Kobe Short Ribs and Côte-Rôtie

Bone-less Kobe Short Ribs cooked in red wine, served with mashed potatoes and baby carrots, and 2001 Rene Rostaing Cote-Rotie.

The short ribs are slow cooked in red wine with tomatoes, carrots, garlic, celery, leeks, bay leaves, thyme and parsley, for hours until tender.

I have chosen the a northern Rhone syrah with this decadent dish for three reasons: The high acidity of the syrah will cut through the fattiness of the beef. The oak in the wine combined with syrah gives it a "bacon" or smoked fat character for a common taste in both meat and wine. Finally, legumes secondary flavors of the wine matches the red wine/tomato sauce and baby carrots. This 2001 has enough power, complexity, soft tannin, and acidity for the dish to complement the wine, and the wine to complement the dish. This is one of these occasions where the result is greater than the sum of the parts.

Gros Nore Bandol Rose 2010

Tasted in the late evening , this wine was a pleasant surprise. Color was clear, light intensity, day bright, salmon pink color with orange reflections, and medium viscosity. The nose was dominated by the mourvèdre, with leathery aromas, as well as cherries, and limestone. The attack is fresh, the mid palate powerful, and the finish mineral and elegant. This wine has great complexity and acidity, it leaves you refreshed and ready for more.  With a 13.5% ABV this rose has plenty of body and will pair well with food. Try a roasted red pepper, marinated in olive oil with Provencal herbs for a perfect late afternoon en-cas.
$24.99/bottle at Bleu Cellars. Bleucellars.com

Going After the Master Som Licences

Since the last post many things have changed. The real estate bubble burst, Lehman went bankrupt, we elected a black president, I became a United State Citizen, and a father. I am now, and for the last 5 years, working full time for my parents' restaurant: Bleu Provence in Naples, FL. I am the floor manager, and the sommelier.
Lately I have been working on improving my work performance, and while I have made strides in managing co-workers, I decided it was time to take the sommelier experience to the next level. After being suggested multiple times to go for the Master Som licences, I studied the question seriously, and finally decided to take a crack at it.
It will be a long, and difficult process which will require patience, discipline, and perseverance.
I can't hide the fact that I am very excited, and highly motivated. In the last 5 years wine has taken and much bigger dimension into my life, we have even opened up a wine store next to the restaurant (bleucellars.com). These sommelier licences should prove to be  valuable assets for the rest of my career in the food and wine industry.
I plan to use this blog to come up with wine pairing, and give you as many tips on wine in general, wine buying, or even wine investing, as possible.
I will be honored to share my experiences throughout this process with you over the next four years. My first examination will be on August 8th, after 2 days of classes with Master Sommelier Virginia Philip of the Breakers, West Palm.

Emillia II

Emillia

Credit Crisis, Tip of the Iceberg?

The current market conditions are pushing me to come back to my blog after a long absence.
Folks, make sure you're sitting down before reading this, and I might upset a lot of people with this post but this is my view of things at this point.

First off, I would like to focus your attention on the Carlyle Capital Corporation. This investing firm (mostly Fannie may and Freddy mac mortgages and US government bounds) had at the beginning of 2008 $21.1 Billions in debt principally funded by repurchase agreements ($20.976 Billions) , $129.923 Millions in Liquidity cushion, $16.4 Billions in assets. The drop in the value of the assets held, created margin calls on the Carlyle Capital loans, and the company was unable to make theses calls for lack of sufficient liquidity (cash). The bank traders decided to take advantage of the recent pledge from the Fed and JPMorgan to back up Bear Stearns (Who by the way was the first one to liquidate positions in Carlyle Capital Corporation) and provide them with liquidity. the bankers seized all assets, or whatever was remaining of the bonds and mortgages backed assets. The big wigs with which Rubenstein usually meets with to get the loans, had abandoned the company, their leaders, and the shareholders.The company had just gone public on the Amsterdam Stock Exchange leaving the proud owners of 500 Millions of B, non voting, shares with absolutely nothing or close ($0.71 per share, up 90% on vague comments from founder Rubenstein to somehow try to compensate shareholders).

The lesson to be learned here is to remember that stocks, in the end, are worth nothing. They are just pieces of papers. There will never be enough money, after the bankers get their shares, for the stock holders to get anything back.

