Wine as an investment vehicle

[Musigny 151]

Just received an e mail from Bordeaux Index which makes for interesting reading. Several English newspapers are touting the idea of investing in wine. Nothing new, except Livex, basically a marketplace for wine, allows the consumer to buy and sell in real time. Hard to know more, as I kept hitting paywalls.
It makes it cheaper and easier to trade in wine. How much it screws up the market is anybody’s guess. The good thing is these wines will be stored well. Also they need eventually to be sold. But the needs of the investor and timing are probably quite random.
Should be interesting.

[jckba]

‘Cult Wines US’ seems to have a similar model that I keep running into as they are appearing at the top of some of my recent Wine-Searcher searches. It looks as if as all of their pricing is 'In-Bond' meaning it’s coming from the UK and Tax, Duty and Delivery fees will be added so the advertised price is a little misleading if you are on this side of the pond.

https://www.wineinvestment.com/

[Claudius2]

Guys
In the 90s and 00’s lots of wine investment schemes started in Australia. As far as I know, none of them still exist and the auctions were flooded with the wine they bought. Too often they bought into the Parkerised wines that lost value rather fast.

I have to think that if wine trading is run by speculators and arbitragers then I am out. Yeah I’ve sent wine to auction but never with the intention of flipping for a profit. It is a pity that the best wines in the world are now so expensive that they can’t be drunk by enthusiasts. The auction I went to last weekend was a good example. The auctioneers were saying which vintages of DRC will make the best investment and why 1996 Romanee Conti is a better investment than property or funds. Whatever. No I did not bid and the hammer price was SGD50k a bottle plus commission and sales tax.

I keep getting emails from a local company here that has its own index and sends out a pile of emails daily which trades anything on its platform. Well I can smell another collapse sometime.

Cheers
Mark

[JimS]

As someone who works in finance, this has always been a topic of interest to me - largely because as more “money” is created within the financial system by way of quantitative easing, this almost creates an artificial “scarcity” of financial assets relative to supply of money seeking returns. So asset prices get bid up, etc etc. But, as a result, other “collectibles” or “alternative investments” then can become an area of focus. Wine in particular lends itself well to this as there are finite amounts created, a constant shrinking supply of the vintage as wines are consumed, and wine of the highest quality often improves or develops more nuance as it ages - hence, this is the universal pitch of this industry or any wine investment fund.

I personally don’t view wine this way as I am a hobbyist and enthusiast, so I don’t really look for returns on investment but moreso just savvy purchases that in retrospect look like good investment decisions as the market recognizes quality and I can enjoy them for cheaper than they’d cost to buy off the shelf several years from now. Anyway, I don’t know how much wine is bought for “investment purposes” but judging by how much some of these investment houses have grown in terms of AUM, it’s not immaterial. Cult Wines, and a newer one I’ve heard of in the states called Vinovest are both growing quite rapidly and I believe are in the order of several hundred USD equivalent under management.

The good news in my opinion is that these bottles will all be stored properly and eventually find their way back to market, but the negatives obviously is that it is just that much more incremental dollars chasing wine that there otherwise wouldn’t be. If anyone looks at Livex type analysis, plotting quality (as measured by critic scores) versus price, fitting the relationship with an exponential line of best fit, and identifying cheap vs rich outliers, that’s really how they do it, and supplementing that analysis with momentum indicators….a lot of Bordeaux EP investment, a lot of focus on Burgundy, and now shifting more toward Champagne…

Anyway, I don’t know where I was headed with this post other than to say it really is something that is more materially impacting our market, viewed as an “inflation hedge”, and an asset with unique qualities such as shrinking supplies, improving quality with time, etc etc. I’d also be remiss if I didn’t state that I myself do some of this analysis when evaluating savvy purchases, though I have no intention of selling as I generally feel wine is only good as a diversifier but for actual returns, the cost of storage, transaction costs, etc. only make sense from a return perspective if you intend to hold for very long periods of time (GREAT idea from an estate planning perspective, however).

[AKR]

If wine is such a lucrative trading vehicle...why aren't the proprietors of K&L, MacArthurs, Zachy's etc. not billionaires? Presumably they would have a hundred fold advantage over the clients in an opaque, illiquid, non auction market.

The proprietary traders at GS, Solomon Bros., various House of Morgans,etc. seem to gotten quite rich off what seem like similar advantages of their matchmaking abilities.

In the world of wine, it seems to me more that those who have earned fortunes in some other field, migrate over to purchase a career capstone bauble, to dissipate said fortune.

[Musigny 151]

For anybody looking I am happy to forward the e mail, just pm with your e mail.
What I thought was interesting about the articles was not that this was a good path to riches, but in these uncertain economic times, blue chip wine is a hedge.

Personally, buying for myself as a portfolio diversification, I am doing fairly well with wine. I am pretty informed, have my contacts in many countries, and I know the market well enough to make decisions on the fly, which can be very important.

Add another layer in commissions, add commercial storage rates, and a percentage for selling, and I would be underwater in no time. There is absolutely no way for a wine fund to make you money with any kind of certainty. No way!

[JimHow]

Sigh, there was time around 2004 when Roberto was going to sell me his case of 1996 DRC Grand Echezeaux for $200 a bottle. I never hooked up with him after that. I wonder what I’d get for it today?

[DavidG]

Exactly, Mark. Not many have your market savvy and connections. Paying someone else for those skills is a severe drag on profits.

