St. Emilion, Encore


“I’m going to stand up for America,” said the woman’s voice at breakfast. “And besides, this seems ridiculous. Why would President Bush want to poison U.S. citizens?”

Unaware that there were other English speakers in the room, the people at the next table were having a heated discussion. The young, blonde American woman was arguing with her husband – a Frenchman with frizzy gray hair.

“Not just anyone has access to anthrax,” he explained in a thick accent. “It has to be someone who is connected to a government that has the stuff. And if Bin Laden or Hussein were doing it, why would they do it on such a small scale? And why would they warn everyone that it is coming…by sending just a few letters? They’d do a massive, spectacular effort…like their attack on the WTC.

“Bush wanted to send the anthrax around just to continue the atmosphere of panic and hysteria so that Americans would support his war on the Islamic world.”

“Now I know you’re crazy,” said the woman.

“I’m not saying that it was Bush himself,” he went on, “it could have been one of the right wing groups that support him…”

All over the world, people are talking about things they know nothing about – even in a tiny bed and breakfast in St. Emilion. Politics and politicians are back in the news, since the September 11 attacks.

“War is the health of the state,” as Otto von Bismarck put it. Thanks to the terrorists’ attacks, the state is in fine fiddle. People want to know what the state is doing…and argue among themselves about what the state should be doing.

What a pity.

Always a contrarian, your editor decided to ignore the war, depression, and direct mailed pestilence and tend to his own health. Not that there is anything wrong with it, but even the best physical condition could be improved, he reasoned, by self-indulgence and an absence of politics.

While the rest of the world worries about the “clash of civilizations” and the biggest, most abstract and remote ideas in half a century, he decided to turn his attentions to things he could see, smell and slosh around in his mouth and stomach. And so with the sunniest, warmest weather for this late in the season in memory, he set off for France’s best wine country – the area just east of Bordeaux – and a mini-vacation of intensive drinking and driving.

But even here, dear reader, in St. Emilion, the very heart of the wine country, he was unable to escape the blather of politics.

The town is located only a short drive from Bordeaux. It sits atop a limestone plateau, built of the same limestone that the recluse Emilion dug out of his cave 1300 years ago. Emilion had come to the region to worship God. He was followed, over the many years, by thousands of other monks, priests, nuns, sisters of mercy and brothers of sometimes dubious piety.

But long before St. Emilion was born, the grape vines had already been planted in the thin, rocky soil. Before the French were French, the wine of the Bordeaux region was famous. The Romans planted the first vines in the area. The soil was so poor they had to dig ditches in the limestone and fill them with dirt to get something into which they could plant their vines. The vines lacked nutrients – for the soil was bad – and water too, because it would not hold much moisture. And there was nowhere the roots could turn – because a huge plate of limestone lay just beneath the surface.

“But that is the amazing thing about vines,” said our guide, “the more they suffer, the better the wine.”

Wouldn’t that just be like Mother Nature, dear reader? She gives nothing away. The fat, well-watered grapes – like businesses that have been given too much capital – prove worthless. It is the tough ones – those that have had to scrape by on almost nothing – that produce the richest wine. How likely is it that this same Mother Nature would give investors an 18% gain while the economy grows only 2%?

Our guide was a short young woman provided by the tourist office. (If you call ahead and make arrangements, you can get a private tour.)

“Every ten years, they classify the vineyards,” she explained. Only two have made the very top listing – Premier Grand Cru Classe A: Ausone and Cheval Blanc. But all the top vineyards are located on top of the limestone plateau. Because that is where the soil is poorest.”

She proved her point by taking us to a vineyard not far from town. We went down into the cave – a massive underground chamber carved in the limestone during the 14th century. At one point, an opening had been carved to let in the light. There we could see, the rock went almost to the surface with only a thin rag of stony earth between it and the blue sky.

“Down on the lower land by the river,” she elaborated, “the soil is better, but the wines are not as good.”

Torturing the vines seems to bring out the best in them. Like an investor in a bear market, the vines turn their attention to quality. Fewer grapes are produced – especially among the older, wiser vines – but they are superior ones.

Later in the “Ecole du Vin” we had a chance to test the fruits of all this labor.

“You can look at a good wine and tell how old it is…” the oenologist explained. “And you can tell what the weather was like that year. You can also tell the type of grape used.

“Winemaking has been standardized…at least in some ways,” he went on. “Partly because of the influence of your fellow American, Charles Parker. He has become so influential that local winemakers often try to make the kind of wine they know he will like…then they get a good rating from him and the wine sells well.”

After the class, we were asked to taste a few of the wines to see if we could pick out the various qualities we had discussed. Elizabeth squirmed in her seat and rushed to give the right answers. Even in a taste test she feels she has to win.

