A Tale of Two Kitties

According to Google Maps, the length of my block, from intersection to intersection, is 200 feet. It's on a harsh incline. The kind that Ivan Drago loves.

 I've made two friends on my block. They understand about as much Cantonese as I do. In the wee hours of the morning following Valentine's Day, they listened to my resolutions. "No more carbs!" I proclaimed. They meow in approval as another french fry from my lazily wrapped kebab drops to the floor. I continue to find myself very interesting. Their eyelids go into screensaver mode in unison, in the same way that human married people's collusively do when they just want me to leave. "No, wait, wait, did I ever tell you about Paris?"

I wake up with that "oh-fuck" feeling and go to get a coffee and apologize to the cats. But someone has already torn down their house and they are gone.


No cars will pass through my block for the rest of the day. The road has been taken over by street vendors - some legal, some not - just like any other day. They are all women. And they are all about 90 years old. Some of them are under four feet tall. I'm still trying to figure them out. Each one has this palette of stuff. Sometimes, there is consistency: lettuces, potatoes, garlics. Fine. But other stands have this weird mix of a dollar store selection - Chinese slippers, Dale Carnegie in paperback, combination locks inside an open wooden case labeled "Chateau La Tour Carnet." I left for the gym one time, and this one old lady was playing with a wooden plank as if she were a child dreaming about an imaginary boat from a faraway land. She smiled like one too. When I got back from jockeying the elliptical, she was still holding the plank under her arm, and was playing with a newly found treasure: a shiny watch. "What time is it?" she asks me. "It's one." This seems to make her happy. 

 The Pakistani guys who run an actual carpet store have carpeted the sidewalk in front of and around their property. An old lady sits on one of them and starts to spread out her own makeshift shop 'o' scarves. The same cop comes every day to enforce the law, but he can't do anything about it because she moves so slowly that it takes an hour to pack everything up. Of course each day she's back and lays out her goods in 30 seconds.

In the evenings, a couple of versatile old ladies (only in their 70's!) operate a fly-by-night operation on the elevated end of the block. A large white van - the kind that you own if you either deliver plutonium or snatch women off the street - pulls up to the curb - and some low-end middle-aged thugs come out and make deliveries of pirated DVDs, phone cards of questionable provenance, and the most random crap in the world, like a cardboard box of restaurant-takeout-tupperware. Presumably, they also collect money. Perhaps they also say, "Thanks, Mom."

 A lonely old man peers out from a large storefront – the kind of square footage that rents for over a million a month – and goes back to tending to his single shelf of soy sauce bottles.  I like to believe that beneath the layers of dust, there is a trap door or a false wall that leads to a cellar of vintage soy sauces the Japanese soldiers never found; or any other romantic narrative that can sedate the befuddlement of my inner-economist.  

 This is a Hong Kong that has refused to move on. Or cannot move on. As I prepare to enter my peculiarly placed corporate apartment, I turn around, see an empty space, and hope that my feline friends have found a newer world. But of course, I hear a "meow."

Can the Party Continue?

 Everyone on the street has been agreeing on one idea: 2010 will be another great vintage, and the chateaux will be releasing at very high prices, similar to those of 2009. This has led to a rush of people stockpiling their "cellars" (whether moldy passageways beneath castles, state-owned warehouses in China, or Excel spreadsheets at hedge funds) with back vintages that appear to be good relative value. For example, a UK merchant recently sold through many cases of 2006 Palmer @ 1100 GBP/cs (RP 94) as it looked inexpensive in comparison to the 2009 Palmer (RP 94-96), which was released at 2400 GBP/cs.

While I've certainly been a beneficiary of this uncoordinated, collective market movement, I have another view regarding the 2010 en primeur campaign, one that nobody wants to talk about. I believe it will suck so much cash out of the wine investment economy, that no one will want to buy more Bordeaux again for a while, thereby limiting the short-term upside of prices.  In the long-run, there is also a problem: the one where every vintage is a new "vintage of the decade."