I would like to take a moment and take a look at how a corporation run by such a brilliant man as Rubenstein with friends in very high places who were there to start him up by funding his private equity fund (Citi ex CEO Charles Prince), was to fail so miserably.
Lets look at what I think is key in this situation and really in what the credit crisis is about: How does an investment company leverages (borrows) $21 Billions with $130 millions in liquid assests????!!!!! That's an 161:1 ratio!!!! To put it in perspective if you went to the bank with $100 as collateral and ask for a loan the bank would say in return: "Yes! Here is $16,150.00!" I'm not sure what the interest terms were, but do you think this would ever happen to you or me? Why are there no limitations on the amount of money financial institutions can leverage to invest with? Try printing your own money out of your house and see how fast the secret service guys will be knocking on your door, yet this is exactly what is going on and what got Carlyle in this mess.
So when the dividend paying assets, on which the Carlyle Capital guys were trying to get fat on, starting to free fall in value the lenders wanted their money back. Why wouldn't they? It's their money, they need it to pay off their own debt, which for a while was getting called in buy the boss of the banks: The Federal Reserve.

The Federal Reserve who after a few years of record low interest charging, created a monster in the real estate bubble, and then drying out markets of liquidities buy raising interest rates and selling securities to the banks.
As Federal as Federal Express, and holds no reserves whatsoever: the U.S. government only owns 20% of the shares, and all the money they lend out is created out of nothing, but the interests they collect is real.
I will give my 10 shares in the gold ETF GLD to anyone who finds me a list of all the Federal Reserve shareholders.

But you're probably not persuaded, well here is an other prediction Bear Stearn is not going to survive, it will either be absorbed by the mother ship of banking and financial companies JPMorgan Chase, or if enough insiders and friends of privileged get out in time, it will become insolvent, the stock will be worth nothing, employees laid off, pensions and retirements wiped out, lives ruined, and the offices will close. All financial institutions in Europe, specifically in London, have be told to stop doing business with Bear Stearns, all the New York Hedge Funds have pulled out their holdings. This, my friends is a banker's worst nightmare: a run on the bank, and there is no coming back from that.
Plus liquidation continues and the domino effect will soon affect the entire financial sector and will spread to the more credit sensible industries (and already has). Stay away from any investment that demands capital to be readily available in order for the company to profit. All the cash in the market is being sucked into a hole which has no bottom, as all the debt far, far exceeds the available liquidity.

Good luck, we all need it now.

Monthly Portfolio Performance Report

Two months have gone by, and after a market peak mid July, my stocks took a big hit, lowering my year to date return to +15.20% from a high of +26.74% on 07/13, and bringing my monthly losses to -6.02%.
Even with above expectation earning announcement my biggest loser was Volcom plunging -29.21%! The last time this stock lost a third of its value it went on a bull run, rising 140% over 11 months. This may well be an excellent buying opportunity, now that their European infrastructures are up and running the next quarterly earnings should bring a big upside surprise.

GOOG: -2.43%

NUAN: -1.49%

MRK: -0.30%

EEM: +1.12%

VLCM: -29.21%

GLD: +2.29%

COP: +2.98%

Investing Strategy

After a day like today, it's always good to take a long hard look at your portfolio and point out what is not working, and at the same time look for what is working that is not in your portfolio.
Here is what you should see in there:

• Defensive stocks (food, liquor, tobacco, and high yielding stocks)
• Bonds ( I don't care if you own munis (municipal bounds), or the total bond market ETF AGG, buy more)
• Oil related equities
• Precious metal

While I personally don't recommend shorting the markets, money can still be made buying index puts, or even going long on one of the new ultra short ETFs, like SDS which will capture twice the loss of the S&P 500, up +4.62% today. Putting a small portion of your money out of say, your small cap growth funds, in there would probably be wise.

Google's Earning Miss, an Opportunity For You?

