image

It’s reality check time and we are opening the holiday-shortened trading week in a bear market in the S&P 500 after U.S. stocks had their worst week last week since March of 2020. The Federal Reserve hiked the federal funds rate by three quarters of a percent last week as it tries to cool inflation. I know, I said that would be “out of character” and “off script” on last week’s podcast. So, you know the situation is pretty serious, and the Federal Reserve does not have inflation under control. No central bank does, for that matter. It’s going to take aggressive interest rate hikes to get to what the Fed calls a normal rate environment (3.4%), which means we may very well see another 75 basis point hike at the Fed’s next meeting in July. While that 3.4% may be normal, if you look at the last 50 years, it is not normal when you look at the past decade, which has been characterized by accommodative monetary policy via low interest rates and low inflation well under 2%. This is new terrain for a lot of investors.

We always say that the stock market and the economy are not the same, and they are not. But occasionally they walk down the same path, especially during dynamic economic cycle changes. The stock market’s forward looking and trades on future expectations. Stocks are essentially a bet on the future growth and profitability of a company. So, as investors, we have to educate and ask ourselves, ‘How long might this downturn last? How deep will it go? And what will be the impact of a doubling of interest rates from here? And can the Fed guide the economy to a so-called soft landing?’ For stock investors, it’s a question about time. Your time. The bad news is that bear markets last about nine and a half months on average, and the average drawdown is around 36%. The good news is that a year after a bear market, the S&P 500 is up an average of nearly 15%, with a median gain of 23.8%.

What’s in This Episode?

Subscribe NowApple Podcasts / Spotify / Google Podcasts / PlayerFM

The Express is taking a hard left this week and climbing high into the Rocky Mountains. Our destination, the Food and Wine Classic in Aspen, Colorado. This high-class and high-spirited event has been hosted for 39 years by our partners at Food and Wine Magazine. Investopedia and Food and Wine are both part of the DotDash Meredith family of websites, and I was delighted to be invited to Aspen this year to host a conversation about investing in wine. I know, someone has to do it, and I took one for the team. But I really am fascinated by investing in alternative assets, and wine and spirits fall into that category. And full disclosure, I love good wine, great tequila, deep bourbons, and really good food. In short, I was perfectly cast for this assignment.

A few things to know. The global wine market is worth about $350 billion. Not massive, but sizable. That’s all the production, the vineyards, the labels, the distributors, the collectors, the restaurants, and you and me when we pick up a bottle of wine for dinner. It’s a global market with Italy leading the way in production, where they produce about 4.25 million liters a year of wine. France, Spain, the United States, Australia, Argentina, China, and South Africa round out the top eight. As for consumption, well, Europe leads the way as well, and Portugal has the highest consumption of wine per capita, and they make delicious wines over there in Portugal. They consume about 51.9 liters per capita every year in Portugal. In France, they consume about 46.9. Then Italy, Switzerland, Austria, Australia, Germany and Spain also round out the top eight.

Wine has been around since about 6000 B.C., and recent archeological research points to its origins in the Republic of Georgia in the ancient wine growing region of Coquette. Fast forward to today and up here in the posh town of Aspen, Colorado, 5000 people have come from all over the world to try new wines, eat vine fare, take seminars about food and wine, throw on cowboy boots, and party like they are a mile high. And our pals at Food and Wine put on a first-class event. I led a seminar on investing in wine with three really smart people who know the industry from the ground up. And on the panel were Charles Antin, the auctioneer and head of wine auction sales at Zachys; Erik Siegelbaum, the founder and principal of SOMLYAY; and Carlos Solorzano-Smith, the founder and managing partner of the Aspen Hospitality Group. These guys have been around wine their entire professional lives. I’m going to play some excerpts of that conversation, and we’re going to post the entire one-hour chat as a bonus episode if you’re a wine enthusiast and you want to learn more. I learned a lot.

Caleb:

“So I want to get into, ‘Why invest in wine?’ Obviously, it’s an asset class. Obviously, it does have value. Sometimes it goes up in value, but it doesn’t walk and talk like a traditional capital markets asset class. Like a stock. Like a bond. Like a cryptocurrency. Thank God. But there are various reasons why folks might want to invest in wine, and I want to get into that. And then once we get into that, and I want you each to kind of weigh in on the reasons (pick a different reason if somebody picked one ahead of you) the things to really watch out for and the things to pay attention to. And then we’re going to go through some lists of things you absolutely have to know if you’re going to try to invest in this asset class. So, Charles, let’s start with you. We’ve talked ahead of this about the dangers of investing. The things that could go wrong, the things you have to pay attention to, but most importantly, the expectations. So, why don’t you take us out with that?”