Whereas great wine used to be predominately determined by the weather and the idiosyncrasies of each individual French producer, these days, technology plays an increasingly important role. Disastrous years simply don't happen anymore because the technical knowledge is much better across the board. And with the current levels of revenue at stake, everyone in the Old World  is investing in technology.

But maybe the bulls are right about China. And by bulls, I mean everyone. Maybe there will just be enough billions injected into the wine market by mainland Chinese, supplemented by the emerging markets of India and Brazil. Things, however, don't stay cool forever, and the elasticity of demand changes over time. We've seen Japan and Russia walk away, and America finding substitute goods in the Russian River Valley.

I'm also skeptical about this recent boom in the Bordeaux Second Growths. "Demand in the Far East is broadening," says the street.

I will bet my left testicle it's not consumption demand.          

I know many well-off Chinese people who have lived in the US/Canada for decades who couldn't tell you the name for the "Bull's horn bun" that they used to eat in Hong Kong. (It's "croissant," by the way.) And so, I have a hard time believing that after a couple years of interest in wine, that there will be long lines forming at Zhejiang wine shops with people clamoring for, "more Ducru Beaucaillou, please."

But what IF, it's entirely investment demand out there? Assume 100%. And assume that 100% of "investment" is "speculation." Can a Chinese sell-off cause a crash? Not really. Because there is a pervasive problem of fakes in China, there will be no re-exporting. No merchant in the world will buy wine that has set foot inside the mainland. So if Chinese demand should taper off, I think it will first lead to stagnation in the UK market, followed by a gradual readjustment of release prices from the chateaux. A parallel exit by Western investors might take place, especially if interest rates creep back up. A dramatic bubble explosion it seems, would require a global financial crisis of the variety we saw in late 2008. But I would not be surprised to see immediate panic, if a credible rumor surrounding, say, Hong Kong's alcohol import tax, were to surface.

While I believe that these macro factors should make one weary of buying into the generally accepted types of wine portfolios, there are still creative opportunities for wine investment that over a long-term horizon remain less sensitive on the downside to sudden shocks, and in my view, an attractive alternative asset class. I'll talk about these in a future post.

- Pinotchio, CFA level 0.

A fleeting trace of time and place

In Osaka, before we were poisoned, I was going on about the mainland Chinese cutting the tannins of '82 Lafite with a splash of Coke. "The Chinese hardly invented that," said Max, a celebrity chef in Beijing. "The Spanish have been doing it for ages."

Here in Hong Kong, I read about the kalimotxo (red wine, coke, and vermouth) at Mesa 15, and proceeded up Hollywood Road to see whether for dinner, I might get some tapas too. Hollywood Road, to my parents, who have not lived in Hong Kong for decades,  remains the antiques street where all of the Indians sell all of the carpets. While a fair number of these storefronts still exist on the flanks, Hollywood Road continues to thematically shift toward a bar and restaurant extension of nearby Lan Kwai Fong and Soho. And so it's there, Mesa 15, across the street from the large Central Police compound that Google Maps has labeled "Former." It used to be that British officers enjoyed partying nearby, while the lower ranks went to Wan Chai.  What did Hong Kong, under Chinese rule, decide to do instead with all of these prime real estate locations? The waitress doesn't know either.

Terrence arrives and we order drinks.  I ask for a white Rioja in Cantonese - or more accurately - I say "bahk-Rioja" in response to a Cantonese question while looking at a menu that's entirely in Spanish and English. The wine comes in what I can best describe as a stemless midget water glass. There's only one place in the world I remember these from, and I had drunken there for an entire year: Pakito, the Basque bar across the street from my apartment near Bastille station in Paris. I was fond of drinking there alone after a difficult day at the restaurant. The owner would thumbs-up my order of Irouleguy d'Ansa every time. It was cheaper than a beer and always filled to the brim. There is no swirling of a glass that's full, and attempts at sniffing for aromas will be reminiscent of the first time you went bobbing for apples. But that's the point of this working man's glass. After a day of unloading deliveries and shuttling between the dining room and the dishwasher, there's no energy left for remembering, regretting, or hoping. No place for an ephemeral nose of pear chutney. All you want is a cold drink.

