My afternoon train reading:

• The Overconfident Investor Moves Markets (Yahoo Finance)
• Three Major Market Threats; Advice for Advisors  (Financial Advisor Magazine)
• Has Schwab Cracked 401k Code For ETFs? (Index Universe) see also Limiting the 401(k) Finder’s Fee (NYT)
• Why Was GDP Revised Down so Much? (Real Time Economics)
Alphachat podcast: Noah Smith on the Japanese economy (FT Alphaville)
• We have always been modern, and it has often scared us (theguardian)
• Senators introduce bipartisan bill to replace Fannie, Freddie with new agency (Washington Post)
• Congress Has Only Itself to Blame for IRS Troubles (The Chronicle of Philanthropy)
• One Tech CEO Puts His Money Where His Mouth Is (Fox Business)
• Is Wine Bullshit? (Priceonomics)

What are you reading?

Source: Bloomberg Brief

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “10 Midweek PM Reads”

  1. changja says:

    So…what’s the implications of a stabilized debt deleveraging?

  2. Anonymous Jones says:

    That was actually an excellent article on wine. As they point out, just because enjoyment is uncorrelated with price does not exclude the possibility that any particular drinker might rationally prefer one bottle over another.

    Most expensive wine I have tried, I was unimpressed, though the most expensive bottle I’ve ever had (a reserve amarone, the price of which I did not know when it was passed around) was definitely to my liking the best. In any event, no matter what your palate, you can find a wine between $12 and $20 that is excellent. Unless you have a very specific taste for a very specific flavor (say, certain burgundies (and other regional pinot noirs) or special processes (like appassimento for amarone)), there is never any reason to spend over $20 on a bottle of wine at retail.

  3. rd says:

    I live close to the Finger Lakes in NYS, so have lots of opportunities to do wine tastings at the wineries. A few times, the owner was pouring and we were able to talk about the winery. They have all told me that the price for their wines are largely based on production cost. Sometimes the wines that cost more to produce are better but not always.

    The blends are often cheaper for them to produce since they can use a wide variety of grapes and vintages to get the taste that they want efficiently.

    Putting kids through college has meant a limited wine budget, so it is fun to go into the stores and try a variety of $8 to $20 wines. Some are duds, but there are some that are consistently very tasty. Sometimes it is a specfic vintage but other times, the winery seems able to consistently produce wines that we like.

    Some of the best deals these days seem to be Spain, Italy, Chile, and non-high end France. In Spain and France their internal wine markets seem to have declined with the economic woes and so we are an important export market for their vast quantities of excess wine. Chile isn’t a big country but has a long history of wine production and seems able to produce consisitently good wines at low prices.

  4. theexpertisin says:

    Costco has it nailed on wine. There is no reason to look anywhere else for value and a decent selection.

    They are the largest purveyor of wine in the United States. Even their house Kirkland brands are very, very good.

  5. willid3 says:

    Chinese shadow banks

    only difference i guess is the Chinese have been known to execute executives..

    course then again it seems that workers in China (and India and France I think) have been known to put their bosses in ‘jail’.

  6. willid3 says:

    hm. if central banks are powerless and ineffective then why would tapering matter?

    which is it? it can’t be both

  7. Peter Pan says:

    Wine is totally bullshit. I call it the devil’s drink.

    Personally, I prefer MD 20/20 over Thunderbird. But Thunderbird excels at stripping paint or rust.

  8. san_fran_sam says:

    Wine — in a blind taste test most people could not tell the difference between red and white.
    Wine – Two Buck Chuck is now $2.49. still a great value if you like how it tastes.

    Household deleveraging – terrible graph. the left axis starts at $4T. Makes it look like mortgage debt has gone way up as a share ot total HH debt.

    HH deleveraging — the implication from stabilizing is that the consumer won’t be cutting back on spending any more to lower their debt obligations. the consumer may not be back. But he has pulled his wallet out of his back pocket.

    • My B-in-law is a oenophile who did a blind testing for us — we all brought different wines, and he used some of ours and some of his.

      In a blind test, I disliked $2 Buck Chuck and loved the $70 Mercury Head I brought — but the rest of the wines involved, which ranged from $20 to $100 — were totally random as to likes and dislikes.

      There is no doubt your expectations impact your enjoyment of wine!

      • Cato says:

        From my experience, there’s always a pretty damn solid $20/£20 rule where most people who know what they like and are tasting wine of that preference (i.e. red bordeaux, southern rhone, etc etc.) will prefer and find more enjoyable (in blind tasting) the premium wines, up to a value of about $20/£20 and then frankly it is anyone’s guess.

      • lrh says:

        “your expectations impact your enjoyment” That’s Merton’s insight of a self-fulfilling prophecy, right?

        Glad you made the point that double blind tests don’t prove that all winemakers are full of it and that cheap is indistinguishable from the best.

