Why Futures?

Post Reply
User avatar
jal
Posts: 2931
Joined: Mon Jan 26, 2009 9:30 pm
Contact:

Why Futures?

Post by jal »

As far as I can tell these are the reasons for buying Bordeaux Futures:
  • 1. The price on release will be higher than the future price. It is therefore a speculation on the price of the wine or the exchange rate.
    2. The wine one wants may not be available after release. When one remembers that Bordeaux estates usually produce thousands of cases, that doesn't make a lot of sense.
    3. Eagerness to close the deal. Makes even less sense when one is happy to spend now but will need to be patient for at least two years till release.
    4. Specific format. Ok I understand this one. It's not easy to find 375ml or 6L bottles of a certain wine but seriously, how much of the futures market is sold in these formats?
    5. Provenance. Not so sure about that one either, buying right on release from merchants who have the wine in stock should be safe enough.
Take into account the risks; that the merchant might go bust, that the wine may be delayed, that the vintage might be actually much worse than predicted (2003 anyone?), and I have trouble understanding the hype. What am I missing?
Best

Jacques
User avatar
AlexR
Posts: 2373
Joined: Fri Nov 21, 2008 10:35 am
Contact:

Re: Why Futures?

Post by AlexR »

Jacques,

That's a pretty good summary.

The most compelling reasons are 1 and 2, which are often closely linked.

For a price, you can always buy anything, but for certain wines, especially the tip of the pyramid, you can *still* make a savings by buying en primeur.
Of course, the greatest wines are released in "tranches", which means buying early can also be a decided advantage.

I would ceratinly agree that the inducement, the financial incentive to buy en primeur has gone out the window for many wines.
But, let's not forget: this is quite variable, so it is tough to make sweeping statements...

I continue to pay less for the mid-range Bordeaux I buy on a futures basis (generally a savings of 15-20% I'd day).

Also, when plotting the market value of wines, this needs to be seen over a long time span.
What may seem like a pretty poor investment can, after a few years, seem like quite a sound one!

That having been said, buying a vintage that has a poor reputation (2013, 2007) only makes sense if it keeps your place in line to buy from somone in the well-reputed vintages.

All the best,
Alex R.
User avatar
DavidG
Posts: 8280
Joined: Sat Nov 22, 2008 1:12 pm
Location: Maryland
Contact:

Re: Why Futures?

Post by DavidG »

Peer pressure. It's Ian's fault.
User avatar
jal
Posts: 2931
Joined: Mon Jan 26, 2009 9:30 pm
Contact:

Re: Why Futures?

Post by jal »

AlexR wrote:That having been said, buying a vintage that has a poor reputation (2013, 2007) only makes sense if it keeps your place in line to buy from somone in the well-reputed vintages.


Ok, that's a good reason if you believe in 1. and 2.
DavidG wrote:Peer pressure. It's Ian's fault.
Yup, thought so. That makes sense :D .
Best

Jacques
User avatar
Comte Flaneur
Posts: 4864
Joined: Mon Jan 26, 2009 9:05 pm
Contact:

Re: Why Futures?

Post by Comte Flaneur »

Jacques - stop talking so much ridiculous common sense and stop being such a spoilsport :D

On a serious note I think all your points are valid, 4 is the only one that does not matter. I just looked back on some of my futures purchases in the 2008 and 2010 vintages.

In 2008 I only bought two cases as futures, Leoville Barton and Pichon Baron. The LB is up 75% the PB has doubled. These by the way are replacement costs, not realisable values.

In 2010 I bought five cases as futures and I am up between 10% and 100% - but 30% on average - the 100% being Pape Clement which RMP subsequently rated 100 - so compared to cash yielding zilch that is not too bad...but clearly lagging the S&P.

The other point is the thrill of the chase. I ended up buying nine cases of 2016s not just because the vintage ticked all my boxes, and in spite of y-y price increases of 25-30% in sterling, devalued by Brexit, but because I had a modest windfall after an elderly relative died. Without that I would have bought a lot less. I am not worried about these going down in value and I suspect one of two of the wines I bought will be upgraded. I reckon at least one, maybe two, perhaps even three of them, will end up as 100 point wines, so I could have another lottery ticket here like the Pape 10. I know Parker is not around anymore, but still...

Now it is back to auld claes and porridge...
User avatar
jal
Posts: 2931
Joined: Mon Jan 26, 2009 9:30 pm
Contact:

Re: Why Futures?