And so, at Mesa 15, I find it difficult to reconcile my memory associations of the glass with the carefree-summer-days memory associations of its contents. Or sitting across from a Chinese-Canadian guy who has spent more time in Costa Rica than in Asia, as he says the word "duck" in Spanish and the waitress confesses to not knowing Spanish, at a restaurant where the primary language on the menu is Spanish. And weighing that against my own non-trivial language blunders back in France, while staring out the window at the Police Compound that Google Maps has now listed as "Former," on the road that my parents know as the one where all of the Indians sell all of the carpets.

I pound the wine.

"New money." Terrence says.
"Excuse me?"
A dish has arrived. A martini glass of carbs and protein that is off the charts in artistic merit.
"The new money would try to figure out what this dish actually was and how it was made and all of that. And the old money would already know. We just eat."
I nodded, and continued to stare, and still could not decide which of the two dishes we ordered this was: duck or patatas. Or maybe it was just a generous amuse bouche.

It turned out to be either the duck or the patatas, and we ordered more things. When all of the food and wine had come, Terrence decided he needed more food, and I wanted more wine. We headed to the outdoors upstairs of Staunton's Wine Bar and were joined by a literary friend of Terrence's. I offered her a kebab.

"Thanks, but I've eaten already."
"So have we."

 I finish my Pinot, recommend her the Pinot, order a Shiraz and continue with the Shiraz until last call. The three of us go to Globe and I take a pint of Hoegaarden and sit next to two not-bad-looking Chinese girls at the bar. They spoke great English and in front of them were empty wine glasses. I invent a brainteaser on the spot involving our glassware - a knockoff of the Die Hard 3 water bucket problem.

"We're not good at math," they respond.
"How's that possible? You're Chinese!"
"That's a very communist thing to say."

Terrence laughs and says I should write a book: "How to Make Friends in Foreign Countries."

I try to tally my night's consumption, but each glass, each grape, each continent, each memory, blurs into a downhill stumble back to the corporate housing apartment I currently call home.

Terrence's friend looks concerned. When I depart, she asks him whether I'll be alright.
 "Tomorrow, he'll be pissed he forgot the kalimotxo."

Is bigger better?

One of my first investments in wine was Chateau Mouton-Rothschild in magnum (1.5L) and double magnum (3L) format. In sommelier training, I was taught that larger bottles, especially those of First Growth Bordeaux, evolved better over time. The basic idea is that aging happens slower when there is less exposure to air. Because the mouth and neck of the magnum are the same sizes as those of the standard bottle, the wine/air ratio is much higher, yielding slower oxidation.

Large formats are also rare. They may constitute just 5-10% of the producer's entire vintage. In fine dining, it is considered prestigious to unleash one of these upon your guests.

This is why for years, large formats have traded at a premium. In my first trade, I quickly snapped up the magnums when I was offered a choice between cases of magnums or bottles for the same price. (6 x 1.5L or 12 x 75cl). The reason for par pricing was that Asian demand came primarily for standard bottles. Once the emerging markets learn more about wine, every broker on the street told me, magnums would trade over bottles again.

In the following months, I began to notice slight discounts for cases of magnums - about 2%-3% relative to bottles. My initial impulse was to buy more. After all, if everything went to hell, I would certainly be able to drink a magnum by myself in a single night. But then, as now,  I understand that the only way I can afford to stay drunk is by trading sober. If a glass of wine can take me back in time to catch a glimpse of women and countries I will never see again, a cup of coffee awakens the mercenary tools I've tried many times to leave behind - statistics, game theory, economics. The symbols and equations, I had forgotten long ago in that massacre of brain cells that transpired between final exams and graduation.  All that remains is anecdote. A treasury bond trade from the downfall of Long Term Capital Management a decade ago came to mind, and I decided that the magnum/bottle spread would continue to diverge.

