emotions from the buying and selling decisions.  That’s hard enough to do with a stock or bond.  How in the world can you do that with wine, whose value is often derived specifically from the emotional connection that you have to it? 

As a purported “investment professional” I simply have no idea.

Maybe it’s the shell shock from a generally positive week in the market or the fact that we’ve been busy working our way through a half-bottle sampler from Calera this week, but I figured it was a good time to provide some short updates on a number of subjects.

And besides, after my wife’s amazing post about Uccelliera and the naming of our son earlier this week, how can I even compete?

So, here we go:

As you probably saw in this post, we attended the Family Winemakers of California event in Del Mar a couple of weeks ago.  We were ungraciously denied entry to the “trade-only” portion of the show and had to instead elbow our way to the booze with the rest of the riff-raff.  Despite the indignity, we did find a couple of nice surprises, notably a mostaco called Frivolo from Vino Noceto.  It’s only 7% alcohol and has great fruit and some slight bubbles.  I’m betting that this will be our preferred summer wine for 2009.  At only $15/bottle you can’t beat it.  It was also a treat to be able to meet Gary Pisoni and Mary Elke, among others.

Speaking of Gary Pisoni, Jocelyn A was the first to correctly to identify one of our pinot heros.  At Jocelyn’s request, we’ve sent off $250 to the Central Asia Institute, which promotes and supports education for girls in remote regions of Pakistan and Afghanistan.  Remember, the best way to win money for your favorite charity is to send in your Bruliam t-shirt pictures!!

If you are wondering, the guide we had in Italy who led us to Uccelliera is a man named Pino Teresi.  Pino’s been running wine and food tours in Tuscany for many years and has actually developed quite a following.  Along with his wife and son, they now also own the Fattoria Borgonuovo – a small group of rental homes in Tuscany for visiting families.  I can’t recommend him highly enough for area tours.  And, who knows?  Maybe he’ll introduce you to a burgeoning winemaking star.

We recently received a second barrel sample of our 2008 Doctors Vineyard pinot from the Santa Lucia Highlands.  The strong fruit was still prevalent, but the mid-palate issue that we were concerned about in the first tasting (click here for a refresher) was absent.  Possibly a nuance of barrel samples?  We’re not sure.  We’ll be up in northern California in May or June to do more sampling and blending.

Speaking of wine tastings, a number of you have mentioned that you never saw the video of our second wine tasting – the one with the smoke taint.  Here’s the link.

Finally, we’ll be taking a little Spring Break of our own next week, so no new posts until April 6^th.  That should give you all plenty of time to send in your new Bruliam t-shirt pictures!!

“Mom, you should get a job,” counseled my son from the back of the minivan.

What??  I nearly swerve off of the road.  Must I actually endure career advice from a 5 year old, one whose most passionate vocational aspiration entails a hand drawn, homemade book titled What do People Do All Day at the Landfill?

My son peered at me from atop his Auto Trader magazine.  “You know,” he continued, “while the girls are at school.”  He was serious; I was stupefied.

Besotted with equal bits curiosity and amusement, I had to encourage him.  ”So what kind of job could I have?”

Without a beat, he posited, “You could work at Costco.”  It’s not like we couldn’t use the employee discount.  Maybe he had a point…

“Well isn’t taking care of you and your sisters and cooking and cleaning enough work?” I mused.  (Stop laughing.  I do clean- on occasion).

“No,” he insisted.  “You should drive the miniloader and stack up palates of water.”

“Well what about working on our wine company?  Isn’t that a job?”

“No.”

And there it is: the crux of my personal, existential dilemma, exposed by a child who aspires to see his mom behind the wheel of a heavy duty construction vehicle.  I am no longer practicing medicine but am too terrified to return to pathology.  Each day is idled away with the hour long aliquots toddler ballet, gym, swim, and art classes.  On the side, I drink and taste and cook on your behalf, sumptuous calories consumed for the good love our beloved Bruliam Brigade, due diligence indeed.  Of course all this begs the question, “really, is this a job?”

Obviously, Brian and I love wine.  And food and wine.  And eating and wine.  But unless you’re contracted by some magazine or newspaper to review the local restaurant scene, there isn’t much of a “job” in what I do.  For one, there’s no health insurance, benefits, or 401K.  Heck there isn’t even a salary, since we’re entirely not-for-profit anyway.  Plus, what happens when you’re commandeered by your kid’s preschool teachers to volunteer in class and “talk about your job?”

Some weeks back, my son’s curriculum included a “Be All You Can Be” unit highlighting different jobs in our community.  All parents were encouraged to come to class and explain what it is that they do.  Giddy with anticipation, our son, of course, rushed to sign us up.  “Daddy can come in and talk about being a company,” he gushed, excited and gesticulating wildly.

“What can I do?” I asked him.

“Talk about cooking,” he solemnly replied.

To be fair, his teachers did ask me to chat up my culinary school experience and discuss what it means to be a “chef” (their generous title, not mine).  But what if I had headlined as “winemaker” instead?  Given the daily prominence of wine at our table (and our girls’ moniker “daddy’s special water”), I suspect our iterations as “wine people” is integrating naturally into our kids’ consciousness.