Drinking and driving is illegal in the U.S. But here in the Bordeaux wine area, the tourist office will arrange it for you. We drove over to Pomerol and down to St. Christophe, stopping to drink wine along the way. Then, we returned to St. Emilion for dinner.

The restaurant at the top of the hill across from the tourist office overlooks the town. There were only a few diners. St. Emilion, like the rest of the tourist industry, has suffered collateral damage from politics. Fewer Americans visit since the Sept. 11 attacks.

One man wearing an ascot ate alone. Between courses, he read a book.

“These terrorists really disturbed the entire world,” Elizabeth said, taking up a popular subject. “I had planned to go back to the U.S. to go through our things before we put them in storage. Now I don’t want to go…”

“I hope this bombing campaign works,” she added.

Your editor, back on the job…

Bill Bonner
January 02, 2002



        And so…2001 is no more. Sic transit gloria mundus modernum. Or something like that. And what a year it was!

        Of course, some things never seem to change: Stocks are still expensive. We still sing Auld Lang Syne on New Year’s night. And Osama bin Laden is still at large.

        And, of course, most people are still loveable morons.

        One of the great illusions of the modern age is that economists, analysts, and central bankers know what they are doing.

        In fact, they may have a plan…but not a clue.

        “Forecasters from international organizations, government and the private sector failed miserable to predict the speed of the downturn,” reports the Financial Times. Instead of the 3% growth they expected, the world’s major economies grew at barely 1%.

        “Wall Street analysts,” were no better continues the FT, they “overestimated 2001 corporate earnings, on average, by more than 30%.”

        Porter Stansberry adds: “MONEY Magazine’s “Best Investments for 2001” netted a loss of almost 15%. MONEY identified 15 of these “Best Investments,” and 9 of the 15 turned out to be losers. (Two of them, in fact, LOST OVER 90% – Lucent Technologies lost 92% and Redback Networks lost 95%.)

        “Not to be outdone, SMART MONEY Magazine’s “Best Investments for 2001 – First Choices” lost a cool 33% this year. Of their six picks, five were losers…and the one “winner” gained just 7%! (In case you were wondering, SMART MONEY’S “Second Choices” lost just 13%.)”

       Despite the evidence to the contrary, investors still seem to take these ‘experts’ seriously. The recession is supposed to end early this year, they say. Stocks will ‘look ahead’ and rise.

       A poll of 401(k) investors shows how silly people can be. While they expect only about 7% on their stock investments in 2002, over the long term they actually think stocks will rise at 15% per year. And why not? Abby Cohen says they’ll go up by more than that.

      As Warren Buffett says, 15% a year is so absurd it is not even worth talking about. But what the heck? It’s the absurdities that make life interesting…

      Eric, what absurdities did Wall Street throw up on its last day of trading?


Eric Fry in not far from Times Square…

– Mr. Market limped into year-end like the fife-playing patriot in the painting, “The Spirit of ’76”- he’s playing a victorious tune, but looking a little haggard nonetheless.

– The Dow fell 115 points to 10,021, while the Nasdaq dropped 37 points to 1,950. For the second year running, all the major indices finished the year in the red. And the S&P 500’s 13% loss for the year was its worst showing since 1974.

– Even so, anyone who might just be awakening from a 12- month Rip Van Winkel-style slumber would have little inkling of the trauma investors have endured over the last 12 months.

– Our hypothetical narcoleptic might take a quick survey of the financial markets and conclude that 2001 was a good year for a nap:

* The Dow is only about 7% below where it started the year.

* Abby Joseph Cohen is still as bullish as ever.

* Barton Biggs is as bearish as ever. And Henry Blodget still shills for investment bankers by hyping profitless Internet stocks.

* Numerous high-profile CEOs like Hewlett-Packard’s Carly Fiorina and Daimler-Chrysler’s Juergen Schrempp continue drawing their obscene paychecks in exchange for steering the companies they lead into the nearest tree.

* Investors still love tech stocks, especially tech stocks that lose money.

* Investors still hate gold stocks, especially gold stocks that make money.

– Our latter-day Rip Van Winkel might furrow his brow with befuddlement and pensively stroke his foot-long beard upon observing that the S&P 500’s PE ratio is quite a bit higher, even though the index’s price is somewhat lower. The reason, of course, is that corporate earnings collapsed while he was napping. (He might also want to know something about this horrible thing called “Osama bin Laden,” and whether there is any known cure for it).

– And if our long-slumbering soul is a Daily Reckoning reader, he might want to know why retailing stocks were among the year’s very best performers, even though Mr. and Mrs. Consumer are swimming in an even larger sea of debt this year than last.