In the current market, magnums trade at a 10%-15% discount to standard bottles. No one in the industry has a solid explanation. "Asians drink less" can't even be the reason, with half-bottles also trading at a similar discount.  The largest merchants and traders in the world continue to be baffled, and my own Excel spreadsheet shows global magnum stocks accumulating and not turning over.

"But mom, it was supposed to work!"
"Of course not, silly. Serving big bottles makes you look cheap when you're entertaining."
 "I'm sorry?" [Picturing a Jeroboam of '61 Latour rolling out at Tour d'Argent.]
"Big bottles are fine for home use. But only for things that keep fresh. Guess what we bought at Sam's Club today?"
"Oh."

Went back for the wines

For dinner we went to Bacar right next to Cicada. The two share a wine list. I started with a dry Riesling from New Zealand that was so easy I practically did it as a shot. Next, officially speaking, came a 2006 Hawkes Bay Malbec/Merlot blend. Didn't care for the details. It was a red. And there was a plate of spicy chorizo in front of me. When that came to an end- and it did not take very long - lamb, chicken, and cod showed up, and the sauces were hummus coriander, peri-peri, and cilantro-coconut. I wanted a huge Pinot, and found one called Rex Goliath. I recall now, from my days in Paris, a secret-of-sorts that Legras was the producer for the house Champagne at Tour d'Argent. Less confidential I'd imagine, is that in America, Rex Goliath is the house red for Red Lobster. Forced into a different direction, I went with a 2005 Rioja. It outperformed all expectations.

Proceeded to Staunton's which was dead at 10:00pm on a Sunday. At the bar, one woman complained to another the entire time, dominating 98% of the conversation. Something about "weight" and something about a "relationship." Behind us, an English guy blabbing on about the World Cup's superiority to the Super Bowl. I was at a loss for coming up with my own generic complaint. The Marlbourough Pinot, while not great, was passable. I finished it and left.

Recovery day

The weather in Hong Kong today has all the essential components to make even me, venture out-of-doors in a pleasant sort of mood. Seventies, moderately sunny and breezy, I take on the risk of being spotted by my family who does not know I'm in town for the tail-end of that orange-giving, tea-drinking, pretend-like-you're-not-hungover week known as Chinese New Year.

From my new rental in Soho, I take one set of outdoor escalators up the mountain and spot a booth - one of those elevated tables that has bar stools with backrests - at Cicada where I decide I want to take lunch. They've gone three walls today, and as the warm breeze comes in, my greaselust lightens to an order of fish and rice and beans and vegetables. I can name three types of wine I do NOT want on a day like this, and one of them is Cicada's hand-written special: an afternoon coma inducing Robert Parker 92 points South Australian Shiraz. Their Wine by the Glass list, however, is very appealing with about 9 selections for each red and white, with all major continents covered. But I feel potential for a comeback to the gym today, and ask for water. One benefit of being a Chinese person is that I get tap by default, as opposed to having to panhandle for it after being offered "still or sparkling."

Leaving Narita

The airport shuttle from the hotel (USD $37) as opposed to the taxi (USD $200) only leaves every hour, so I'm now at Narita much earlier than desired. Despite years of travel and knowing the mathematical incorrectness of it, I still run the hedge of doing post-check-in activities - security, passport control, monorail to correct section - much too early, just to get them out of the way. As a consequence, now as always, I'm in some stupid wing with lots of gates, a bookshop where I don't know how to read anything, the JAL First Class Sakura Lounge that I can't get into, and one bar.

Naturally, I'm at the bar. It's 9:00am and I have two options: 400 yen for a coffee or the Kirin liter special for 1000 yen. The four old Japanese guys behind me are going for the beer. I'm in disbelief until I remember that old people wake up at 4:00am, therefore this is just an afternoon brew for them. I order a coffee.

