Sunday, November 11, 2012

Time For Post-Harvest & Post-Election Yogi.

When life is confusing, we all have to have a moral compass. For me, I look to the immortal Yogi Berra to make some sense out of things. Lets look at a few factoids:
  • That was two years of campaigning estimated to have exceeded $6 billion dollars. That is with a B. . . . . six billion. I remember when a thousand million was meaningful and to cite the immortal Yogi Berra, "Pretty soon that adds up to real money."
  • How expensive was it? It was the most costly election in world history according to the Financial Times by almost double. It cost $18 for every man woman and child living in the US. And what did that money get us? ...... just about what we had before. So the real question is, who is expecting a different result? It's deja-vu all over again.
  • Don't you think it's strange that the approval rating of Congress is lower than that of amoebic slime mold  (....even lower than bankers....)  and we largely voted the same gridlocked bunch back into office? I guess that means we've lowered our expectations of our politicians. The future aint what it used to be.
  • Your guy didn't win? Just buck up and stop your whining. Its a victory knowing we can get back to normal and reclaim our lives like they were before fact-checkers at different networks came to different conclusions about the same facts. They could have observed a lot by just watching.
  • It says something about us that when our candidate loses a debate, the FOX or MSNBC talking heads start flogging the moderators and then read idiotic tweets and emails from "anonymous" just to look like they are with it from a social media perspective. Its like when your team loses, you got jobbed by the refs. When did respected news-people become fair game instead of the candidates? My advice is next time the spin room gets an anonymous letter, don't open it.
  •  Ever notice how every year after harvest whoever is interviewed says, "This was one of the best growing years ever." Oh sure there was frost at budbreak. That just made the vines work harder. And yea ... there was a monsoon at flower, but that just lowered the yield naturally. We didn't need to drop fruit. ...... So when we really DO have the best harvest .... maybe ever, who is going to believe us? Maybe we need to plan our spokesperson playbook because if you don’t know where you’re going, chances are you will end up somewhere else."
So.... can anyone remember what we were talking about before our collective consciousness was eaten by political zombies and our brains turned into polenta? There is a lot to talk about but lets talk about just a couple critical related topics; the economy and the stock market.

Remember the Stock Market?

The stock market is one of the better leading indicators for the economy and is a good sign for forward wine sales. Its trended in a pretty narrow range for some time --- until the election was decided. Since then we've seen the worst trading losses of the year. WT ..... Heck! Why did the market just have the worst trading losses of the year?

If you voted for Romney then you just got hosed in the stock market because Wall Street hates Obama. Wall Street was exacting its revenge. Wall Street decided to sell-off to voice it's "collective displeasure." It was the Ghost of Business Past showing everyone that Mitt Romney was a better choice.

But if you voted for Obama, the market went in the crapper last week because the Greek Parliament can't agree on the Troika's austerity measures and those are a requirement for additional bailout funds which when disbursed this month will bail out nothing. The funds will pay interest on the Greek debt. It wont go into any programs and wont buy a single new job. That's why the market dropped. Everyone loves the President and he now has a mandate from the people.

Oh phuleeze you right and left wing nut cases! Get off your self-interested dogmatic partisan gum-flapping ..... (that sentence is proof I went to college). You think investors would sell out of disappointment? Wall Street might be peeved after the President made the greedy bunch into scape goats for all that is wrong in America, but don't forget they are a greedy bunch.

Traders sell because they see opportunity and profit, not because they want to voice their displeasure. Post-election traders can focus on the expected tax plan. Tax rates will go up under the President's plans. Anyone with a gain in the stock market might be inclined to take the gain this year rather than waiting. Certainly the Eurozone problems play a role as well. In fact, where is there good news right now? I believe the most concerning thing with the haze of wall-to-wall election coverage over, is really business and the economy itself. While we've been glued to CNN, Fox, and MSNBC, the Wall Street types have been researching and watching the US Economy. And frankly, its probably doing worse than you thought.

Remember the Economy Stupid?

That was the famous quote from James Carville; the Yogi of the Democratic Party. Public companies normally do a good job of forecasting. They already know where they are trending when they announce earnings about a month after quarter end. Then they sandbag the analysts: under-sell so they can over-deliver.

When the number of revenue misses are as high as they were in Q3, there is something going on that is surprising public companies in a very small window of time. But even more concerning than bottom line earning misses to me, is the number of top-line revenue misses as noted in the chart to the left. Sales growth in our domestic companies is now not keeping up with inflation, and less than a third of companies hit their sales number in Q3. How can there be that many misses when there is about a 60 day window of the unknown? That's a problem.

Why is this all important to the wine business? I like to say sales are the potential to make profits. Declining revenue means declining earnings unless you cut costs like workers salaries. Forecast profits are the fuel that feeds hiring. Hiring fuels the salaries that buy wine. We are now entering a holding pattern on new hires unless we see growth from somewhere and frankly, if you look at the world right now, all the world economies are flattening, including the US which is showing GDP under 2% and is perilously close to entering a second recession. Will we? I'm not predicting that because in my mind, it aint over until the fat lady sings.


  1. I am told by PinotDavid via email the first Yogi citation is incorrect and is properly attributed to Everett Dirkson. I don't know that its true, but if so only supports the other quote by Yogi, I never said half the things I said.

  2. Are there really no other comments yet, Monday evening???

    Well, if you combine the earlier posts about a lot of cheap imported wine coming in, and a recession at 50/50 here in the good ole, this must be a good time to sell your land, and plan on buying it back for 40% less in 3-5 years. Just like buying a house in 2006. But hold on tight to the cash in between. A mattress might be better than a bank.

    1. Thannks MAW. 3 day holiday has a little less traffic than normal. Lets hope the holidays don't drop by 40%!

      and .... while I'm on the subject of the 3 day weekend, thanks to my dad and all those who've secured our liberties and freedoms.

  3. Pinotgraves here--what effect does the smallest world wine harvest since 1975 have on all of the prognostications about what the next 12 months? (I think that's an OIV number but I can't cite it.)


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