As I came home today and turned on my favorite channel (CNBC) I first beheld the DOW closing above, or more exactly at 14,000, and thought "uhm, how bullish", my next observation was not as promising, as I watched the GOOG ticker followed by a red 39.40.
My heart dropped. I immediately checked the Dow Jones News to find out why my favorite stock was taking a 7% dip after hours.
As I remember, there was a couple of things that scared investors last quarter, one being the fear of rising expenses, and the other, the fear Google could not grow it's revenues fast enough anymore to justify this kind of PE. These two worries seem to have been put to rest for the time being, as traffic acquisition costs declined to 30% from 31%, and revenue came in for the quarter at $2.72 billion when analyst were expecting $2.68 billion.
Unfortunately, earnings came in at $3.56 a share compare to the expected $3.59, but since we are used to see Google's earnings beat the street expectations like a pinata, investor disappointment is high.
Time has taught us that any dip in price for Google share is usually a buying opportunity, but if CEO Eric E. Schmidt doesn't turn his recent acquisitions into earnings this company is going to have a hard time growing at the speed they have been in the past few years.

Fortress and Blackstone, Time to buy?

I was in a classroom environment last week, briefly discussing recent IPOs, when one of my class mates noted how poorly Blackstone stock had performed since its debut on the New York Stock Exchange. At first it didn't bother me..., but I then realized he had no idea why the IPO had a bad first week, and that did annoy me. The reason behind the poor start are the fears of tax law changes which could drop hedge funds and private equity firms into the 34% tax bracket from the actual 15% I believe.
Today the stock dropped an other 2.51% to $29.18 on corporate governance issue concerns, apparently the way the IPO was structured it did not follow NYSE rules imposed on other corporations trading on the exchange (operating company vs. investing company).
But as investors will learn tomorrow the first legal hurdle seem to have been passed, as Treasury Assistant Secretary for Tax Policies Eric Salomon had nothing positive to say about the new proposed tax laws.
I remember thinking, last week, "with all the money these guys have, I'm sure they'll be able to lobby successfully(Blackstone co-founder and CEO Steve Schwarzman made $7.7 Billion on the day they went public), plus if this guy says "sell" without knowing why, the odd lot theory would indicate "buy"".
Now it seems my initial prediction is holding true, I am sure they are smart enough to navigate around anything legislators might throw their way, and with BX now down 10% from its opening day, and FIG down 22%, I bet they are due for a pop.
Keep an eye out!

ConocoPhilips Shares up 3% After Company Annouces $15B Share Buy Back

Conoco's buy back represents about 180 million shares, or 11% of all outstanding stock, it will be buying back shares every quarter until the end of 2008. Very bullish news for Conoco stock holders, on top of high oil prices, making this stock look attractive in times where the sub prime mess is pushing most averages lower.

Monthly Portfolio Performance Report

I know it has been a while, but it was a good while. Markets are going in only one direction and it’s up…for now. We just went through a great month of May the DOW was the biggest gainer with + 4.5% followed by the S&P +3.33% who set new record highs for the first time since 2000, and the NASDAQ +3.12%.

As far as my holdings go, this is the first time this year I failed to beat the DOW, my portfolio had a + 4.4% return, due to a slight down turn in gold prices, but my YTD (year to date) return is still far above the markets (+17.38% compared with +9.52% for the DOW). My performance for May was as such:

GOOG: +7.40%

NUAN: +9.21%

MRK: +3.00%

EEM: +4.92%

VLCM: +2.95%

GLD: -2.56%

COP: +11.58%

For June I think there should be a slight correction in energy prices, at least until we see the first hurricane come through the Gulf of Mexico, and I would take a good look a tech and semi-conductors in particular, since a few of them are back to 2005 levels, right before they had a real good run up.

Good luck out there.

Financials, Goldman Sachs

This week were are expecting some big financial names to release their earnings. Goldman Sachs tomorrow morning, Lehman Brothers on Wednesday, and Bear Stearns Co. on Thursday, both of them before markets open also.
While GS beat earning expectations last quarter the stock is now 10% from it's highs at about the same level as it was on its last earnings release. So the stock looks like a bargain, specially when you look at the PE and PEG compare to the industry(10.4, 0.7 to 18.2 and 1.4). It looks to me as the stock should double before it would reach average valuations. So what's keeping this stock from taking off? Guidance, I imagine.
Analyst only expect $21.15 EPS for 07 compared to 06's $19.69. That's only 7.41% earnings growth, could that be true? After 06 75.55% earnings growth and 5 year growth rate of 35.75%? I must be missing something.
If you see anything out there that could qualify as a big red flag, please let me know. Meanwhile I'm going to unlock some funds and start a very small position.
Good luck out there!

