What will the effect on the wine trade be of the current alarmingly rising inflation? I assume many issues like this are determined by what very wealthy people do with their money under various economic conditions. Predictions?
I remember a small article in the Wine Spectator back in the day- a woman decided instead of investing in the stock market for her kidsā college tuition, to invest the money in wine and wine futures. Iām fuzzy on the exact details and couldnāt find the article but seem to remember a Bordeaux and Bordeaux futures focus and an early 2000ās time-frame.
Iāve periodically wondered how it worked out. It would be odd to secretly (or worse yet- not so secretly) wish your kids didnāt go to college so you could start drinking their 2000 vintage Haut Brion, Margeaux, Petrus, LaTour, Mouton, etc.
Itās interesting that the Robb Report didnāt mention inflation, since thatās the primary reason to invest in wine (real assets, including āinvestment gradeā wine, are excellent hedges against inflation).
Good question about the effects on the wine trade. Seems likely that price increases (on top wines) due to inflation might be small compared to demand price increases and tariffs over the last years, esp for Burgundy. It might be a good time to stock up on good village Burgundy, top Bourgogne and 5th growth/etc Bordeaux tho.
Just looked up some very basic information about this, and it looks like the S&P 500 return from June 2000 to March 2020 (due to the valuation info from an article referenced below) with dividends reinvested was ~164% (could be way off as I used a canned S&P 500 historical gains calculator). According to this Decanter article, every first growth has beaten that mark, but it should be noted that June 2000 was the ādot com bubbleā bursting and March 2020 was the pandemic drop-off in the market. If you started investing in 2005, you would be looking at a ~198% S&P 500 gain vs. the highest appreciating first growth at 83%. 2009, 2010, and 2016 are red across the board from a first growth value standpoint, and all of those periods were significant growth for the S&P.
IMO, you are most likely to get crushed by the market unless you pick the very specific best wines that get hyped, which is almost as challenging as picking individual stocks that will do the best. The major upside to investing in wine is if a pandemic or otherwise inspired free-fall happens, you might not hit as low of a bottom. That said, you only really look good if you need to cash in when the market is trash, which is a crazy bet to take 18 years before college.
Youāre also assuming people are buying wines EP - I believe some 2010s have moved a lot since the bottom of their range. I dont believe 2016 is in the red, is it? Iād have to check the stats, I dont know the first growth pricing off hand.
Picking wine is easier than picking stocks imho, general upwards momentum is easier to bet on than hoping netflixās earnings continue to grow ata the pace theyāve reported on to date.
Thereās a difference between beating the mark on paper and realizing those gains in the real world, net of transaction costs, as well as expenses (storage, insurance). Risk adjusted, wine is a terrible investment for most anyone other than people who donāt ever need to worry about relying on that money someday.
Though I know there exceptions - sophisticated folks who know what they are doing. But that is rare, and so is making enough money on investing in wine such that itās more attractive than many safer alternatives.
Liv ex had a comparison of ex-negociant prices from 2016 through 2020. If memory serves the majority of the popular wines are still priced lower than 2016 and on par with 2018. Ill see if I can find the link.
Meh, thatās a fairly american centric view of it TBH. Selling wine is 10% commission standard in the UK - though platforms like wineowners.com aim to reduce that more to like 3%-ish.
My storage costs on my portfolio amounts to an approximate AMC less than a passive index tracker fund (e.g. Vanguard), all in.
The returns and (obviously) risk structure are very different, which is why itās useful as a diversified thing. Just look at this week - what IPO can you guarantee 30-50% returns on, like Canon and Carmes Haut Brion in the last couple of days?
Wine as a general thing isnt a great investment. Wine is also not something Iād use an index tracker to invest in, if such a thing existed. But if you can access the right allocations, it can be a useful tool.
Not saying people SHOULD invest in wine, nor that Iām actively encouraging it, but we shouldnt also make it out to be like tulips or beanie babies.
I have a concept I call the āthin fileā investment test. (well its not mine, I picked it up somewhere I canāt remember top of mind). If a prospective investment is one where its easy to pull together a thick file of investment opinions/research/puffery, brokers services, custodians, vendors etc. thereās a good chance the future returns are already priced in. If the file is āthinā, and the hard work has to be done by oneself, and there isnāt a 100 pages on Google indexed to it, thereās a better chance some future excess returns may be had.
In 1975, there wasnāt that much interest in investing in fine wine, Ferraris, and so on. Roll forward a a generation or more and thereās lots of service providers, lots of information. That doesnāt seem to be an awesome setup for prospective excess returns.
If I was forced to characterize fine wine, and put it in some investment box, Iād class it like precious metals in bullion form. No coupons/divs, and ongoing carry costs.
Sure we have lower storage costs in the UK, but there isnāt a 10% commission on Vanguard fundsā¦
And as you say, itās only possibly a good investment if itās diversified.
So even backing out the āAmerican-centricā view you seem to acknowledge that wine is still not a great investment except for a select few, under specific circumstances. Even in the Europe and UK.