Classic Wines

The "R" Word Means Buy, But Not Yet

I think I'm not letting any cat of the bag when I say we are for all practical purposes in a recession. There, I said what CNN has danced around for months. Call me cutting edge. Counter culture media outlet. But what does the "R" word mean to the wine collector? Well once again, when dealing in luxury markets, it is good to look at the other horses that are teamed up to this wagon.

Real estate -- yeah it's really, really messed up right now. However, do you honestly believe that real estate is still a bad investment? Then why are hearing about, and reading about so many "property vultures" that are buying up land for quite a hefty discount? Yeah those with the cash see the formula long before it has to be drawn upon the chalkboard: huge homes in decent neighborhoods being outran by their own mortgages in terms of value, and cash-strapped homeowners just giving the keys back to the banks and walking away from them. Boom, distressed buys, the classic cry of the late night infomercial hocking a get rich quick real estate program. Thing is, if you can find the distressed seller, you can turn a profit.

SUVs and other gas-guzzling cars -- at four bucks a gallon, a twenty five gallon tank on a beast that might get ten miles per gallon can be relied upon to lighten your wallet to the tune of two hundred dollars a week in some families. When gas exceeds the lease and/or payment of a luxury car, even those with the pockets to support it think twice. Here in Texas, home of the Cadillac, the Suburban, and all regrettably the Hummer, you can now drive by a dealership and see rows upon rows of the parked on lots, overflow lots, out back, across the freeway in a field the dealer has had to lease from some farmer. They are everywhere. Even a brand that caters to the financially impervious such as Mercedes Benz, has seen sales of the S, G, and GL class drop in favor of E-class wagons, C class cars and the like. My point? Watch by the end of the year, they will be giving away cars like Chrysler is doing now in conjunction with Pricelock, a fuel hedging concern that brokered unleaded gasoline reserves for Chrysler's promotion at a head-turning $2.99 a gallon for three years. Big cars will be had for a song, especially those that are a year or two old -- watch Ebay.

Diamonds -- okay you're crying foul on this one because we all know that diamonds are a "self-regulated" commodity, and by that I mean that DeBeers has enough diamonds in reserve to drop the price to affordable were they to release them all into the market. This is a well known fact. But as people bunker down financially, they will lower their prices in response to buyers who are being driven by the needs and complaints of retailers whoa rehearing it (or rather, not hearing anything at all) at the storefront level.

This is the way things work. Luxury goods and anything classified as being bought with "discretionary income" fall of the radar with a quickness. This is not necessarily a bad thing. Why?

Granted the fat cats out there aren't going to switch from Petrus to Gallo overnight due to some falling stocks, political woes, gas, real estate, etc... but the guy who maybe dabbled in futures for the past few vintages may have bigger fish to fry. He may thinking about paying off that house quicker, offing the land yacht, or some other more pressing concern than those twenty cases of First Growths. Multiply "that guy" buys a few thousand across the country and you have a situation where retailers are concerned. When I was working retail, 9/11 killed our wine business for months. Killed it. Our chain of stores let some people go because of it. A lot of people reprioritized, overnight. Now I'm not trying to compare our current financial climate with 9/11, but the financial impact of what are seeing now is probably as bad if not greater as far the unrest in the average guy.

So with a possible reduction among the ranks of buyers by a large number, you will in turn see retailers throttle back on buying, which will in turn send buyers and brokers scrambling for homes for un-bought cases of wine that accrues more taxes the longer they sit on them. This in turn will be felt even at a Cháteau level for some of the houses that aren't the bleeding edge and produce more than say Le Pin's 400 cases a year.

So my advice, if you are of the fortunate few, is to join the property vultures and take flight, in time, if you keep circling, you are bound to pick up the scent of deal.