Monthly Portfolio Performance Report

Well it’s the beginning of a new month and I want to keep sharing how I did. Plus it keeps me honest about my stocks.

• GLD +2.27%
• COP –0.53%
• EEM –3.47%
• VLCM +13.03%
• GOOG –10.06%
• MRK –0.69%
• NUAN +22.67%

For a total weighted gain of +2.17%

Not that my biggest gainers were my smallest cap companies and that I am expecting a reversing trend for the month of March. I wouldn’t be surprised if I end up giving back most of these gains. I expect a lot of red ink this month, down 1.1% on the first day, and probably continue to slide until the fed decides to lower the rates hopefully in May.

I hope Google will bottom out, and energy prices will help lift Conoco.
I still think Merk is a not fully valued, the new drugs coming out indicates great potential, I think most analyst underestimate the sales the will generate.
Nuance has made an other acquisition, and I still expect a lot of upside down the road, and Volcom is just getting started its European growth, and I have a strong feeling the Volcom culture will integrate itself well. European youth will receive well this type of “we’re not the big bag corporations” attitude.

I do plan to take advantage of recent events to add a position, the bargains will be out there, I have a real interest for the financial industry, but I have not yet ruled anything out.

Correction Day

So how is everybody's portfolio doing today? Are you feeling pain and nausea from the red paint all over your account statement? If yes, then don’t you worry, you’re not the only one out there. As of 9:09 a.m. my portfolio was down 2.2%. That’s almost my January’s entire gains wipe out in one day!

I’m not worried though, February had been stellar until now (up 5.93%), and I always brace myself for some big losses after a long winning streak.

For those who read my posting on February 1^st you can now see that I was right to be worried about Emerging Market’s valuation level. EEM is my biggest loser today, currently shaving 4.7% of its value after being down over 6% at the opening bell. By now everyone should know that China’s market had its biggest one-day lost in a decade (8.8%), and this is only the beginning. I think the decline can easily continue to -25% before it bottoms out, based on previous experience (in May of 06 EEM went down 27% from about $110 to just above $80).

To look on the bright side, this is only a correction (based on CNBC analyst’s opinion) and soon opportunities will present themselves in the form of under valued equity.

The one sector I remain bullish about is commodities, and most importantly gold. I think gold is on a strong up trend and we should see prices breaking its May of 06 highs of $732 pretty soon, probably within 6 months.

Good luck out there, and don’t let a set back hampered your enthusiasm for the equity markets.

Volcom Reports Quarterly Earnings

Volcom Inc.'s (VLCM) fourth-quarter net income rose 6.7% to $7.63 million, or 31 cents a share, from $7.15 million, or 29 cents a share, a year earlier.
The Costa Mesa, Calif., sportswear designer said revenue increased 37% to $56.6 million from $41.2 million a year ago.
On average, analysts polled by Thomson Financial predicted fourth-quarter earnings of 30 cents a share and revenue of $54.8 million.
Volcom expects first-quarter earnings of 15 cents to 16 cents and revenue of $48 million to $49 million.
Analysts predict first-quarter earnings of 19 cents a share and revenue of $51.2 million.
-Monica M. Clark; 201-938-5400; AskNewswires@dowjones.com > Dow Jones Newswires
02-22-07 1704ET
Copyright (c) 2007 Dow Jones & Company, Inc.

Volcom beat analyst's estimate for this quarter but announced lower than expected guidance for the first quarter of 07, although the guidance for the year was on the high end of the analyst's expectations. The stock is currently up a little over 8% for the day after the quarterly numbers produced mixed emotions after the closing bell yesterday (down 2%).
I still think Volcom's approach to the market is right, by sticking to their traditions and what have made them successful in the past they are securing long term growth.

The market has been good to me this earning season, long live the market!

Microsoft Vs. Google

I read an interesting article this morning on TheStreet.com. In "Vista Makes Run at Google" by Vishesh Kumar, we are told how Microsoft will (hasn't happened yet) be eating away market share from Google in the online search market.