Post by jal »

Sorry for throwing shade Ian, I just want to understand if the whole process is rational. I guess the thrill of the chase makes sense.
As far as the return on investment, a better analysis would be to look at the appreciation from purchase to release. In any case, enjoy the wines, I hope to see you soon.
Best

Jacques
User avatar
AKR
Posts: 5234
Joined: Thu Mar 19, 2015 4:33 am
Contact:

Re: Why Futures?

Post by AKR »

There's another risk, which I suppose is housekeeping related.

For those of us who are older, if one sinks a big pile into futures, how will those be dealt with if one passes away in the next 12-24 months.

Many spouses/estates are not aware of non financial intangible assets because they are generally not recorded well by owners.

Of course the better vendors will make some efforts at reaching out, but even then, that can get lost in the chaos and loss of dealing with loss.

As someone who is working through the finer points of my states escheatment rules, trying to retrieve some assets, its another pain.

So I'd throw that into the mix too.

Maybe not germane if one is 20ish.

But having met a friend over the last week who is starting to prepare for his (currently) 99 year old fathers final settlements, its another sad risk to consider.

(said 99 year old is NOT purchasing 2016 vintage, btw)
User avatar
stefan
Posts: 6225
Joined: Mon Jan 26, 2009 9:08 pm
Location: College Station, TX
Contact:

Re: Why Futures?

Post by stefan »

Gosh, Arv, you make me worry that Lucie or I might live to be 99. I don't have enough wine to last for 26 years even if we slow down our consumption a bit. So when I get through buying wine for the fall I might take a look at the 2016s after all.
User avatar
AlohaArtakaHoundsong
Posts: 1460
Joined: Sun Sep 02, 2012 5:12 pm
Contact:

Re: Why Futures?

Post by AlohaArtakaHoundsong »

The number one reason (perhaps the only one) to buy futures is does it make you happy to do so. This is implicit in a few of the enumerated, so-called "rational" reasons for doing so.
User avatar
stefan
Posts: 6225
Joined: Mon Jan 26, 2009 9:08 pm
Location: College Station, TX
Contact:

Re: Why Futures?

Post by stefan »

Lessee now: Should I respond to this f***ing complaining client whom I would like to dump, or should I surf and find some 2016 futures to buy?

Duh now.

stefan,
writing "An academic's view of the business world".
User avatar
AKR
Posts: 5234
Joined: Thu Mar 19, 2015 4:33 am
Contact:

Re: Why Futures?

Post by AKR »

stefan wrote:Gosh, Arv, you make me worry that Lucie or I might live to be 99. I don't have enough wine to last for 26 years even if we slow down our consumption a bit. So when I get through buying wine for the fall I might take a look at the 2016s after all.
My friends pop is still cruising along at age 99.

I cheered him up by pointing out that is a favorable point for his own lifespan.

That, and pouring him some more Kutch Pinot.

My observation is really that wines in your cellar are much more likely to get taken care of properly than wines that exist in the netherworld between purchase and delivery, when really only you know about them.
User avatar
Comte Flaneur
Posts: 4864
Joined: Mon Jan 26, 2009 9:05 pm
Contact:

Re: Why Futures?

Post by Comte Flaneur »

It's a good point Arv...I know someone who was crossing the road to buy some cigarettes and he got run over by a #19 bus. The moral of the story is that smoking is bad for your health...but he also had a few EP purchases from the most recent vintage, so his next of kin lost out too.
User avatar
jckba
Posts: 1809
Joined: Wed Apr 24, 2013 9:18 pm
Location: Sparkill, NY
Contact:

Re: Why Futures?

Post by jckba »

I have a notepad on my iphone where I keep track of all undelivered purchases and notate each store, the rep to contact along with their contact info, the wine(s) and the quantities and should something happen to me, whether it is my girlfriend or my father, they'll have a fighting chance at retrieving the wines that I have paid for. Besides, it also keeps me in tune with what is outstanding ;)
User avatar
Nicklasss
Posts: 6386
Joined: Tue Jan 27, 2009 5:25 pm
Contact:

Re: Why Futures?

Post by Nicklasss »

Buying futures is the only fun left, before the North Korea start the next World War, a nuclear one.

Saddly, we will never try the 2016 futures we're buying.

:-(

Nic
User avatar
DavidG
Posts: 8280
Joined: Sat Nov 22, 2008 1:12 pm
Location: Maryland
Contact:

Re: Why Futures?

Post by DavidG »

Peggy actually asked if I thought we'd be alive to enjoy the 2016s before she gave the thumbs up. I said sure, we can just How them...

Plus I got a good deal of enjoyment out of just buying them.

If I get hit by a bus, it's all on CellarTracker, with a separate spreadsheet of undelivered futures.
Post Reply

Who is online

Users browsing this forum: Bing [Bot], Google [Bot] and 17 guests