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Wine as an investment?


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#1 surfdude

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Posted 17 June 2008 - 03:28 AM

It has become popular to buy cases of wine and keep them as an investment. I once read that some wine afficinados would buy three cases of qulaity wine, drink one and sell the other two at a profit to buy the next three...

Hong Kong has recently abolished all taxes and duty on the import of wine and beer. This has been followed by 2 or 3 high profile wine auctions and HK is apparently becoming a wine hub for the reggion. I have been approached by a fellow at Platinum Wines who are in the business of investment. Basically you buy cases of wine that have been sourced by them and they will store them with you for up to three years in optimum conditions. You can consume them or ask them to trade them for you.

Has anyone had experience with this in the past? I would be interested in hearing your comments.

Also, what opportunities are there to be had in HK now that it is a wine hub?

Cheers!

#2 TinBrick

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Posted 17 June 2008 - 08:28 AM

QUOTE (surfdude @ Jun 17 2008, 04:28 AM) <{POST_SNAPBACK}>
It has become popular to buy cases of wine and keep them as an investment. I once read that some wine afficinados would buy three cases of qulaity wine, drink one and sell the other two at a profit to buy the next three...


I've a wine merchant friend who specialises in fine Bordeaux wines and can arrange purchasing en primeur. He has this question put to him very regularly by friends and clients looking for an alternative investment to the usual asset classes. He always answers the same way - if you want to invest, as you outline above, in a small way as a method of getting to drink fine wines cheaply, that's one thing. He would, however, not advise anyone to put any significant amount of money into wine, purely as an investment, even though he personally could stand to gain considerably from selling such "investments". It's too uncertain, subject to fads and fashions, storage risks, etc. You also need considerable specialist knowledge or else you need to trust your adviser implicitly.

That said, there are tax advantages - in the UK at least, there is no capital gains tax on investment gains in wine, as it is considered a "wasting asset" by the Revenue. In my own view, however, there are easier ways of investing tax-free, notably via spread betting.


#3 knavel

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Posted 14 July 2008 - 05:42 PM

I've been meaning to write about this for awhile. I haven't invested in wine properly but am very much an enthusiast and know a good deal about the ins and outs. Some observations from over the years.

1) The English merchants set up a classification of Bordeaux wines in 1855. While there are many other great performers, buying in the top of this group has never proven a bad investment.

2) You need to be able to get in with a very reputable UK merchant (in my view) for two reasons. First, because you want to be able to get en premier (futures) allotments of the consistent good sellers. Second, because if they go out of business you will be from somewhat to very screwed.

3) Put the wines in bond with the top storage facilities as you will have the best provenance when it comes time to sell.

As far as the wines you buy, if you really know what you're doing, then there can be interesting sleepers, like for instance Pomerol (merlot region in Bordeaux, where Petrus comes from) seems to do well even if not an preeminent chateau.

I plan to make some significant wine investments in the next year or two and will be putting these concepts into play.

Here is a mildly interesting article re the returns on wine as investment.

http://www.thisismon...;in_page_id=166

Remember that this is not to be confused with wine you drink. For that I used to get great stuff from Christies "trade clearance" South Kensington auctions. Now I live in Italy so I can get from the farmer directly.



#4 DrBubb

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Posted 14 July 2008 - 09:17 PM

MOST PEOPLE i know wind up drinking their investment
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#5 knavel

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Posted 15 July 2008 - 04:22 AM

QUOTE (DrBubb @ Jul 14 2008, 11:17 PM) <{POST_SNAPBACK}>
MOST PEOPLE i know wind up drinking their investment


When talking about wine as an investment to people I generally preface "you have to force yourself not to think of these very certain wines not as a liquid in a bottle you drink but (ironically to a theme of this site) like a gold bar sitting in a vault."

This is why in my post I talked about buying wines to drink at "downmarket" Christies South Kensington--(although with clear exceptions) basically a trade clearance vehicle and for sale of more classic wines without good provenance.

Wine that you invest in you should never even see. And because it should be in bond (no VAT paid) you know that you will get stung for (currently) 17.5% if you want to drink your investment. That should be a strong disincentive. Let the eventual end user pay that VAT (restaurant, etc) since you can arrange for the sale while the wine remains in bond the whole time.

In my own personal case, I just can't ever justify the price differential for an investment wine that is 5% better than something which can be gotten for 10x less so there is no risk that I would drink the investment. Using my research I regularly would get exceptional (but unknown) bordeaux at auction for around £20/bottle including all costs and delivery to my flat in Islington.

I even remember at last Thanksgiving I opened a Mouton and a Ä25 Gaja and did a blind tasting. Everyone liked the Gaja better.

So the moral is you buy the Picasso to hold for eventual sale to some rich banker who has more money than sense and you go to the London Affordable Art Fair for the stuff you hang on your own wall.


#6 John Doe

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Posted 15 July 2008 - 06:23 PM

QUOTE (DrBubb @ Jul 14 2008, 10:17 PM) <{POST_SNAPBACK}>
MOST PEOPLE i know wind up drinking their investment

Liquidating assets? rolleyes.gif

Actually Iím fairly new to drinking wine (since stopping smoking and getting my taste buds back), but find myself absolutely hooked on Pouilly Fume and Sancerre.

I hope to be travelling there in a couple of months so if anyone can recommend a good (yet not too expensive) producer (and year), I would appreciate it.

To me, the true expert is someone that can recommend a great wine, at a great price.