Charles:

“That’s the first thing I always speak to everyone about when they think about investing in wine. I mean, when you invest in wine, there’s a lot of things to think about. Number one, it’s not something like crypto or any of your other money that’s on your phone and you can watch it go up and down. It’s purely liquid. You can get rid of it when you want. I think that the majority of wines that I see that have done really well in the market are blue chips that you get and you hold for a long time, a long period. And there’s a lot of costs associated with holding wines for a long, a long period.”

“That’s probably the first thing that I tell people is, ‘What do you want to get out of this? Is a hobby investment? Is this an investment where you’re really going to consider putting a portion of your assets because it’s a tertiary to your normal investments?’ You really need to answer those questions because like any other investment in anything, whether it’s any business or any… anything really, you need to know what you’re getting into and what you expect to get out of it. I think a lot of people see an ad or something that shows that the fine wine market has outpaced the S&P 500 by two ‘X.’ And that is at best misleading and at worst a lie, I would say, because there’s so many things that go into investing in wine that you’re not necessarily told about. What else, guys?”

Caleb:

“Erik, why do it? Why do you think people, besides the fact that they find value, enjoy it? What’s important to know if you’re thinking about investing in this asset class?”

Erik:

“So, I do a lot of private cellar investment management for wine, and my biggest piece of advice is plan to drink every bottle you’re buying. And that’s your investment: delicious wine. If you’re doing this simply for like, ‘Okay, what percentage ROI can I make? What’s the curve? Where can I maximize/sell at top of market?’ Wine isn’t the thing for you. I guess we could make the point that gold comes in and out of fashion, but not as much as wine does. And because wine is very much something based on trend and based on opinion, it changes dramatically.”

“So, I have some clients, like, ‘Okay, so I want to buy Lafite or whatever. How long do I need to hold it until I can make 30% back on it?’ I’m like, ‘I don’t know. It depends what vintage. It depends what you paid for it. It depends if we can find a buyer for you.’ So, my number one piece of investment is if you’re going to do it, plan to drink the wines or plan for those wines to move down in your family. So, I do a lot of legacy cellar planning. Like, ‘Hey, let’s invest in this asset class because you love it and maybe your kids will love it and maybe it will be something incredibly valuable for your kids to either drink or sell.’ But if you’re looking to invest in wine for short term, it’s not like flipping houses. It’s not the right strategy to be like, ‘I want to buy and sell it within a short span,’ if you want to make money.”

Charles:

“That’s an investment in its own right, though. I mean, we’re talking here about investing for financial return, but investing in wine that will mature and develop with age is the same kind of investment. I mean, you’re investing in your own pleasure in that way.”

Caleb:

“Right. So, there’s the investing for taste, there’s the investing for collection, there’s the investing for estate. So, Carlos, why else does…”

Carlos:

“But there’s a romance about wine. Wine is not just a liquid in the bottle. It’s something to enjoy among friends. So, I’m going to China, for example. The Chinese were actually bringing high-end bottles to drink to make a deal. That’s happened in Silicon Valley all the time now. If a new up-and-comer company got sold, the founder who got a lot of money, now his next step is going into a wine auction, get somebody who knows about wine, who teaches them how to invest in wine because the next deal is going to be done around a table with a really good bottle of wine. There might be the person who was going to buy the next company or the founder… Where you got the bottle, provenance, that’s what the auction houses do. And I think that the romance doesn’t have to take away of what the profits can come.”

Caleb:

“Yeah, absolutely. There’s the story, there’s the experience. Wine does all of these things that a stock can’t do necessarily, Bitcoin can’t do necessarily. But there’s also investing, and we’re going to stick mostly with investing for collection, investing for value. But obviously you can invest in the public markets, in wine companies. You could be a private equity investor in vineyards. You can own a piece of a vineyard. There’s other ways to approach it. We’re going to stick with the ‘what to consider if you’re actually thinking about turning this into an investment.’ And there’s a lot of things to consider. You talked about provenance, but what are the other key considerations as you consult with folks, Carlos, or as you help folks build, potentially, their own cellars? What are some of the key considerations you’re always talking about to your clients?”

