Don't Invest in Wine Right Now?
Written By: Kasey Carpenter on Thu, Jan 1st 1970
I rarely go after anyone on any subject, much less on wine and investing. But I recently came across a post on a rather well known wine investment site that basically says as much: don't invest in wine right now.
Their reason? Well the jet set who are typically the buyers of such wine are getting squeezed just as much, if not more, percentage-wise, than we are. The same writer also says that the Russian and Asian markets are hugely overvalued, and will dry up soon.
Now while I agree with the first part, everyone is feeling the squeeze, and while you and I may be worried about mortgages and jobs and IRA's oh my, others are seeing millions, if not billions, evaporate before their very eyes, I mean, when Warren Buffet loses ten figures in a week.... But keep in mind, what is the rule of thumb of any good investor? When the price is low, you don't sell do you? No. You buy. Market correction is a fact of life. And while we have seen auction prices generally lower and more and more lots going unsold, does that mean you should invest in wine? Hardly. What it does mean is that you shouldn't sell right now. A lot of these collectors are having to sell off because of their financial situations, I think in real estate terms this turns into what is called a "distress buy." And those are the best kind. When you are buying from a position of power, and the seller is desperate for any kind of money, and make no mistake, when a person who has spent decades building a cellar decides to sell in this market, he is desperate, you are able to dictate market price with more authority. In short, you can exploit the situation to your advantage.
So I will give the writer the benefit of the doubt, and assume he meant to say "don't sell wine right now." Because unless you have some killer Burgundy that you acquired for a steal, he's right. This is when those of us who can, should be snapping up those 2000 and 2005 Bordeaux that are stalling, not because of demand or change in quality of the wine, but because of the economy. And I already outlined my stance on Burgundy right now, a segment that seems to unable to do any wrong at auction.
All you have to do is go back over the last couple of months of auction results to see what I mean. There have been some historically bullish bottles that have been snapped up for, in some instances, 50% or more below their last auction price. That is a discount you can't ignore.
And as far as the Asian market. It's one thing to make a statement that the market is over-valued, and it might be, but I would need numbers, and so far, the only numbers I see are the huge sales being garnered overseas. And not just at auction. Many producers are setting up shop in Asia, as we have reported here in the past, and many wines that are typically auction items are also shipping their wines direct to the trade in Asia now, because of the two fold issue of increasing demand abroad, and slowing demand in the US, Canada, and even in Europe.
In my mind, the best scenario is to buy up these low lots at auction today. Sit on them, as you should do with any investment. Don't go for the '61s or even the '82s, those might not be worthwhile in a decade. But the '90s, '96s, '98s (right bank), '00s, '01s, and '05s - some of those are being bought for a song. Buy them, sit on them, and watch the Asian market, because that is where I would sell them.
