Thursday, June 24, 2021

Caveat Emptor

One of the warehouse receipts for the whiskey that became A. H. Hirsch Reserve.

There is an old saying among card players. When you sit down to a game, if you don’t know who the mark is, it’s probably you. That’s not to say someone is always trying to rob you, just that you should be skeptical and cautious whenever you’re asked to put money at risk.

Earlier this week, Louisville’s WDRB aired a story about CaskX, an “international investment firm … busting into bourbon territory by offering unique opportunities for individuals to bank on Kentucky’s spirit.” It featured the firm’s relationship with Kentucky Artisan Distillery in Crestwood. 

Although billed as a business story, the piece is more sales pitch than news. You can read it/watch it for yourself. I won’t rehash the details here.

The online version also conveniently provides a link to the CaskX web site. That you can also read for yourself.

One thing you won’t see in either of WDRB’s presentations is the word “risk,” but risk is an inevitable part of all investing. The type of investment CaskX is promoting is unusual. Here are some of the specific risks identified by CaskX in their hard-to-find, hard-to-read ‘Safe Harbor Statement’ (as required by law).

“These risks and uncertainties including, but are not limited to the following: the highly regulated nature of the whiskey industry and the requirements that may be imposed on you due to changes in law after you acquire your whiskey cask; changes in consumer and commercial demand for whiskey; loss of whiskey due to evaporation or failure to appropriately monitor the cask as it is maturing; loss of whiskey due to leakage, damage or theft, competition for the sale of whiskey with other investors or distilleries having greater resources than you; negative perception for the distillery who manufactured the whiskey in your cask or lack of brand loyalty; and lack of public market for whiskey casks and the requirement to hold your investment for quite some time due to the long maturation of whiskey and applicable United States securities laws. Please review our Notice to Investors and related Risk Factors for a further description of these and other factors you should consider before making an investment in whiskey casks. CaskX is under no obligation to update any of the forward looking statements after the date of publication for this website and associated documents to conform such statements to new information.”

CaskX’s product appears to be a revival of something that was pretty common at one time, investment in warehouse receipts. One famous investor in warehouse receipts was Adolph Hirsch, who bought some barrels of bourbon made in 1974 at Michter’s Distillery in Pennsylvania. (One of the receipts is pictured above.) Bottles of that bourbon now sell for thousands of dollars each, but that money isn’t going to Hirsch (who is long dead anyway). That whiskey has been bought and sold many times. We don’t know exactly how much Gordon Hue paid Hirsch for it back in 1990 but we know it wasn’t much. The whiskey was distressed property. Hirsch only sold it because the distillery was bankrupt. If he hadn’t sold it when he did, he might have lost it.

That also is a story you can read for yourself in a book I wrote.

Friday, June 4, 2021

Remembering the Bucket


Despite its name, Bucket O’Suds owner Joe Danno claimed his joint on Cicero was a bourbon bar. I met him there in 1992, long before bourbon bars were a thing. The supporting evidence for his claim was convincing. If you ordered ‘bourbon,’ without a call, you got a healthy free pour of a top shelf brand. Water was by request and ice may not have been available. In those days, Danno's ‘well’ pour was Very Very Old Fitzgerald, the now-legendary 12-year-old made at Stitzel-Weller. He swore he would pour it until it was all gone, but he couldn’t buy more because the Japanese had cornered the market.

The name ‘Bucket of Suds’ may have been inspired by another Chicago bar, The Bucket of Blood, an infamous saloon on the southwest corner of 19th Street and Federal in the Levee District, notorious during the late 19th and early 20th century. It was still operating in 1916 even though the District had been officially cleaned up in 1910.

On the backbar at the Bucket, Danno had brands that hadn’t been sold in years. Many bottles were empty, just there to take up space. In some, the remaining whiskey was undrinkable. I know, I tried. He had a Fairfield McKenna, a unicorn so rare most people have never even heard of it. It is a wonderful whiskey when in good shape, but the little bit in The Bucket's bottle was not in good shape. It tasted like vanilla extract, and not in a good way. Other bottles bore names like Belle of Nelson and James E. Pepper, brands that died in the 60s. 

I wasn’t a regular. I was only there a few times. Lots of people knew it much better than I did. Joe was a craft mixologist before that was a thing too. He created all sorts of drinks, frequently described as “crazy,” often using ingredients he invented with names like Elixer Lucifer, Apple Knocker, and Meister Likker. It was just Danno and his sister-in-law, Fena, who I remember passing around a tray of deviled eggs.

Danno opened The Bucket in 1964. It was a neighborhood tavern then, a family place. By 1992 it was an idiosyncratic dive bar, open Wednesday thru Saturday starting at about 7:00 PM. Often the outside lights would be off and the door locked. You had to knock. 

The Bucket is long gone but there will be places like it as long as people drink. At least, there should be.