Still, I fear the day when my child’s classmate responds to mom’s requisite query of “how was school today, honey?” with their own half-truthed interpretation of Bruliam LLC.  “Bruno’s mommy taught us how to distill grain alcohol in the backyard- without going blind.  Don’t worry, mom.  The explosion isn’t that loud.”  How the heck do I spin that?

EPILOGUE:

So what did we drink in San Francisco?

Terenzi “Colle Forma” Cesanese del Piglio (2003)

More on this unusual varietal next week.  (And no I hadn’t heard of it either until I got to the restaurant).

If you read Kerith’s post last week on the smoke taint update, you may have noticed a little disclosure under the video we posted.  You see, YouTube decided recently to start automatically muting all videos containing music owned by Warner Music Group.  Apparently they are in some sort of copyright spat and we’re all getting dragged into it too.  The original audio that we had planned for the video was, unbeknownst to us, owned by Warner and, as such, we had a very rude awakening a few minutes before the post was about to publish that all of the audio (i.e., the 30 seconds of music and the 5+ minutes of the interview with our winemaker) had been muted.

Now, don’t get me wrong.  I have nothing against protecting and enforcing intellectual property rights.  Sagient is built almost entirely on intellectual property and nothing pisses me off more than learning that someone has co-opted our data without paying for it (in case you’re wondering, yes we do have the means to check and yes we have had to enforce our IP rights in the past).

That said, there is something incredibly annoying about spending 10-15 minutes uploading a video onto YouTube and waiting 30 or more minutes for it to process before being informed that the audio has been muted out due to copyright issues.  Isn’t there some way for them to detect the issue before wasting 45 minutes of my time?  Or how about giving me the ability to pay some fee to use the music rather than just muting the whole video.  Wouldn’t YouTube, Warner Music, and the musician actually like to make a couple of bucks from our usage (speaking of IP, I’m calling dibs on that idea).  And, frankly, who the hell else is using Tom Paxton’s 1963 masterpiece Bottle of Wine – I’m pretty sure Mr. Paxton would be happy to make a couple of dollars from our videos.

Out of immense frustration, I spent some time searching around last week on Google and YouTube trying to make heads or tails out of this new ridiculous muting policy.  Somehow or another I stumbled upon a video which pretty much shut me right up (it’s at the bottom of the post).

There are so many great moments in this news report from 1981, but two of my favorite are:  1) at about the halfway point they interview a guy and under his name it actually says “Owns Home Computer” just like it might read “Senator”, “Astronaut”, or “NFL Linebacker” – that’s how unusual this guy was back then; and 2) at the very end of the report, the anchor comes back on screen to talk about the download times.  I’ll let you listen all the way through to get to that punch line.

So, in the midst of all of my frustrated blogging about digital music rights and video upload times (while using one of three computers I have access to), I’m reminded at how far we’ve come in a very short period of time and how Bruliam Wines wouldn’t even exist were it not for the technological advances of the past 25+ years.

Bottom line:  I’m going to stop griping about YouTube and just enjoy the fact that such things now exist.  At least for a few days…

Enjoy the video – it is a blast!  If you can’t see it, please click here.

We hope you enjoy our latest installment of cooking with Bruliam Wines!  The recipe follows after the video.

If you can’t see the video, please click here.

Pinot Pocket Chicken Recipe

2 cups thinly, vertically sliced sweet onion (like Vidalia or Oso sweet)

1 tbsp sugar

2 garlic cloves, minced

2 ounces goat cheese/ chevre

4 teaspoons olive oil, divided

Salt & pepper for seasoning

1 tablespoon Italian seasoning

1/4 to ½ cup chicken broth

½  cup pinot noir

4 (6-ounce) boneless, skinless chicken breast halves

2 tablespoons chopped fresh Italian parsley (optional)

1. Preheat the oven to 375 degrees.
2. Heat 2 teaspoons for olive oil in a small sauté pan over medium heat.  Add the onions to the pan and sprinkle with 1 tbsp sugar.  Cook until onions start to soften and turn translucent, about 5 minutes.  Add the garlic cook 1-2 minutes more.  Reduce the heat to medium-low and allow onions to turn golden brown.  Add ½ cup of pinot noir.  Simmer until liquid is absorbed, about 10 minutes.  Remove the pan from the heat, and season the mixture well with salt and pepper.  Add chevre, stirring until the mixture is creamy and the cheese melted.  Set aside.
3. Trim excess fat and rib meat from each breast (if present).  Beginning with the thickest portion of the breast, use a sharp knife to cut horizontally into the chicken breast creating a “pocket.”  Cut deeply into but not completely through the breast, so it holds together.  Create a pocket in each of the 4 chicken breasts.
4. Season the top side of each chicken breast with salt and pepper and Italian seasoning blend.  Divide the onion mixture into 4 portions, and stuff an equal portion (about 1/4 cup) into the pocket of each chicken breast.
5. Heat remaining 2 teaspoons of olive oil in a large sauté pan over medium-high heat.  Add the stuffed chicken breasts seasoned side down and cook 3-4 minutes, browning well.  Carefully flip the chicken over, so the seasoned side is now up.
6. Slowly add ¼- ½ cup of chicken broth to the pan, scraping the bottom to loosen the brown bits.  Place the pan in the oven for 12-15 minutes, until the chicken is firm to the touch, cooked though, and juices run clear.
7. Serve immediately, spooning remaining pan sauce over each breast.  Sprinkle with parsley, if using.