Carlos:

“Especially investing in wine because I know it’s always trying to… if you want to buy a wine, if you can buy the the original wooden box or the wooden case, it just brings more value to the wine. Buying futures, people might not be into paying something for… today and three years, but it’s a really good investment. We pay $500 for a… that we don’t know in two or three years is going to be $1,000. So, it increases in value very quick. I will say, ‘Find somebody who knows about wine, learn yourself about wine, and focus.’ And listen, this is a business. Get the best value you can. I mean, people forget the Internet is there. You Google a bottle, you see it, you go to a liquor store, I pay $400, I can sell it for $800. We, people like us, that’s what we do. We teach you, ‘This has a good value.’ I think, try to figure it out, find somebody who knows and can help you to get more profits from your investment.”

Charles:

“What everyone always asks me is, ‘What is the next Google? What is the next Amazon?’ ‘Facebook,’ whatever. But the reality is much less sexy. As it is investing in the stock market, for example, and what I advise on really long-term investing, buy wines that have proven results, sometimes over the course of hundreds of years, some of these wineries. And if you want to take a small portion of the money that you’re thinking of investing in wine and have a few moonshots… this might go up, it might go down. But as Erik said, if it goes down, I’ll drink it, I really enjoy the wine. That’s fine. But whatever you’re investing in some of it needs to be in something safe, something reassured.”

“And as Carlos said, you need to think of it a little bit like memorabilia or any other collectible in that, if you have Mouton Rothschild, Domaine de la Romanee-Conti, some of the most famous valuable wines in the world; however, if you have one bottle, there’s a lot less value to that than having the original case bound in the wood. You know where you got it from. You got it from a great source. It’s been stored correctly all these years. I think people think that one bottle of Mouton Rothschild, just to use it as an example, is equal to 1/12 of a case. And it’s really not. It’s really worth quite a bit less. And that comes a little bit back to what Erik was saying, which is, ‘What is your exit strategy for this?’ We find it, in my business, it’s much, much easier for us to sell a $15,000 case of wine than to sell one $200 bottle of wine just because that’s what people want. And because people are in the same mindset as you buying it originally, they want to buy something that’s in this original case, perfectly pristine. It’s almost in some ways in that respect… and remember, these wooden boxes… we talk about the wine being this magical thing. The wooden box is just a piece of junk that some… I mean, right? Like… there’s nothing special about it. It’s not like you’re buying something that is artisanally made when it comes to the box. Yet similar to lots of collectibles, whether it be watches or figurines or whatever it is, people want that whole set, which sort of links it more to a memorabilia or a collectible world as opposed to the financial world.”

Caleb:

“Yeah, great points. I definitely want to get into all the things we need to be careful of. There’s like a ten-point, at least, checklist. So, folks, we’re going to want to write this down. But before we do that, Erik, let’s talk about the point system. You spoke about the fact that you should use it, but you should be careful about how you use it as well. Folks, anybody not know what the point system is in wine? All right. So, tell us what to be careful of.”

Erik:

“First of all, what you have to understand is the point system is highly subjective. It’s one individual or one publication’s opinion about the value of something. And as more and more people enter and exit the reviewing and scoring world, it’s kind of become dilute. One person’s 93 is another person’s 95 is another person’s 89. But what does that mean? Like I like to say as a sommelier, if you put two wines in front of me, and one was 100 point wine, one was an 89 point wine, and you said, ‘All I want to do is taste them. Tell me which is 100 point wine.” I wouldn’t know how to do that cause I don’t know what one point tastes like. So, how do I know 100 point like?”

“But the bigger thing that points can do from an investment standpoint, it’s sort of a blessing and curse. The blessing is, if you have the ability to acquire a highly pointed, 95 plus point wine, then that is going to be a more appealing wine for resale than that same wine but in a different vintage that maybe didn’t score as high. However, since I also do acquisitions for a lot of people, those high scoring wines then cost you more to acquire. I have a client that wanted Screaming Eagle. I’m like, ‘Sure.’ He’s like, Can I get a 100 point vintage?’ I was like, ‘Yeah.’ He’s like, ‘Why is this three times as much per bottle as the 98 point vintage?’ I’m like, ‘Because it’s 100 point vintage.’ So there is a bit of a blessing and a curse with that.”

“And if you have the opportunity to acquire directly on a mailing list or early on before the scores come out, that’s when you really have the opportunity to get a win. Because the moment something is top of any of the top 100 list, top tens, or the moment it gets those high scores, automatically the value of that goes up, but then the cost to acquire it goes up as well.”

