Are we seeing the end of the madness?

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Mark Golodetz
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Are we seeing the end of the madness?

#1 Post by Mark Golodetz » February 13th, 2020, 6:49 am

Not so long ago, Burgundy was seeing a seller’s market. Not just any seller’s market, but one that saw the likes of Rousseau Chambertin hit $3000 plus. It seemed they could charge pretty well what they liked, and still find buyers.

Today I got an e mail from Zachys with reductions on Rousseau. I have long ago sold all of mine, but I am pretty sure they will never again slip below $1000, and I will not buy, but I am hoping the second tier such as Trapet which has been on the rise, will also begin to decrease.
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Re: Are we seeing the end of the madness?

#2 Post by ybarselah » February 13th, 2020, 7:02 am

lol - hard no. i think the most you can hope for is that off vintages sell for full retail instead of some level of "crazy" market price. but actual decreases cannot happen.
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Re: Are we seeing the end of the madness?

#3 Post by Mark Golodetz » February 13th, 2020, 7:34 am

I am not so sure about that. A lot of the top Burgundies were bought by speculators; not sure they can hold on to it forever, and almost certainly they don’t plan to drink it by the case. As I said, I am cautiously optimistic.
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Re: Are we seeing the end of the madness?

#4 Post by ybarselah » February 13th, 2020, 8:07 am

Mark Golodetz wrote:
February 13th, 2020, 7:34 am
I am not so sure about that. A lot of the top Burgundies were bought by speculators; not sure they can hold on to it forever, and almost certainly they don’t plan to drink it by the case. As I said, I am cautiously optimistic.
this is of course true, but unlike - say bordeaux - there just isn't any size. no one is sitting on 100 cases of a single vintage of rousseau chambertin.
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Re: Are we seeing the end of the madness?

#5 Post by JLee » February 13th, 2020, 8:40 am

Livex shows a 9% drop over the last 12 months in their burgundy index, but that is a narrow measure.

https://www.liv-ex.com/news-insights/indices/
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Re: Are we seeing the end of the madness?

#6 Post by Victor Hong » February 13th, 2020, 8:48 am

For the Chinese wine collectors, Burgundy may have lost its corona......er, uh......halo.
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Re: Are we seeing the end of the madness?

#7 Post by Ethan Abraham » February 13th, 2020, 9:05 am

Community price on that cdb is under 1k, auction is 1300, so a "sale" to 1700 doesn't mean much. Similarly the sale price on 16 gevrey, for example, is still over auction value and double community value (which I assume is some sort of release price).

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Re: Are we seeing the end of the madness?

#8 Post by Dennis Borczon » February 13th, 2020, 9:26 am

La Paulee has a DRC dinner coming up in a few weeks....Cost per person $9,250.00 and it is sold out. When there are people who can drop 10GR on a dinner and there is a waitlist, well draw your own conclusions. Last major correction in the market was the worldwide recession of 2008. Suppose if the economy really crashed again things will drop but who knows? If the climate shifts much more even Burgundy will not taste much like Burgundy anymore and then those older vintages might get even more valuable. Who wants to buy a whole string of 2003 Burgs?

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Re: Are we seeing the end of the madness?

#9 Post by Mark Golodetz » February 13th, 2020, 9:39 am

I looked at La Paulee dinner. Not many tastings of that quality in any given year, and not at all surprised that it sold out. It gives people who want to taste wines like this a chance for the price of a single bottle of RC.

I think the people who have been buying in case quantities would be mostly a different audience. I am sure there is some overlap, but drinker as opposed to speculator, investors represent two totally different breeds.
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Re: Are we seeing the end of the madness?

#10 Post by Tom Reddick » February 13th, 2020, 10:29 am

The answer is a bit complicated, and not necessarily good news for those who buy the wines to drink them.

Starting this past fall, several things started to move dramatically. It started with Giacosa- in one prominent fall sale about half the lots went unsold and the ones that did sell stayed near or at reserve. Rousseau was next, and in the past 90 days it is happening with DRC. The drops have been relatively dramatic and have had some impact on the lower end of the range for those wineries. Like you Mark, I got out of the Rousseau game a long time ago, but in the past couple of months I have purchased several cases of recent vintage Rousseau GC, Ruchottes, Charmes and Clos de la Roche at very nice prices compared to how things were 6-12 months ago- and I plan to drink them. But I have not touched the Big 3- those are still beyond what I am willing to pay. Some of the cases I got at auction, and some from retailers who had been trying to get really high prices on release stock and had been sitting on the wines for quite a long time (in proper storage of course.)

