| 16 April 2010
I see that we are going through a period of bullish sentiment towards wine
investment. These come and go, like platform shoes or costume jewellery, but
I am not convinced, or rather, perhaps, I should admit that I am one of those
who is constitutionally incapable of making the distinction between admiring
my investment and drinking it.
Trying to be dispassionate for a moment, there is a recent report from the
American Association of Wine Economists which notes the increasing professionalism
and transparency of the wine market. They point out that wine values can be
counter-cyclical, which is useful; but even they have to admit that only the
1982 vintage (French, presumably) outperformed the Dow Jones Industrial Average
during the study period (1996 to 2009). Now, how would you have known that in
advance?
The London-based Liv-ex 100 Fine Wine Index, which tracks the price of 100
top wines, has gained 12% in Q1, 2010. But in 2009, the index gained 16.2, while
the S&P 500 gained 26%. Liv-ex director James Miles says that Asian demand
for top Bordeaux wines, particularly from Hong Kong and China, has caused prices
to soar over the past 12 months. Drowning their sorrows? As China recovers,
demand will drop off, then?
If you do want to invest in wine, perhaps a better bet might be an indirect
one, in the shares of the Wine Investment Company, which is about to be floated
in London on AIM or the Full List next month by fund management group Ampero
Capital, to raise up to GBP10 million. The company says it has made consistent
returns based on the long-term attractions of top-quality Bordeaux wines.
Now I'm going to have my say. As a regular red wine drinker, I just don't get
it, this stuff about Bordeaux. Of course, if you invite me to dinner and offer
me a choice between Mouton Rothschild 1982 (you are rich, aren't you?) and Tuscan
Red, I am going to have the Mouton; but my stays in Australia, New Zealand,
Chile, California and Cyprus (OK, mostly in Waitrose) convince me that there
is a pack of hungry wolves breathing down the necks of the uppity Bordeaux,
and the only thing that is sustaining them is their snob value. An up-and-coming
businessman in a booming Asian economy is obviously going to impress his clients
(and mistresses) with the Volnay and the Dom Perignon. But he will learn. This
is no basis for long-term value investment, imo. And what will climate change
do to champagne?
On the subject of champagne, I have had a long love affair with Lindauer (20%
of the price of Moet) and once conducted a blind tasting among half a dozen
of my oenophile friends of Lindauer against Moet, some methode champenoise whose
name I can't remember, and Perrier-Jouet. The Lindauer won hands down.
Now, it's confession time. When I was 35 (don't ask) I decided to go on the
waggon, and stuck it out for five years. I was travelling quite a lot then,
and I built up a formidable cellar (I did have a real, empty wine cellar) of
good clarets and burgundies. In those days there was still duty-free in Europe,
which helped. And at the same time I bought wine in bond through a good London
merchant. I used to love looking at my bottles, row upon row of them, holding
so much promise of future joy. But I can't say I was ever thrilled by the quite
costly quarterly storage reports that came from the merchant.
Then after five years I had a bad period financially, and starting with just
the nose of my precious clarets when I served them to my friends, I graduated
to one glass, then . . . well, you can guess. They gave me a lot of pleasure,
unlike the stored wine, which I sold at a loss after seven years.
Perhaps my experience is not typical. You have to make your own judgement.
But this sommelier is clear: drink it, don't keep it!
You have been reading an entry on the following blog:
Penelope Wise
Penny Wise but not Pound Foolish! But remember: I am not offering investment advice. My comments are just for your general information; I do not recommend investments, and you should take professional advice before entering any investment contract.
Penelope blogs on investment and financial services around the world: mainstream and alternative. Contact: penny@lowtax.net
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