Caleb:

“You deal a lot on the secondary market, so you’ve got to keep an eye on that, right? Tell us what to look for on the secondary market, where most folks are probably going to start investing or start collecting their wine.”

Charles:

“Well, in terms of points, I would just… I mean, there are like Canadian ice wines that have 100 points. I mean, they’re not necessarily… if something has high scoring points, it’s usually not a bad thing, but that doesn’t necessarily mean it’s a good thing. I mean, a great example is DRC, Domaine de la Romanee-Conti, by far the most uniformly expensive and investment-grade wine in the world. And it doesn’t have the greatest points, really. On Thursday we had an auction, and just right off the top of my head, 2016 Corton from DRC, it’s a bottle of wine we sell for $2,400 a bottle. It’s like 92 points, something like that. So, I have a client who decided a number of years ago that he was going to create a fund, and this was a pure investment vehicle. This was wine that he was never seeing. It was going straight into a warehouse, never saw it, never touched it, never opened it, based solely on 100 point scores. And it didn’t serve him well because he was missing out on wines that didn’t have good scores that have been great investment for ones that did have good scores that weren’t great investment like that ice wine, for example. There’s just not the market for it.”

“But other things to look for in the secondary market other than points is that… So, in the secondary market, it’s a great place. I think what you’ll find when you start to buy especially mature wines, it could be anything from 10 to 50 years, if you’re buying them oftentimes from retail, a lot of times those retailers bought from auction because it’s a great place. Traditionally an auction was a trade business where the auction houses would sell directly to the trade. The trade would sell on to you. And the auction business is intentionally opaque because they actually wanted the trade, wanted to keep consumers out. And over the last 15, 20 years, the auction houses have done a lot of work to sort of cut out the middleman and bring the consumer, the end consumer, directly to the auction. And by doing that, you’re cutting out the middleman margin. We still have clients, and some of our biggest clients are buying from us and then selling on and adding up. So, if you can cut out that middleman and go straight to auction, there’s work involved with that. And what you get for your work is you get the wine at a less price.”

“So, it’s really up to you if what you want is the convenience of going to a retailer and saying, ‘I want this wine, here’s my credit card,’ transaction done. ‘I want 12 bottles, I want it delivered tomorrow,’ done. Or if you want to say, Okay, I’m going to go to auction, I’m going to save 15%. But the auction happens in two weeks. I’m going to have to bid on it, which means I’m going to have to come up with a price and so forth.’ But the things to look for are the same regardless of where you’re buying wine. What is the the storage of that wine? How has it been stored? What are the conditions of the individual bottles? When I say conditions, I mean everything from the level of the wine in the bottle, the ullage, to the cork condition to, sadly, I guess for some of us who love wine, the label conditions. It doesn’t really affect the taste of the wine in most cases. But label conditions are something very important to think about. I mean, mainly what you want to work towards is the platonic ideal of the pristine bottle that looks like, even though it’s 25 years old, it looks like it’s never been touched or seen or looked at by anybody.”

Caleb:

“Carlos, you run a restaurant group, you have a couple of restaurants. You also are a consultant. You’re very steeped in the market. It’s super important, just like any asset class, to know which way the market is going. So, how do you stay on top of that? You stay on top of that, obviously, through your your channel checks, but also you’re feeling that from your customers as well. Where is the market going now, and how are you paying attention to it?”

Carlos:

“I mean, definitely reading a lot. It’s important to figure it out every year when the vintage is coming. We keep in touch with what was going on in the vineyard. So important to go back to the roots of the wine, where the wine came from, how the years… winter to summer. Did we have hail? Is the wine doing well? Are the winemakers still alive? Or if things like that have changed. But I think that’s one of the things I see. I mean… it’s going to go up and down, there are going to be new up and comers. We have to keep looking out for them. But what I do is, I work mostly for venture capital. That’s what I do. I take care of private cellars, and I stick to blue chip wines, wines that I know are going to increase in value over and over and over. And I recommend that if you want to buy anything, buy it from an auction. I don’t think you can buy cheaper from an auction, but one thing you can do is… a lot of people are going to take a look at the bottle. That bottle will not be missed. You’re paying 25%, 24% of a premium fee. That it’s a lot of money. But you know the bottle’s gonna prestige. Or from people like us. I go to a private cellar, I look at it, it’s got $1 million. I buy it, and I sell it to my clients. And that’s how… but I go to every single person, and when I have a doubt, I have a resource of knowledgeable people that I can send a video picture, and they take a look at it.”