        I saw it firsthand in my early twenties as a very vocal engineer sneered at wine tasting snobbery and then promptly declared the $50 wine best among seven different price points.

  9. Francisco Bandres de Abarca says:

    What am I reading? Here’s a couple interesting tidbits:

    -The Federal Investigation Agency (FIA) [Pakistan equivalent of FBI] on Tuesday named former president Pervez Musharraf as the prime suspect in the December 2007 assassination of ex-prime minister Benazir Bhutto.

    -Saudi Foreign Minister Prince Saud al Faisal went into a near rant today in Dubai over the negative turn of developments for the Syrian opposition. He accused the Asad regime of genocide and Iran and Hizballah of having invaded and occupied Syria. He promised to provide more aid to the opposition.

    “The Kingdom demands a clear, unequivocal international resolution that bans any sort of weapons support for the Syrian regime and declares null and void the legitimacy of that regime,” Prince Saud said at a joint news conference with the US Secretary of State.”
    [That sounds like a serious escalation of arms flow to me.]

    Referencing the ‘Advice for Advisors’, I too try to keel abreast of what Dalio, Gundlach, and a couple others you’ve cited, are thinking. Cliff Asness seems to keep a pretty low profile, though. He needs to get out more–an occasional chat with Trish and Adam wouldn’t hurt.

    On the ‘Is Wine Bullshit?’ story, I’d have to answer ‘no’–though I had the unfortunate experience of drinking a bottle of Tsingtao beer once. That was pretty close.

    Speaking of Finger Lakes wine, I have a friend who is rather fond of the Bully Hill (just north of Hammondsport) winery selections. Beautiful country. And, yeah, some of those points made by ‘rd’ on wine are spot-on. Not much need to spend more that $20 for a bottle of wine. Have a friend that previously represented some vineyards around the Rioja region of Spain, and many of those were a bargain.

    Y’all take care out there!

  10. Richard W. Kline says:

    While most of what was stated in the wine article is literally true in so far as I’m familiar with the tests—better ‘tests’—involved, the manner in which wine is presented is really badly distorted.

    First, there is an embedded assumption that price is correlated in some more or less direct manner with quality; the writer than goes on to show how ‘this can’t be true.’ —But the assumption is faulty from the get-go. Price in wine is first of all a function of scarcity, and secondarily a function of cache. Those $500-2000 bottles are from _tiny_ annual outputs where a few hundred bottles or less of production are chased by the most moneyed buyers from all over the world. Of course the price is bid up, it doesn’t matter what the content of the receptacle actually is. Only some of those bottles will be aged to optimum drinkability, making a scarcity within a scarcity. These small production lots come from postage stamp vineyards with enduringly good reputations, and that reputation builds cache, which further draws big money. The end result is that even when truly superior a $500+ bottle may be only .5% better than a comparable bottle in a nearby vineyard in the same vintage . . . costing $50-100. This is a reality of market pricing when buying against billionaires, not a level analysis on the basis of quality. (And haven’t we seen this in MBSs recently, for instance?)

    This leads to point number two, that wine quality is a logistic curve, not a linear one, and certainly not and exponential one _even though price changes exponentially at the ends of the curve_. Wine at the high end of the curve really is going to consistently taste better than wine at the low end of the curve. The author of the article keeps equating $2 wine and $$$ wine because that makes for a provocative article, but the conclusion is essentially false. Drink a wine under optimum conditions where it’s had proper time to decant, or better age, where your palatte is clear, where you linger over the nose, mouthfeel, and finish, and I guarantee you’ll have NO trouble distinguishing the former from any reasonably good wine _whatever it’s cost_. In this sense, wine is not bullshit, and it’s simply disengenuous to imply otherwise. But the distinctions at the top end become small, more a matter of, well taste, and circumstance, even while the above-mentioned drivers of price may state that Wine X is ‘better’ than Wine Y. The same is true at the bottom: awful wine may vary in exact quality but remains awful in it’s own, sad, way, no way you’d pay even $5 for it.

    The author refers to tastings where ‘experts couldn’t tell the difference.’ This ‘conclusion’ is repeated multiple times, and taken as a proven fact of known value: “Nobody knows nuthin.” And there have been some of these tastings, but the representativeness of those ‘failings’ is itself questionable. Wine tastings are understood to be a _terrible format_ for making fine distinctions between wines. The palatte dulls. Most tastings are not of mature wines but of recent wines, when one is already having to fight through unfinished aspects of the pour to ‘guess’ at where the wine will end. Most tastings don’t really decant the reds long and well enough to really develop a glass; I’m serious, even elite pours may be only a few hours open when you need a half of a day for the wine to really get to where it can be. Whites are seldom served at optimal temperature. My own nose tends to stuff up terribly so that individual sips out of the same glass can be wildly different—an I know this, but not everyone really takes one’s own inherent perceptual variability into account. Then there is the matter of the degree of expertise of the ‘failed experts’ in these (very few) tests. As the author pointed out, there are a small number of folks who consistently CAN tell the difference between wines in these deliberately deceptive tests performed under suboptimal conditions. What this says is that while most ‘experts’ are connossiuers, few are really masters of distinction. What the tests may show is simply that very few people, regardless of status, can tell fine distinctions, NOT that there _are_ no perceptible fine distinctions. Human ability to make fine distinctions by the sense of taste IS quite limited, that is no falsehood, but it is not negligeble. This is the conclusion which I have drawn from reports of such tests.