How will they do that? Just like they did every other time a competitor came out with a technically superior product: They're going to bundle up their own inferior product with their operating system. This strategy has worked in the past (ie: Explorer vs. Netscape), but look at what is going on now in the browser business: FireFox is eating away Internet Explorer's market share, (12% to 86%).
I think what the author is missing is user awareness. After a couple of decades of Microsoft product the public is finally turning an objective eye on Microsoft's product and noticing the flaws.

I also believe he is totally underestimating the momentum Apple is currently carrying. Even if Microsoft does find a way to send more Vista users to Live, the effort will be annulled by the fact that more and more users are switching to Apple, and who sits, on Apple's board, with Al Gore? Google CEO Eric Schmidt.

All of this is understandable if you read more of this author's articles about Google. He sees every new venture Google gets in as a recipe for disaster, and always points out negatives. If I didn't know any better I would say he's being paid by Microsoft to create negative publicity about Google. He is most likely just disgusted by Google's incredible success with for only mission to organize the world's information and make it universally accessible and useful.
It must be tough, for any analyst, to be positive about a company that doesn't hold it's shareholder's interest as their only reason to do business.

Chablis Grand Cru Chistophe CAMU "Les Clos" 2004

I had the pleasure to spend last weekend in Naples where the good life is lived, and lived well. During my short vacation I was lucky enough to taste my favorite Chablis of all, Francois Raveneau. Tonight, I am just a little less lucky to have found this bottle at our dear Central Market.

I can tell, when I drink this bottle, that Christophe Camu transferred his genius to his wine. This is the first time I am impressed by a Chablis that does not carry the name Raveneau.

I have to admit the hesitation was great when I was standing in the Burgundy isle and I was staring at the $70 price tag. I'm, usually, and luckily, not the one opening bottles carrying this type of price tags. So when I uncorked the bottle and gave it my first tasting step: the cork smell, I was very anxious. I could distinctively smell the fruit pass the cork, which made me very optimistic about the rest of the exercise.

The nose was a total let down: Weak, smelled like a mix of iron and honey. But the honey gave me hope and I carried on to the tasting.

This is something I would never be afraid to serve. I would be proud to have on my hypothetical wine list and I would recommend it to any make believe customer who wanted a great chardonnay without having to feel like you are locked in a new oak barrel.

It's a perfect balance between fruit and minerals, earth and air. The savors dance on your tongue, and fill you nose with sweet sent.

If I were to compare it with Raveneau, I would say: It lacks Raveneau's magic touch, and only him can produce that, it's also half the price.

Nuance Communications NUAN

While I am not recommending this stock, I think it is a very interesting story I should bring to your attention. Nuance Communication is a Voice Recognition Software company. This is a small cap growth story with accelerating revenue growth and a top of the line product.
I know what you think, voice recognition is one of those mirage technologies as soon as we think we have it in our grasp we end up with...software that doesn't work. (ie: this video of how Microsoft made it "work")

But Dragon Naturally Speaking 9 is the real deal, not only it would understand even my French accent, but it will also help you navigate through your windows applications. Microsoft and Ford signed contracts with Nuance this year to provide them with their voice recognition software.
This isn't the only product Nuance is the proud owner of, they also provide IP voice dialer solutions for employee to employee communications, a very useful tool in the Health Care and Education industries, also voice recognition solutions for Sprint customers enabling the full potential of their mobile devices. The usage rates doubled during the last 9 months of 06.

Why is that important? Because Nuance’s highest margins are done on maintenance fees charged to these companies.

I’ve checked out the financial and I like the equity building, the cash flow, and it seems they have their debt under control. The obvious bother in all of this is that they have yet to produce any GAAP income, also the non-GAP came in 3 cents per share higher than analyst’s estimates last quarter.

Of course after a 20% jump last week, and the way the stock handled itself the last time the company had disappointing earnings (-50% in one month), at these levels I might add, you might want to take some money off the table.

Overall the future looks bright for Nuance, if not acquired pretty soon, it looks like a winner for many years to come.

Les Clefs D'or, Chateauneuf-du-Pape

This 2001 was a delight to enjoy. It was soft, balance, with nice rasberries and strawberries hints. The finish was a little short, but what it lacked in elegance, it made up for in complexity.