A lot of it is a question of supply. Last spring prices got really insane, and so this fall we have been treated at auction to an embarrassing quantity of many top wines that are usually quite rare- even in an auction setting. It is a perfect demonstration of the fact there is a supply of wine at the very top which is being frequently traded at auction and in private sales in much the same manner as contemporary art actually.

But that world is very separate from our own. There are still a great many merchants around the world who take in these top wines at release and sell them at a normal markup. There are still waiting lists years long in many cases to get access to top burgundies in that manner. And the DRC of course has their private list which means many of the biggest collectors buy at prices that give them no reason to even look at the secondary marketplace.

So while the speculation market is in a bit of a lull, it is business as usual in the more traditional marketplace with normal retail markups, and I really do believe that if the secondary market evaporated tomorrow there would still be enough demand in more traditional venues at those lower prices to fully absorb the impact, and still there would be customers on waiting lists.

For practical purposes, I think 2017 could be a bit disruptive- generally very good scores from BH and JG even if the vintage itself does not have a 5 star perception, and also very good supplies for the first time in a while. That is going to put downward pressure on everything to some extent.

But I am already hearing tales of massive price increases for 2018- so we will be right back in it before too long.

Current buying strategy- go for the less-famed bottlings from the best houses in good to very good vintages at auction. 2014s are a particularly good target right now. It is a rare chance to get things at acceptable prices that many of us have avoided for a long time even though we want them in our cellars. But it is a temporary thing. There are just too many collectors and too few bottles of Burgundy out there these days for a substantial long-term rollback in pricing.

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Re: Are we seeing the end of the madness?

#11 Post by Dav1d S@wyer » February 13th, 2020, 11:21 am

Tom Reddick wrote:
February 13th, 2020, 10:29 am
There are just too many collectors and too few bottles of Burgundy out there these days for a substantial long-term rollback in pricing.
This sums up why the Burgundy madness won't end. We can only hope it plateaus and that no new emerging economy's upwardly mobile class develops an affinity for Burgundy.
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Re: Are we seeing the end of the madness?

#12 Post by Peter Chiu » February 13th, 2020, 12:02 pm

Dav1d S@wyer wrote:
February 13th, 2020, 11:21 am
Tom Reddick wrote:
February 13th, 2020, 10:29 am
There are just too many collectors and too few bottles of Burgundy out there these days for a substantial long-term rollback in pricing.
This sums up why the Burgundy madness won't end. We can only hope it plateaus and that no new emerging economy's upwardly mobile class develops an affinity for Burgundy.
+ 1...

Excellent advice :

****Current buying strategy- go for the less-famed bottlings from the best houses in good to very good vintages at auction. 2014s are a particularly good target right now. It is a rare chance to get things at acceptable prices that many of us have avoided for a long time even though we want them in our cellars. ****

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Re: Are we seeing the end of the madness?

#13 Post by Chris Seiber » February 13th, 2020, 12:04 pm

Funny reading this question on WB. We are the madness.

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Re: Are we seeing the end of the madness?

#14 Post by Nathan Smyth » February 13th, 2020, 12:22 pm

Tom Reddick wrote:
February 13th, 2020, 10:29 am
But I have not touched the Big 3- those are still beyond what I am willing to pay.
Who are the Big Three?

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Re: Are we seeing the end of the madness?

#15 Post by Dale Williams » February 13th, 2020, 12:44 pm

Nathan Smyth wrote:
February 13th, 2020, 12:22 pm
Tom Reddick wrote:
February 13th, 2020, 10:29 am
But I have not touched the Big 3- those are still beyond what I am willing to pay.
Who are the Big Three?
I assume he means the Rousseau Big 3 (Chambertin, Beze, Clos St Jacques)

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Re: Are we seeing the end of the madness?