    There is the ‘food coloring’ test cited, which I had read about before. But again, how representative is that? What is the skill level of the experts, and what wines were involved? Yes, I can imagine that a low-acid sancerre (sauvignon blanc) might be confused for a mourvedre, especially if the taster was working on their fifth or sixth consecutive tasting. The circumstances and deception can defeat ones limited ability to make fine distinctions. I’m not convinced that food coloring alone would cause one to miss a txakoli passed off for a pinot noir; one might miss that it is txakoli but conclude that it was a bad bottle of burgundy. One might confuse a malbec for a cabernet franc (they’re nearly the same grape anyway), but it’s much less likely that someone is going to confuse, say, a Red Mountain cabernet sauvignon with a beaujolais colored to look the same; one may not tell that the latter is a gamay but something’s going to seem amiss. The point is that confusing medium bodied wines is unsurprising, especially in bad conditions designed to deceive. Wine evaluators of any ability, credibility, and sense, taste _individual bottles, alone_, take time over the pour while taking notes, and often revisit the bottle hours or a day later. Banging back a bunch together just leads to misperceptions at best, which is what these ‘tests’ have really shown.

    The broader deception in the article, and I do think it a deception, is that the variability of wine is in no way engaged with; wine is simply presented as it it’s taste quality should be as reliable as a Whopper or a cone of Baskin-Robbins Strawberry. Vintage years can very enormously so that even reliably excellent vineyards can have a seriously off year, $500+ cost to the sucker regardless, while even mediocre plots can give a solidly pleasing year as long as things like finish aren’t attended too. Which after the second glass over gorgonzola cheeseburgers they are not. Thus the assumption that ‘they’re all nearly alike’ doesn’t address the huge range in variability, not only due to tasting conditions, but even season to season off the same vines. I guarantee that a good vintage off great vines is going to knock the two-buck shucks off the table, something the author seems to think as disproven or largely in the conditioned response of the taster to a name label. Yes, names and other cues do have psychological effects which influence _perception_ of taste. Actual taste of the pour does make distinctions though when the differences are large; and the differences often _are_ large. And too, of course point evaluations vary on the same wine misleadinly represented—the wine may actually taste different in the glass a half hour apart, that seriously happens. Wine isn’t like motor oil, it does shift its taste minute by minute, sometimes magically, sometimes tragically. The author of this article doesn’t engage with that physical reality of the potion either. “They got it wrong” is packaged as the takeaway, when ‘they got it differently’ would be inherent, often, even if one knew they were tasting the same glass, let alone the same bottle.

    I have certainly had $30 bottles of burgundy which would whup arse on some of those $500+ bottles. This is not, however, because ‘there’s no real difference,’ or because of the logistic compression of distinctions at the high end, but because the latter might be only 1% better in an absolute sense, and not even that much in an average year while the former was seriously mispriced by the market (and I’m not telling where or whose it is, either!) because an obscure producer working with a new vineyard having no track record. In otherwords, the price distinctions was a market distortion, not a reflection on an accurate analysis of potential quality difference. This is often in play in tasting situations: the wines may, at _optimum_ be of quite different taste value, but in so-so conditions in an average year for one and a good year for another may taste as ‘about the same’ or even more skewed.

    There are further issues glossed over in the article, such as the real taste distinctions between different kinds of wine grapes, or the fact that the high-alcohol, fruit forward winemaking styles presently in vouge will, yes, tend to blur distinctions of season and quality. And so on, and so on. I’m not touting the virtues of high-end bottles here: I think anyone buying those $500+ bottles is buying for ego and has enough money that they enjoy expressing themselves that way, but that for most of us it would be a criminal and entirely unnecessary waste of cash. There’s an ocean of excellent whites that can be had for under $20, and you need never go over $30 in your life unless you’re the kind who buys pricey champagne to impress your date (and who, as a serious wine drinker, EVER drinks champagne anyway, it’s a commodity not a vinous beverage). Properly handled, you may get really good bottles of reds for under $20, but really, you’re cheating yoruself. Learn what’s what and who makes it, buy in the $30-60 range, any you can have a knockout bottle every night of the week, there’s an enormous amount of wine. And you’ll taste the difference if you bother to get the bottles which actually _are_ different as opposed to those which are simply priced or marketed differently. Sez I.