Step 1In a medium heavy-bottomed saucepan, simmer the shallots, wine, vinegar, salt and pepper over medium-high heat until reduced to about 1 tablespoon. Add the water. Cook down until you have about 2 tablespoons.
Step 2Into the hot reduction, whisk in two cubes of butter and immediately turn the heat to low. Whisk in the remaining butter, one to two cubes at a time, until incorporated. It's important to whisk constantly. The sauce should be thick and nappe, the consistency of heavy cream. Strain if desired.
Step 3It is best served immediately, but if you don't, the sauce can be kept for an hour or two over a pan of barely warm water, near a pilot light or in a thermos. Stir occasionally, whisking in a little bit of water if the sauce thickens.