Caleb:

“Let’s rip through the biggest mistakes because I want to get to the hot or not list and then let the folks ask some questions here. Don’t split a set. Why is that so important?”

Charles:

“Don’t split a set? That gets back to what I was saying before. I mean, people want… why? Why do people want that? I mean, I think it probably comes down to the fact that people like this contained unit, and for the same reasons that we’re talking about, it’s been established that it will trade better always. And of course you don’t want one bottle, you want to drink one bottle now, one bottle in two years, one bottle in 10 years, one bottle in 15 years. But that’s certainly a that’s certainly a rule of thumb.” 

Caleb:

“Yeah, don’t buy on points. We talked a little bit about this before. Any other points on not buying on points?”

Erik:

“Well, it all it all comes back to wine should be fun. If you’re not investing in wine for fun as well as for potential financial gain, then you’re kind of doing it wrong. But at the end of the day, plan that anything you buy, you’re going to end up drinking. And if that’s the case, you should only be buying things that you want to drink. Because if you cannot find the market for it, if suddenly Burgundy has a back slider, or this new wine that’s supposed to be the next thing but that doesn’t turn out to be the next thing, or the 100 point Canadian ice wine, which is delicious by the way, doesn’t perform on the secondary market.”

Charles:

“You’re a wine lover, that’s the problem.”

Erik:

“I do! But what you’re buying… buy to be able to drink it. And if that is your background ethos, then you’ll probably be guided to better investments based on the sheer fact that you’re probably buying things that you want to drink. And if you want to drink them, other people probably want to drink them too.”

Charles:

“Let me make a counterpoint to that, which is you should do that… say you had a certain amount of money that you want to invest in wine. You can do that with a portion. Like there’s wines, and I can throw out some names that have just skyrocketed beyond anyone’s wildest dreams, that are things from Burgundy estates like Domaine… is one or Clos Rougeard from the Loire Valley is another, which that’s a wine that many people might not actually enjoy drinking their wine, but a lot of people do. So, maybe take the amount of wine money that you want to invest, take a portion, and say to yourself, ‘Look, I love these wines. I think they’re really great. If they go up in value, that’s great. But if they don’t, that’s fine too. I love them.’ But then a portion too and say like, ‘This is the stuff that is just those blue chips that have really a proven track record.'” 

Caleb:

“We’ve touched on label, we’ve touched on box, we’ve touched on storage. Anything else beyond what’s in the bottle that you got to look at if you’re considering buying a case, buying a collection?”

Erik:

“I mean, condition, especially when we’re talking about acquiring from somebody’s cellar rather than acquiring through a direct source. And especially we’re talking about… Charles talked about Domaine, which is a great resource because they can handle your logistics and your inventory and all that. But if you’re just constantly sending wine in there, you don’t know if there might have been a seepage event. Corks are plants, they fail. Even if it’s a sealed banded case, if one bottle seeps, not only is that bottle probably not worth anything, but it could affect the labels on other bottles. So, don’t just put your babies in the dark and forget about them. You have to sort of check in on your assets too.”

Caleb:

“Let’s end with bourbon. Switch gears a little bit here. Pappy Van Winkle, the high-end bourbon. Is the bourbon bubble still hot or not? Let’s start with you, because I know you deal with old bourbon.”

Charles:

“Bourbon? Yes. Pappy? Maybe. Pappy is the workhorse of the collectible bourbon world. You’re not going to get rich buying pappy and reselling it. But bourbon is one of those things where you need to be very, very in-tune to what is selling and what people are interested in. It’s tricky. It’s tricky.”

Caleb:

“Any thoughts on bourbon?”

Carlos:

“I think, yes. Pappy, definitely go for it. Your local the local places, if they’ve got Pappy cheap, buy it.”

Erik:

“That’s acquiring it at what it should cost, then sure. I think whiskeys in general as a category are hot. A prescient example is Buffalo Trace used to be my well whiskey. If you ordered a whiskey and coke, that’s what we were pouring you out of the well because we were paying $12 a bottle for it five years ago. Now, if you fly United, get that little mini bottle of Buffalo Trace and you can sell that one serving for $25.”

Charles

“Well, we just sold Yamazaki, 55 year old. They just released it. And if you if you were lucky enough to get a bottle through the three tier system, you were buying it for, I think, $75,000, and you can flip it instantly for $700,000. So there’s definitely examples out there. I think the real lesson is, like any investment, there’s no shortcuts, really. You need to know the market through and through.”