I'm only modestly tired for waking up at 6:30 after a night of both sake and wine. Perhaps my body healed stronger after the poison. Or maybe I'm just getting teased and will throw up all over the plane. I was 4.5 kg over the baggage weight limit because of the sake I'm bringing back to HK and got a mention. Fortunately, the lady at the check-in counter only asked me to make a ceremonial removal of items: 3 small books, and sent me on my way.

In the Japanese calendar, the year is HeiSei 23, referring to the current emperor's reign. My coffee tastes like it was brewed in Hirohito 1. Tired of writing, I board the plane early to secure overhead compartment space for my large-ish backpack and coat. It's a long walk back to 69H, and already I know this Cathay plane is a downgrade from the Cathay plane that I'd come to Japan on. It's older, and the movies play at pre-designated times, and there's no electrical outlet on the back of seats. I turn around to pee, but discover to my surprise, no bathroom at the back of the plane. As I walk up 20 rows of Asian people reading Asian newspapers, I realize one thing: Asian people love to read Asian newspapers.

The Upside of Rice

Despite my very best attempts at self-sabotage, something I've been very good at recently, I am now officially a Certified Sake Professional.

I don't need the gods to be any more pissed at me than they already seem to be, so I will try to fulfill my karmic obligation by teaching something here.

While you will not be able to Good-Will-Hunting the next douchebag foodie who laughs at your order of warm sake at Sushi Samba, the following is a basic general set of skills for self-defense:


Sake, pronounced Sah-Kay, is made exclusively from rice, water, and a moldy rice called Koji, with yeast and some decision on lactic acid. Alcohol levels are generally a touch higher than that of wine but not always. The top-end of sake is Ginjo and Daiginjo. These terms, generally, are designated based on the milling rate of the rice. If a rice has been milled to 60% of it's original size, that's a good thing. 50%, even better. This number might be on some labels in the middle of Japanese characters. It's not the alcohol percentage.

The word "Junmai" refers to a sake that contains no added distilled alcohol. At the Ginjo and Daiginjo level, distilled alcohol is not a bad thing. It's added for technical reasons and not as a fortifyant. (Pretty sure that's not a word.) Therefore the highest price point can be shared by Junmai Daiginjo and regular Daiginjo.

Taste mostly comes from the rice. Smell mostly comes from the yeast. So, come Valentine's Day, if someone says you smell like Aiyama, (rare sake of rice from "The Love Mountain") you probably smell like Strand-901 foamless industrial yeast.

The cloudy sake is nigori. It can be dry or sweet. It's usually less pricey than Ginjo and Daiginjo.

Sparkling sake is what you serve to people who are nostalgic for Zima.

Sake can be enjoyed at various temperatures to accompany different occassions. Yes, you might not want to boil a Daiginjo. It's delicate nature would likely be crushed. But there are plenty of fun things you can do with a bottle labeled "Junmai" or even "Ginjo."

So, the other night after dinner, we had some sake left, and I found myself staring at a pint of Asahi...
It's OK. I'm a Professional!

The American Embassy

I'm back to eating solid foods now, even if the number of calories a day is still in the hundreds. And no, I didn't get a toy with my Happy Meal. And, no, that is not a Happy Meal.

Chicken McNuggets here come in 5's. Due to recovery, it will be a while before I can say I want 4, only to have the cashier say they only come in 5's, whereupon I say, "no I meant I want 4 orders of 5's." In fact, it will probably be a while before I learn the Japanese word for "4" let alone have an actual conversation. In a week's time, I have successfully hit the trifecta of answering Japanese questions with separate and isolated responses of "si, oui, and dui," before stumbling upon "hai," which also happens to mean "yes" in Cantonese.

My poisoner is still on the loose. So it looks like I'll be staying with the American Embassy from here all the way to Narita. Fortunately, we're in the middle of the Big Idaho Burger installment of the Big America 2 campaign rollout. Previous episodes were Big Texas, Big Miami, and Big Manhattan.

Unfortunately, I don't feel very Big right now. Not even close to 100%. And I have a very big day of getting lost in train stations tomorrow. All I want is a Happy Meal and a toy.