#16 Post by Marcu$ Stanley » February 13th, 2020, 2:12 pm

I think the long term direction for fine wine prices is down, with the sole exception of a few trophy Burgundies such as the "big three" discussed above. We have seen a pretty big wine bubble over the last few years associated with rising asset prices; wine prices have inflated significantly in just 2-3 short years. Long term I don't see those prices as sustainable. Baby boomers are aging out of wine and have accumulated significant cellars they are not going to drink all of, soon they will be selling in significant numbers (and in some cases already are). Then, the upcoming generation of drinkers is not as into the prestige fine wine labels as those of us who got involved in wine in the 90s - early 2000s with Parker. The perception is that they are stodgy and overpriced - just not fashionable. Finally, and perhaps most importantly, there is the massive increase in supply of high quality wines driven by the improvement in winemaking technique globally (and perhaps to some degree the warming weather). This is true even in Burgundy because the quality of lower tier wines has increased incredibly, and there are so many up and coming producers exploring satellite regions. It is that much more true for Bordeaux and California where land is not a constraint.

It's hard to predict "big three" prices because they are sustained by a small number of extremely wealthy collectors and exist in a different realm from the rest of the wine world. But the writing is on the wall for other segments of the market I think.

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Re: Are we seeing the end of the madness?

#17 Post by Tom Reddick » February 13th, 2020, 4:42 pm

Dale Williams wrote:
February 13th, 2020, 12:44 pm
Nathan Smyth wrote:
February 13th, 2020, 12:22 pm
Tom Reddick wrote:
February 13th, 2020, 10:29 am
But I have not touched the Big 3- those are still beyond what I am willing to pay.
Who are the Big Three?
I assume he means the Rousseau Big 3 (Chambertin, Beze, Clos St Jacques)
Correct. I have heard reference to the Big 4 more recently- assuming that includes Ruchottes now- but I always knew only of the Big 3.
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Re: Are we seeing the end of the madness?

#18 Post by Dav1d S@wyer » February 13th, 2020, 7:58 pm

Marcu$ Stanley wrote:
February 13th, 2020, 2:12 pm
Then, the upcoming generation of drinkers is not as into the prestige fine wine labels as those of us who got involved in wine in the 90s - early 2000s with Parker. The perception is that they are stodgy and overpriced - just not fashionable.
Been on Instagram lately?
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Re: Are we seeing the end of the madness?

#19 Post by Mark Y » February 13th, 2020, 7:59 pm

Dav1d S@wyer wrote:
February 13th, 2020, 7:58 pm
Been on Instagram lately?
+1

Seen @clayfu.wine lately? ;)
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Re: Are we seeing the end of the madness?

#20 Post by Howard Cooper » February 14th, 2020, 3:27 am

Dennis Borczon wrote:
February 13th, 2020, 9:26 am
La Paulee has a DRC dinner coming up in a few weeks....Cost per person $9,250.00 and it is sold out. When there are people who can drop 10GR on a dinner and there is a waitlist, well draw your own conclusions. Last major correction in the market was the worldwide recession of 2008. Suppose if the economy really crashed again things will drop but who knows? If the climate shifts much more even Burgundy will not taste much like Burgundy anymore and then those older vintages might get even more valuable. Who wants to buy a whole string of 2003 Burgs?
The only 2003s I bought were from Truchot. I have been shocked at how good these wines are. What are the experiences of others with 2003s?
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Re: Are we seeing the end of the madness?

#21 Post by Dennis Borczon » February 14th, 2020, 4:44 am

Howard Cooper wrote:
February 14th, 2020, 3:27 am
Dennis Borczon wrote:
February 13th, 2020, 9:26 am
La Paulee has a DRC dinner coming up in a few weeks....Cost per person $9,250.00 and it is sold out. When there are people who can drop 10GR on a dinner and there is a waitlist, well draw your own conclusions. Last major correction in the market was the worldwide recession of 2008. Suppose if the economy really crashed again things will drop but who knows? If the climate shifts much more even Burgundy will not taste much like Burgundy anymore and then those older vintages might get even more valuable. Who wants to buy a whole string of 2003 Burgs?
The only 2003s I bought were from Truchot. I have been shocked at how good these wines are. What are the experiences of others with 2003s?
If there was a vintner to pick in 03, this had to be one of them. High yields with minimal extraction vinification. He probably got all the grapes quite ripe in this vintage and it better odds of being successful. I only bought a couple of 03's but thanks for the push to open one. Good idea for a thread, where are the 03's now?