Caleb:

“Final thing, just because we’re talking about something that grows out of the ground in an era of climate change and climate warming, especially through that California region, but all across the world, this is become a scarcer and scarcer investment. How much do you think about that as a collector, as a restaurant owner, as a consultant, as a somm?”

Carlos:

“Well, it’s in our mind all the time now, especially with… I mean, we have some vintages… that we’ve got none. None of the white Burgundy is going to be available because it didn’t… get anything. So, that’s why I know a lot of people from Europe are investing at this stage because we have a little more… is a great place. A lot of people plant Pinot noir, they are removing Pinot noir and planting… Definitely something to think about every time you make an investment or buy any type of wines for the future.”

Erik:

“So, also, remember, at the core of it, wine is plant juice. It’s like moldy grapes, right? And as the climate warms, structurally, things change. Not only does that mean the style of wine changed, but that also means the age ability of that wine changes. Because one of the most important facets of a wine’s ability to age, structurally speaking, is acidity. And as things get warmer, naturally acidities are reduced. And so, stylistically, some of these winds that could have held 30, 40, 50, 60 years, we’re now seeing that they’re potentially no longer able to do that. And I think a prescient example is if you’re paying attention to what just happened in Bordeaux; I don’t know if you know, but the French don’t really like change on tradition and they just authorized a dozen varieties, like Portuguese varieties like Touriga Nacional and other hot climate hardy varieties to be planted, maximum, 5% in your vineyards. But non-French grapes are now authorized in the vineyards are Bordeaux as a first stage of insulation against the effects of climate change so that they can keep those wines ageable.”

Special thanks there to Charles Antin, Erik Siegelbaum, and Carlos Solorzano-Smith for making me smarter about wine investing. Back to that theme about NFTs and wine. That was making some noise around the Food and Wine Classic in Aspen this weekend. And even though NFT tokens have been plunging in value of late amid the downdraft, the concept of putting wine on the blockchain and creating non-fungible tokens to track it from the ground to our glasses is pretty fascinating, especially when we think about wine as an alternative asset. I sat down with the founders of a project called Club dVIN, which helps create NFTs for wine, working with vineyards, winemakers, and even celebrity winemakers like Carmelo Anthony of the NBA. Believe it or not, the NBA has a growing number of wine enthusiasts, including Melo; Dwyane Wade, who’s retired; CJ McCollum; LeBron James; and Gregg Popovich, the coach of the San Antonio Spurs. Here’s a bit of my conversation with David Garrett, one of the founders of Club dVIN, about how the whole process with NFTs and wine is supposed to work.

David:

“So, the whole thing is really built on some technology that we’ve developed for the blockchain. The most important piece of it we call the digital quark. And the digital quark is like a digital twin. It’s an NFT that is attached to a bottle of wine. So, one-on-one basis, one NFT to one bottle of wine, and it performs a bunch of different functions. The most important is the deed of ownership. That bottle belongs to you, so that deed of ownership… and that can be traded, for example. So, if you want to trade that particular bottle of wine, no matter where the bottle itself is, it could be in your cellar, it could be at a bonded warehouse, it could still be at the winery. But if you trade the NFT, then the ownership benefit trades along with the NFT.”

Caleb:

“So, it’s like a digital twin to the bottle of wine or the case of wine that I’m buying, right?”

David:

“Exactly right. So, deed of ownership. The second thing it provides is a certificate of authenticity. So, it says, ‘This bottle came from the winery.’ So, it authenticates that bottle. The third thing it does is it provides a chain of custody. So, as that bottle is traded in the aftermarket, you can see who owned the bottle before you. And because of that, it’s a real disincentive against fraud or counterfeiting. And then the last thing that the digital quark provides is a royalty back to the winemaker. So, as that wine trades in the aftermarket, the winemaker for the first time really gets to participate in the value creation in the aftermarket. So, it’s really great for the wineries and really great for the industry.”

Caleb:

“Because typically a winery sells its wine to a collector, to a restaurant, or to an individual, and they don’t really see that person again. They may have them on the mailing list and be able to say, ‘Hey, we have a new a new brand coming out, we have a new year coming out, a new vintage coming out,’ but they don’t have that digital touchpoint forever. Does this help them with that?”

