Overproof and Navy Strength Demand
"Overproof", "cask strength", "barrel strength" and "navy strength" - all terms
used for growing number of brands of whisky, rum, gin and cognacs with
higher-than-normal concentrations of alcohol that go beyond the standard 80
proof or 40% alcohol by volume. The higher strengths indicate the spirit has not
been heavily diluted prior to bottling. The British Royal Navy historically
demanded "navy strength" which meant if gunpowder was doused with a spirit it
would ignite, the “proof” the navy got what it ordered. “The higher the proof,
the more flavor that’s extracted,” says Tim Cooper, resident bartender with the
downtown New York cocktail spot GoldBar, who last month won the grand prize in a
“Show Me the Proof!” cocktail-making competition sponsored by cognac maker Louis
Royer SAS. Cooper says he focuses less on names and more on how this burgeoning
category of spirits helps him concoct drinks. “Show Me the Proof!" event, held
in New York, featured drink mixers from around the country competing to create a
winning cocktail using Royer’s overproof “Force 53” VSOP cognac. The '53' refers
to the alcohol percentage and means the cognac registers at a potent 106 proof.
In strengths topping out at nearly 150 proof recent additions include bourbon
'Knob Creek Single Barrel Reserve', rum 'Plantation Rum Original Dark
Overproof', rye 'Wild Turkey 101' and gin 'Perry’s Tot Navy Strength Gin'.
According to officials from various brands, sales are strong for overproof
liquor. From Deerfield, Illinois Beam Inc, maker of Jim Beam bourbon - sales
have surged by 70% in most recent quarter compared to year earlier for its
Scottish-made Laphroaig Cask Strength whisky which sells for $59.99 for a
750-milliliter bottle. That is a faster growth rate than that of its
still-popular, standard-strength Laphroaig 10 Year Old $49.99. Beam anticipates
selling out of its entire 2,500-case U.S. allotment of the Cask Strength
expression by year’s end. “High-proof whiskies are in hot demand at the moment,”
says Beam spokesman Dan Cohen. The flavor of overproof spirits tends to be more
robust because the spirits have not been watered down. The change in alcohol
potency came about largely because of concerns about alcohol consumption in the
U.S. as well as Europe. As premium-priced, higher proof spirits become trendier
and as sales continue to grow they become a profitable category in their own
The real problem with permanent QE will be the destruction of saving. The
Federal Reserve, the Bank of Japan, the Bank of England, and the European
Central Bank are all creating new money in different ways. QE has gradually
shifted from being an occasional move to being part of the make-up of the
economic system. The QE crowd which consists of mostly university economists,
argue that printing money is essential to stop the economy from collapsing
completely while their opponents, hedge-fund managers or taxi drivers, warn
darkly of rampant inflation and soaring bond yields. When the ugly phrase
quantitative easing was first introduced to the world, it was sold as a
temporary, emergency measure, to be used in the rarest of circumstances. However
QE is establishing itself as part of the normal operation of the global economy
and we are only beginning to understand what the long-term consequences of that
will be. The real danger with permanent QE is that savings rates are being
destroyed and capital is ending on being invested in all the wrong things. The
savings rate has dropped from 9% when QE started to just 6% now. According to
the Department of Commerce, the personal saving rate in the U.S. has dropped way
down to 3.7% which is lower tan any time seen since 2007. QE has the longest
track record in Japan where the savings rate has dropped to the range of 2%,
compared with as much as 40% in the early 1990s. It is bad for the economy if
there is not enough saving and while more borrowing may be good in the
short-term, in the medium term too much debt is bad for the economy as well. If
saving stops, investment will stop as well making it impossible for economies to
According to payrolls processing firm ADP, private payrolls expanded by 162,000
during September. The July increase was reduced by 17,000 to an increase of
156,000, while the August increase was reduced by 12,000 to an increase of
189,000. Most of the September growth came from the services sector, which saw a
144,000 gain, with goods-producing firms adding 18,000 jobs.
The Institute for Supply Management on Wednesday said its services index rose to
55.1 in September from 53.7 in August. The new-orders index, a sign of future
demand, surged higher by 4.0 percentage points to 57.7, striking the highest
reading since March. The inventories gauge fell to 48.5 from 52.5, while the
prices index climbed to 68.1 from 64.3 striking the highest reading since
According to new data from Fitch Ratings, September marked the first time in
2012 that the total amount of outstanding credit-card asset-backed securities
has increased. Fitch noted that the last time this took place was December 2012.
September outstandings for the Fitch prime credit-card index were $110 billion,
up 4% over August with prime credit-card outstandings remain about 21% below
year-earlier levels. Fitch retail credit-card index indicates that outstandings
were 2% lower than August and off 14% from September of last year. Fitch said
its 60-day delinquency index last month came in at 1.69% - a seven basis point
decline from August levels and a 27% decline from the same period a year ago.
Credit-card delinquencies are nearly 50% lower than the historical average of 3%
with the delinquency index measuring the receivables associated with accounts
that are more than 60 days delinquent and are a leading indicator of credit-card
trust performance. Fitch noted that its charge-off index "has dropped to levels
not seen in nearly five years." September charge-offs were 4.29% which is a 9.1%
decline from August. September charge-offs were 32% lower year-over-year and
remain substantially lower than the historical average of about 6%. In the
retail sector, charge-off levels fell to 6.8% striking the lowest level seen
since December 2007. Fitch said it expects charge-offs to remain low in the near
term as delinquencies and bankruptcies continue to decline.
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