"Hey - don't worry, don't be afraid, ever, because, this is just a ride..." Bill Hicks

Just as I start getting my head together, my body starts falling apart (anon).

#7 knavel

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Posted 15 July 2008 - 10:06 PM

QUOTE (John Doe @ Jul 15 2008, 08:23 PM) <{POST_SNAPBACK}>
Liquidating assets? rolleyes.gif

Actually Iím fairly new to drinking wine (since stopping smoking and getting my taste buds back), but find myself absolutely hooked on Pouilly Fume and Sancerre.

I hope to be travelling there in a couple of months so if anyone can recommend a good (yet not too expensive) producer (and year), I would appreciate it.

To me, the true expert is someone that can recommend a great wine, at a great price.



When you say "there" do you mean the Loire valley where those two white wines come from? This questino is actually something to keep in mind as Latin countries are extremely regional even when it comes to waht national supermarkets stock. So you will find the best selection of wines from a French (or Italian) region when you go to a shop in that region (try to go to Courrefeur/ supermarket as you can shop less stressfully wihtout shop owners all over you).

As far as price--I like to pay as little as I can. Last trip to France was Provence where I was filling my car with the best rose' in the world, some at Ä3,50. It's all about price; any idiot can pay a ton.

You only need one book and it will tell you the best rated ones and the price range. It took me years of reading Parker, etc to get it down to just two books, one for france and one for italy.

http://www.amazon.fr...d...8923&sr=8-1

English language books will only rate the biggies; this book instead gets around 30K wines of which 12K make it into the book at all. If it is in here, it is good. It's gotten a little easier than haveing to go wine by wine lately at the supermarket....the distributers (at carrefuer at least) stick a rated by hatchett badge on the neck of the bottle....you buy on that basis you'll be happy. But you won't know if it got 0-1-2 or the magical 3 stars.

This post is about drinking not investing.



#8 John Doe

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Posted 16 July 2008 - 06:28 PM

Thanks Knavel, I will order the book asap.

Yes, I will be near to the upper Loire for my holidays this year (well, within an hour or so), so I will have the chance to spend a little time in the area. I feel it would be rude not to try a glass or two while there (I have pre-arranged a driver on those days wink.gif ).
"Hey - don't worry, don't be afraid, ever, because, this is just a ride..." Bill Hicks

Just as I start getting my head together, my body starts falling apart (anon).

#9 knavel

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Posted 16 July 2008 - 06:57 PM

QUOTE (John Doe @ Jul 16 2008, 08:28 PM) <{POST_SNAPBACK}>
Thanks Knavel, I will order the book asap.

Yes, I will be near to the upper Loire for my holidays this year (well, within an hour or so), so I will have the chance to spend a little time in the area. I feel it would be rude not to try a glass or two while there (I have pre-arranged a driver on those days wink.gif ).


Yes it would be most rude wink.gif Also try the cabernet franc reds like Saumur. Domain Filletreau is one I really liked if I can recall. Vouvray sparklings. It's all good there and as the Loire is the least loved region of French wines, great value. And I have a rule, if it's not in Hachette, I assume it was tried by the panel and rejected.

Let me know how it goes.

#10 John Doe

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Posted 16 July 2008 - 11:05 PM

QUOTE (knavel @ Jul 16 2008, 07:57 PM) <{POST_SNAPBACK}>
Yes it would be most rude wink.gif Also try the cabernet franc reds like Saumur. Domain Filletreau is one I really liked if I can recall. Vouvray sparklings. It's all good there and as the Loire is the least loved region of French wines, great value. And I have a rule, if it's not in Hachette, I assume it was tried by the panel and rejected.

Let me know how it goes.

Interesting, my wifeís parents/grandparents knew the Filliatreau family when they were young (did exchange trips etc as children). Her parents took a surprise day trip to the vineyard/house when we were all staying near Fontenay-le-Comte last year. Unfortunately, they werenít in when they got there. However, they brought back a few cases of their different Saumur Champigny so we had a good evening of tasting and, as far as I can remember, it was very nice.

I will let you know what I find further up stream, cheers.
"Hey - don't worry, don't be afraid, ever, because, this is just a ride..." Bill Hicks

Just as I start getting my head together, my body starts falling apart (anon).

#11 DrBubb

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Posted 25 January 2011 - 12:07 PM

QUOTE (Rosco @ Jan 25 2011, 04:57 PM) <{POST_SNAPBACK}>
Not sure if this oil / wine correlation article has been posted b4;
http://www.economist.com/node/17969905

EXCERPT


Between 1998 and 2010 there was a correlation of over 90% between changes in oil and wine prices. This encouraged the two economists to build an economic model to explain swings in the prices of crude oil and fine wine using the same variables: oil or wine production, growth rates in rich and emerging economies, and a measure of global excess liquidity.
. . .
In the West investing in fine wine instead of equities, bonds or commodities has become something of a faddish way to diversify oneís portfolio. But if wine prices closely track traditional commodities such as oil, buying wine will not reduce overall risk. In contrast, much of the increased demand from Asia is for imbibing, not investment.


Wine looks overvalued here. (!)
If you can turn Water into Wine, why not turn it into Oil, eh?
Those guys who try to convince their clients to invest in Wine, do not tell them about the high correlation to Oil, and the very high transaction costs for buying, selling, and storing wine.

A great waste of time, it seems to me - Unless you want to drink it perhaps.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix




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