David:

“Yeah, for sure. So, it lets them see where their wines are in the market. It lets them see when those wines get traded and at what price, and then they participate in that economic value. And then the really cool piece that we’ve developed is another NFT called the Tasting Token because the wine might be out there for 15 years. It might be traded three or four times. It might go from $100 ‘X’ cellar to $800 by the time the final consumer buys it. And that’s all a really good benefit for the winery, but at some point, somebody is going to open that bottle. You’re going to drink the wine.”

“So, what we’ve developed is a really interesting piece of the technology where if you have that digital twin, that NFT in your wallet, then when you open the physical bottle, you can pull the digital cork. And when you pull the digital cork, that’s what you do on our platform, it does a couple of things, right. The first thing that it does is it takes that original certificate of authenticity and nullifies it. It says, ‘This bottle’s been opened. It’s no longer authentic. There’s one less of those bottles available on the market.’ The second thing it does is it gives the owner the ability to mint new NFTs. Now we call those NFTs Tasting Tokens, but really what it is is it’s the Web 3.0 version of taking a picture of the label and posting it to Instagram, but it provides a lot of really great utility on top of that.”

“So, the first thing is, obviously, it gives you a record of all of the great wines that you’ve drank. Not only is it a little bit more beautiful than your standard picture of the label, but it also gives you all the metadata, where the wine comes from, the appellation, the varietals, oak program, all of that stuff. So, you can visualize or share your tasting journey with your friends. You get a way to really look at your tasting journey.”

Caleb:

“So, it’s a community builder in that respect, but it also gives you a ton of data as the wine drinker, and it gives the vineyard a ton of data on who’s drinking it, who they passed it on to, right? This is a way to really collect, share all that data through the blockchain.”

David:

“That’s exactly right. So, it gives the the winemaker the ability to be in contact with the consumer at the moment of consumption. And that can be as simple as saying, ‘Hey, you opened our wine. Hope that you enjoyed it. What did you pair it with? Hope it’s showing really well.’ But more than that, they could say, ‘Hey, look, if you collect five of those tasting tokens (so five tokens from five different wines), maybe we’ll invite you to a winemaker dinner. Or if you collect ten tasting tokens, maybe we’ll invite you to the winery for a vertical tasting.’ And what we see in the future is the ability for the winemaker to really not only build community around all of their biggest fans, but also really start to shape the culture and turn wine, instead of being just a product, into an experience. Which is why we think it’s the platform for the next generation of wine consumers.”

Caleb:

“When folks hear NFT they think, ‘Oh, that might be something that somebody is trying to trade.’ And it is. But it’s also this token that has all of this information in it. But give me a sense of how folks who try to trade digital currencies and non-fungible tokens might try to trade something like this. Does it have any tradable value?”

David:

“No, actually. And more importantly, we’ve created the contract for for tasting tokens so that they’re not tradable. You can’t trade them.”

As for those NBA players, several of them were in Aspen this weekend as well, including Dwyane Wade, Carmelo Anthony, and C.J. McCollum. Full disclosure, I like professional basketball, and I’m a big fan of these players. What’s interesting about all of them is that they’re not just into wine. They are into the wine business. All on their own wine labels, and all of them are not using their celebrity athlete status to promote and sell their wines. It helps that they’re famous and widely followed, to be sure, but they are all approaching this investment in making wine as building legacy businesses but also to make the wine industry more inclusive to their communities, the communities they grew up in. These guys are trying to change that, and they take this mission (and their wine) very seriously.

Carmelo Anthony has been in the NBA for 19 seasons. He’s a nine time All-Star and the seventh leading scorer in history. He could attach his name and likeness to anything and make tens of million dollars in endorsements. But he doesn’t do that anymore. He builds businesses, a production company, he’s got a great podcast called What’s in Your Glass?, and he has a wine empire called the Seventh Estate. CJ McCollum is just 30 years old. He’s been in the league nine years, mostly with the Portland Trail Blazers, but now he plays with the New Orleans Pelicans. He’s just building up his business empire and learning to spread his investments across channels to create legacy wealth. I caught up with CJ in Aspen for a few minutes, and here’s part of that conversation.

Caleb:

“I’m sitting here with CJ McCollum, NBA veteran, president of the NBA Players Association. But you have a passion for wine. You have a passion for entrepreneurship. What got you here? What brought you into this passion?”

CJ:

“I think the biggest thing was understanding this was a space in which it brought me happiness. It brought me peace. It brought me clarity. Being able to go to drink at different vineyards and understanding the type of moments that I was able to create through wines. I wanted to share with my family, I want to share with my friends. And I felt like it was something that wasn’t as approachable in the communities that I grew up in, and it is still isn’t as approachable as it should be, in my humble opinion. But I think those are the things that attracted me to it, besides the fact that wine is just an amazing fruit that you can enjoy under any circumstance.”

