Fine wine prices sink as credit squeeze bites

[Don Giovanni]

Fine wine prices sink as credit squeeze bites

Prices in the sector had been up 43 per cent since January because more investors moved into alternative asset classes. But that bull run may be coming to an end, experts say.

The early indications are that the 1.1 per cent drop in the index in August will carry through to September, Liv-ex.com director Justin Gibbs said.

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So much for a controlled market...even monopolies can suffer at the hands of the consumer and it's ability to spend discretionary money...Maybe this is a wake up call for the Châteaux... around the world...

The world will always have flippers who will disrupt the markets...

[melkor]

The world will always have flippers who will disrupt the markets...

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:blink: How do flippers disrupt the market?

[Don Giovanni]

The world will always have flippers who will disrupt the markets...

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:blink: How do flippers disrupt the market?

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Melkor,

They cash out as a market starts to crack, thus exasperating the fall of a wine value...this could then lead other vintages and or markets to react to what might be perceived as the end of a bull run...investment funds will then start to lock in cap gains through selling...thus the professional flipper...now you see...

[Daniel Rogov]

May I ask where we see the prices of fine wines falling? Most assuredly not in the wines of California, Bordeaux, Burgundy, Piedmont. Thus....where?

[Don Giovanni]

May I ask where we see the prices of fine wines falling?  Most assuredly not in the wines of California, Bordeaux, Burgundy, Piedmont.  Thus....where?

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the index

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[melkor]

They cash out as a market starts to crack, thus exasperating the fall of a wine value...this could then lead other vintages and or markets to react to what might be perceived as the end of a bull run...investment funds will then start to lock in cap gains through selling...thus the professional flipper...now you see...

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Not even close. Collections come up for sale all the time. Wine shops continue to sell wine. The buyers set the price rather than the "flippers" you describe. I've yet to see any softening in wine prices...

edit: You apparently posted the exact same post about this non-story on the squires forum where the story is getting much the same reaction.

Edited September 23, 2007 by melkor (log)

[tim]

Hi,

I have noticed that the price of Walnut Crest has jumped in recent weeks. The wine markets may be experiencing some qualitative price compression. Kind of a "flight from quality" initiated by the hedge funds.

Then it just may be those flippers drowning their sorrows.

Tim

[Rebel Rose]

The story is very UK-centric, and most of us here are American, so we have to keep in mind that the UK headline in London's Telegraph does not apply to dot.com yuppies trading Kosta Brownes.

The fall in the price of some of the world's most famous wines has raised fears that the booming luxury goods market could come to a halt, as City traders cut back on their spending.

A case of 1982 vintage Chateaux Lafite-Rothschild, considered one of the greatest wines of the last century, fell from £17,000 in July to £16,500 in August. The overall Liv-ex index – which measures the price of fine vintages day-by-day – fell by 1.1 per cent last month, the first time the index has dropped in 11 months.

Most of the buying and selling of fine vintages is carried out by City traders looking to invest in alternative assets

[JohnL]

The article cited is not very definitive or revelatory.

Really, I wonder what the point was/is.

Investing in wine is not as prevalent as some seem to believe--there are a few operations mostly in the UK.

Investing in wine involves paying fees--most numbers I have seen indicate wine appreciation is somewhere under 10%--I have seen very little, if any, indication of anyone actually making any money (save for the brokers etc).

Liquidity (no pun) is a problem.

Lifespan is a problem. Wine reaches a point where it is not drinkable and therefore of no value (save for some wines that have historical significance). To my knowledge, the price of vinegar (save for balsamic and some sherry vinegars) is pretty low. Investment grade wines are therefore limited to wines from good vintages that have long aging records. There has to be a thriving market for them when the investor decides to take profits. We are talking about a very few wines.

The cost to buy, insure and store wines in temperature controlled warehouses is significant.

Investors look to buy low and sell high.

If anything it would be to their advantage to get prices on initial offerings as low as possible.

Wine is subject to fashion and fad to a certain degree.

Investors are vying for the same wines as restaurants and retailers who are more interested in rapid turnover than long term profits.

It just isn't that simple!

Also the article referenced is about the secondary market.

Yuppies trading Kosta Browne have little to do with any of this, as noted. In fact, if one wants a bottle of Kosta Browne, one needs only to visit a retailer that carries it. There are several around the country on Wine Searcher.

Many in demand California wines are produced in very small quantities and are mostly available via mailing lists. If one wants to buy them they must enter a very highly charged secondary market and vie for them or get one off of a restaurant wine list. Is a Harlan Estate cabernet worth more than a Bordeaux first growth? That's a matter of taste.

Again, we are talking about a tiny number of limited quantity wines. So really, what's the big deal? Chances are that even if Harlan estate was selling for ten bucks a bottle very few people would get a chance to taste one--regardless of price, when't the last time anyone saw Romanee Conti on their local wine shop shelves?

[Daniel Rogov]

May I ask where we see the prices of fine wines falling?  Most assuredly not in the wines of California, Bordeaux, Burgundy, Piedmont.  Thus....where?

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the index

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Looking at that graph one sees with the exception of a one month hiccup (I cannot think of a better word), prices have been rising rather steadily and even dramatically. Perhaps I'm missing something here????

[Don Giovanni]

May I ask where we see the prices of fine wines falling?  Most assuredly not in the wines of California, Bordeaux, Burgundy, Piedmont.  Thus....where?

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the index

Click On Me

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Looking at that graph one sees with the exception of a one month hiccup (I cannot think of a better word), prices have been rising rather steadily and even dramatically. Perhaps I'm missing something here????

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Ok ...let me spell it out to you all...the Europe reference is key to the underlying truth...good domestic producers will be able to increase prices...if and only if...the world had tired of the high prices in the royal vineyards...of the 1855 classification system...so you ask what's the point ...the point is some people get it...I do expect higher prices for domestic wines at the expense of further price increases in Europe...and who asked what is the point...the point is not a crash in prices it's that we are as domestic producers are in a very nice possession especially with the week Euro...

Edited September 25, 2007 by Don Giovanni (log)

[JohnL]

What people in Europe are willing to pay for a few "investment grade" wines in the secondary market has nothing to do with the market here in America.

Our top wines already sell for high prices here.

These are mostly limited production efforts that basically sell out on release in the domestic market.

There has been a very limited and luke warm market for these wines whenever they do reach foreign shores. It is folly to think that British "investors" will start to snap up cases of Screaming Eagle because Margaux is too expensive.

As for the market here, just who are the "good domestic" producers? Prices are already quite high for in demand wines in the US. Top wines are somewhat immune to things that impact the economy--Ferrari doesn't run year end clearance sales or offer incentives.

There is no indication that the "investment" world is "tiring" of top Bordeaux prices.

Again, are we talking release prices? Or are we talking auction prices?

In neither arena is there any indication that prices are trending down.

What might have a significant impact on release prices is a string of outstanding vintages resulting in a dramatic increase in supply. Conversely, a string of poor vintages will also have an impact.

Top Bordeaux from top vintages, remain the most viable wines for investors because there is a lot of it produced, it is high quality, age worthy wine with a long track record.

Whether prices in the auction markets for these wines in any country goes up or down has little or no impact on any other wines.

The domestic wines that offer large enough production and track record for aging are few and far between. I see no/little opportunity for domestic producers in the data provided by the chart tracking European auction prices.