The only times I’ve made money was by selectively selling the “winners” from my cellar. There wouldn’t have been nearly the profit, if any at all, in selling everything. But I bought to drink, not to invest.

[AKR]

There is a lot of cherry picking when presenting the returns of dollars deployed into wine.

Winners are sold, everything else is down the gullet.

Maybe Musigny has the skills to a priori to identify those; I doubt the promoters in these schemes can.

Their main life survival skill is to sell high fee products.

[Claudius2]

Sigh, there was time around 2004 when Roberto was going to sell me his case of 1996 DRC Grand Echezeaux for $200 a bottle. I never hooked up with him after that. I wonder what I’d get for it today?

Jim
If you can get it at that price then I’ll happily take every bottle off your hands.
Sigh..
Mark

[Musigny 151]

Around that time I was offered three mixed cases of DRC 1999 for $3600

[stefan]

>>
Around that time I was offered three mixed cases of DRC 1999 for $3600
>>

If you look hard, you now might find one bottle of 1996 Romandi Conti for $15,000. More likely you'll have to pay around $25,000.

[Claudius2]

Stefan
And if you move to Asia, you will have to pay even more.
Auction price here was equivalent to USD35k or slightly less in Euros.
Well I would not want to drop it.
Cheers
Mark

[AlexR]

I love it when some wines I've bought have increased by hundereds of percentage points.

But I would never be tempted to sell my wine.

Anyone read this book? It kind of mocks the trading and retrading of name wines.
https://www.amazon.com/Anatomy-Wine-Tra ... 0060157852

Best regards,
Alex R.

[Claudius2]

Alex
I had to send a lot of wine to auction in Australia as it was just too hard importing it into Singapore.
None of the wine was purchased with the intention of flipping it - just changed circumstances. I intended to bring it over to Singapore progressively but much of it was badly heat affected despite being air freighted in foam boxes.

What do you do if you open a case of any wine and do not like it?
I’ve sent off a few leftovers to auction not as they were out of condition, but as they did not suit my palate including a case of NZ Pinot Noir recently.

Cheers
Mark

[Musigny 151]

Stefan
And if you move to Asia, you will have to pay even more.
Auction price here was equivalent to USD35k or slightly less in Euros.
Well I would not want to drop it.
Cheers
Mark

I know there are plenty of billionaires out there, but it is hard to see somebody opening a bottle costing $35k on any kind of regular basis, unless it is part of a tasting of similar wines.

[DavidG]

Stefan
And if you move to Asia, you will have to pay even more.
Auction price here was equivalent to USD35k or slightly less in Euros.
Well I would not want to drop it.
Cheers
Mark

And how much for a real bottle?

[Claudius2]

David
The auctioneers here source wine from Europe and expensive wine is verified pretty carefully.

Having said that, one local importer who also sells into HK and China was once offered a good deal on DRC wines that were greater than the actual production of the Estate. Yeah sure.

Don’t think it stops at DRC and first growths. Everything in China is fake. Even filtered water, eggs, beer, milk powder, any type of meat, cooking oil, whatever. Never eat anything there that you aren’t sure is real.

Seriously I just about starve when I visit China and bring my own wine even if I have to pay duty. I’ve seen fake Penfolds at all levels in supposedly upmarket retailers. Fake Grange I suppose makes sense but the commercial wines are often fake as well.

As for luxury goods, 90% at least are fake. I’ve been in entire multi storey malls in China where all the merchandise is fake. They even have the audacity to ask you what quality you want. Chanel bag? No worries do you want the really cheap one (maids buy them here for a few bucks) the medium quality or the best knock off? The best fakes have also be found for sale in the branded shops - I mean fake Chanel in real Chanel shops. There is no honour even in the supposedly “real” shops. I’m using Chanel as an example by the way - happens with all of them. Online sellers are 100% dishonest just about everywhere in Asia.

Every now and again there is a big scandal like the fake powdered milk a few years ago that caused hundreds of deaths. But the fakers just move on.

Cheers
Mark

[Musigny 151]

Wow, tiers of fakes. I saw pallets of Black Opal when I was in Shanghai. I bought a bottle and served it blind to some wine judges. We all agreed, it wasn’t as bad as Mao Tai

[JimHow]

When I bought my 18 bottles of 2016 Mouton for $610 each, they were listed at like $780 per bottle on average on Cellartracker.
Now they are only $671.
Oh well. Might as well drink them.
Can't take them with us.

[Claudius2]

Jim
Then you can refill the bottles, recork them and add new capsules for a few CNY a bottle. Simply refill with two buck chuck and sell into HK or Shanghai for a nice profit. Make sure you explain that it won’t be ready to drink for at least a decade.

I’ve tasted a few fake French wines last time I was in Shanghai and seriously, two buck chuck would be a lot better.

Musigny
There is of course some honor among fakers as nobody pretends to be selling authentic products.

At least the Chanel bag won’t kill you. Endless thousands die every year from fake, adulterated or contaminated food. Just don’t start me me on the evils of TCM. The fake milk powder at least will be a less painful death.

The CCP will however not tolerate any talk of fakes or contaminants etc and if you speak out about it, you can expect arrest as you are a threat to social order. That social order means that you cannot do, say or think anything not officially approved by the CCP. Since Xi Jinping became president in 2013, China has progressively returned to the old Chairman Mao era.