Caleb:

“It is a community builder, brings people together. You talk about the sharing aspect. You’re an investor, but you’re really an entrepreneur here. You’re not investing necessarily in wine. You’re investing in the business and the legacy of the business. Why is that important?”

CJ:

“I think the legacy is everything. That’s kind of what I’ve shaped my life around, figuring out how I can leave an impactful legacy, figuring out how I can make the world a better place, make the wine space a better place, and make it more diverse and inclusive. And I think I’ve enjoyed everything that I’ve learned about wine to this point. Obviously, it’s a huge world. There’s so many different varietals, there’s so many different countries that I’m going to have to visit in order to partake. But all in all, this is a great thing. And I think it’s something that I want all my family, I want all my friends, I want all people to be more aware of but also more comfortable trying.”

Caleb:

“And it’s also a lesson in entrepreneurship. These things are never ending. You can never learn enough about wine. You can never learn enough about running a business. But you’re also building legacy, and you’re building basically a business around yourself and for your family. Why is that so critical to you?”

CJ:

“That’s critical because I believe in passing down the right things, passing out ownership, having equity, having ownership, and being able to operate in a manner in which you kind of control the success and failure of a business. I want to be able to control who was hired. I want to be able to control what type of grapes are planted. I want to be able to control everything. And I think being in a position of ownership, it comes with responsibilities, it comes with obligations. And I want to make sure I’m delivering but also leaving something that my family can be proud of.”

Caleb:

“You’ve been in the NBA several years, nine years or so. You came out of Lehigh. You’re a journalism major, like me. But how important is it to learn the financial literacy, financial education for young athletes, especially coming into their first contracts or first deals?”

CJ:

“It’s vital. It’s extremely important. There’s just no class that teaches you how to hire people, how to budget properly, how to manage this type of money. And I think it’s important that we teach people early, we teach our kids early, and we teach them in college on the importance of investing, the importance on saving money, the importance of understanding tax structure, how much money is going to Uncle Sam, how much money is going home and is creating a pathway for people to be able to succeed long term?”

Caleb:

“We’re an investing site built on a lot of our investing terms. What investing or business term is important? You what’s the one that kind of rings in your head that makes a lot of sense to you that you have a passion for?”

CJ:

“In terms of investing? I think I’ve started to learn a lot more about real estate. I’ve invested in a lot of different realms, a lot of different fields. But one thing’s for certain, there’s only so much land that will ever be here. And if you can get the right land and build on the right land, you have a legacy project which can also influence many different people’s lives.”

Caleb:

“And lastly, you did buy a farm, so you’re not just putting your name on a label. You actually bought a farm. You have a business here. Why did you want to bring all of these assets together, sort of under the domain of what you’re trying to do here?”

CJ:

“I think it’s just about the maturation process of me as a human being. Learning about real estate, learning about farming, learning about the importance of wine and what that’s meant to me and my family, and being able to share that with other people. I think ownership is the next step in that and being able to create a certain type of wine that has a certain type of taste. And being able to create a business infrastructure that’s built around diversity, is built around inclusion, is built around opportunity, I think all those things were important to me.”

Caleb:

“CJ is a really interesting guy and someone to keep an eye on as he continues to build his business legacy along with his wife, who introduced him to wine in the first place.”

Term of the Week: SEC Yield

It’s terminology time. Time for us to get smart with the investing term we need to know this week. And this week’s term comes to us from Andy Leishman, a listener who reached out to us via email and might live in Switzerland if the Internet is to be believed. Andy suggests SEC yield, and we like that suggestion because it is a widely overlooked but pretty important term. Well, according to my favorite website, the SEC yield is a standard yield calculation developed by the U.S. Securities and Exchange Commission in 1988 to allow for fair comparisons of bond funds and is based on the most recent 30 day period covered by the fund’s filings with the SEC. And the yield figure reflects the dividends and interest earned during the period after the deduction of the Fund’s expenses. It’s also referred to as the standardized yield. When every penny counts, it’s important to know which yield to heed. Good suggestion, Andy. Email us or DM us with your mailing address in those beautiful Alps and we’ll send you some of Investopedia’s finest socks for your next hike with your lovely looking dog from those Alps to the Rockies.

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also