– He might also wonder how these heavily indebted folks could possibly be expected to lead our nation toward the economic recovery everyone is talking about.

– Five of the S&P 500’s six best performers in 2001 were retailing stocks. Office Depot took top honors among the retailing issues with a 260% gain. (Let’s have a New Year’s “Hip, hip hooray!” for Lynn Carpenter, whose Fleet Street Letter features Office Depot as one of her “10 Stocks for 10 Years.” You know, Lynn, you might want to call it quits right now with Office Depot. The next nine years might be a letdown).

– The other high-flying retail stocks included Auto Zone, Best Buy, J.C. Penney and Circuit City.

– I’ll offer one New Year’s prediction, gratis. These retailing stocks will not top the list of S&P 500 gainers in 2002.

– But the strong performance of these stocks in 2001 provides a telling glimpse into the current market psychology. Clearly, retailing stocks are leading the market because investors expect consumers to lead the way to economic recovery.

– That’s a big burden for Mr. and Mrs. Consumer to bear, in addition to their considerable debt burden. They might not be up to the task.

– Oh well, reversionary economies are not without their silver linings, like discounted New Year’s celebrations. Last year, CBSMarketWatch observes, “festivities to ring in the new millennium carried hefty price tags reflecting the historical significance and the flush state of Americans’ finances amid the most prosperous economy ever.”

– Ringing in the New Year is a little less expensive this year. Many dining establishments, faced with an anemic economy and a more somber national mood, are cutting prices outright. For example, Manhattan’s renowned La Caravelle -whose all-inclusive tab was $325 in 1999 and $1,000 last year – decided to go back to offering what it did three years ago: $85 for a three- course dinner or $175 for five courses. Such a deal.

– Speaking of champagne, I’m not a big fan of New Year’s resolutions. But I’m going to make one this year: I resolve to drink bubbles, not invest in them…I think I’ll get started early on this one…Happy New Year!


Back in France, where it also the New Year…

*** We had a good time out here in rural France – ringing in the New Year last night. This, of course, has nothing to do with money…or our Daily Reckoning. But what the heck…it’s a new year. Let’s take a family inventory. Of course, you have no reason to be interested in my family…but then again, as I point out from time to time, the Daily Reckoning is a free service, so I feel entitled to bore you with family news…

*** Some friends from Paris came down with their three little boys. Adding our two little boys – Edward, 8, and Henry, 10 – brought the number of little boys to enough for a basketball team…and complete pandemonium.

*** Will, 23, is spending the holidays with us before beginning his career…whatever it will be. He’s going to begin in Delray Beach, FL, working with my partner. Will did a beautiful painting for us for Christmas – a copy of a Gericault.

Sophia,19, is here too…she’s a college student, in Virginia…and works as a waitress at a macro-biotic restaurant. Sophia is the most reliable worker in the whole family but doesn’t know what work she wants to do.

Maria, 15, lives with us in Paris and continues her work as a model…and her home schooling. She has an Audrey Hepburn look and style about her – and the temperament of a film star.

And Jules, 14, is working his way through the awkward teenage years, awkwardly. Half his time is spent playing video games or watching movies. The other half is spent pulling up his pants.

*** My mother lives with us too. She’s a veteran of WWII and puts up with us all graciously. Frequently, at moments of crisis, I turn to her with this question:

“You are the oldest and wisest, what should we do?”

“I am the oldest,” she replies, “and only wise enough to tell you…I wish I knew.”

*** Elizabeth and the girls decorated the dining room, richly…with candles all around and a full dinner service on the table. Will had built a nice fire in the fireplace.

We drank, talked, joked until the midnight hour when we got out a bottle of champagne and sang Auld Lang Syne.

*** Jules has a musical bent, so later, the two of us picked up our guitars to entertain the group. We did “The House of the Rising Sun,” and a couple of other numbers. Were we good? No, we were terrible. But we felt hot!

“I smell something burning,” said a weak voice.

It was my mother trying to make herself heard over the din of late-night revelry.


“It smells like something is burning…” she repeated.

“Well, of course something is burning…there are candles…a fire in the fireplace…” I replied.

“Yes…but not that…”

Then, I smelled it too. Something that smelled like a scorched pig…

“Dad,” Sophia observed. “You’re on fire.”

Sure enough. I had backed up against one of the candles. My sweater had caught fire. And, thus, began the New Year…

  • That’s it for 2001. What’s next?
  • Stocks down in last day…down for second year in a row…’experts’ don’t have a clue…but what’s new?
  • Your correspondent is hot!
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