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Re: Are we seeing the end of the madness?

#22 Post by Scott Brunson » February 14th, 2020, 5:23 am

Mark Golodetz wrote:
February 13th, 2020, 6:49 am
...but I am hoping the second tier such as Trapped which has been on the rise, will also begin to decrease.
Trapet was a go-to for us, Mark. Their price increases have been the most distressing part of the bubble.
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Re: Are we seeing the end of the madness?

#23 Post by Mark Golodetz » February 14th, 2020, 5:40 am

Rossignol Trapet is half the price, although I have found Trapet itself is a smidgeon better.
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Re: Are we seeing the end of the madness?

#24 Post by Howard Cooper » February 14th, 2020, 11:47 am

I have a lot of wines from Rossignol-Trapet and have visited there a number of times. Excellent QPR for Burgundy.
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Re: Are we seeing the end of the madness?

#25 Post by Joel Singer » February 14th, 2020, 1:29 pm

Howard Cooper wrote:
February 14th, 2020, 3:27 am

The only 2003s I bought were from Truchot. I have been shocked at how good these wines are. What are the experiences of others with 2003s?
At a Burg. dinner in Toronto that Andrew Arntfield posted on we drank the 2003 Clos de Tart. It was the consensu wine of the night. While rich, it was beautiful on the nose and silky on the palate. I'm opening up a 2003 Henri Gouges Les St. Georges this coming week at another dinner. I'll report back on that one.
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Re: Are we seeing the end of the madness?

#26 Post by edwardmilstein » February 14th, 2020, 2:59 pm

Depends how long your time horizon is. Likely all of today's prices for great burgundies will only go higher over the next 5,10,15 and 20 years.Since most of the red wines I buy can't be drunk for 7-25 years - this is just a small blip in an ever increasing scarcity of great wines.
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Re: Are we seeing the end of the madness?

#27 Post by Patrick Stella » February 21st, 2020, 11:25 am

There's very little speculation in the fine wine market these days. There was a wave of wine funds 10 years ago, but virtually none are left. Individual buyers are not speculators. They generally drink the wines. Expensive burgundies also aren't an attractive target for speculation--they're already really expensive. The notion that people buying them are speculators is palliative to those who believe it, but it isn't true.

The idea that wines get traded a lot is also generally wrong. Successive price rises cause some turnover because wines change prices and the owner chooses to sell rather than drink. But it's foolish to think that rich people sit around buying and selling wines like they are stocks--just think about the headaches and transaction costs, and you'll realize it doesn't make sense. People sell things they decide they don't love or won't drink etc. But very few collectors really trade. It's hard enough for the merchants to make a positive margin; it's really impossible for private collectors.

Prices go up and down, like with anything else. But current burgundy prices are underpinned by very strong fundamentals--limited supply and strong demand. And finally, it is obvious to anyone who participates in the burgundy market that the world has been a huge net consumer of burgundy over the past 20 years. Just go to a dinner. 10 years ago, wealthy collectors used to drink lots of bottles from the 70s, 80s, even older. These days you see a lot of 99s, 2000s, 2001s with the same crowd. Anyone who is waiting for a big wave of wines to hit the market will be disappointed. They've been drunk.
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Re: Are we seeing the end of the madness?

#28 Post by Howard Cooper » February 21st, 2020, 11:30 am

Mark Golodetz wrote:
February 13th, 2020, 6:49 am
Not so long ago, Burgundy was seeing a seller’s market. Not just any seller’s market, but one that saw the likes of Rousseau Chambertin hit $3000 plus. It seemed they could charge pretty well what they liked, and still find buyers.

Today I got an e mail from Zachys with reductions on Rousseau. I have long ago sold all of mine, but I am pretty sure they will never again slip below $1000, and I will not buy, but I am hoping the second tier such as Trapet which has been on the rise, will also begin to decrease.
I am seeing the opposite, esp. with regard to white Burgundy. I feel like a lot of whites that were around $60-75 a could of years ago (like 2014 premier crus) are now in many cases $100-$150 for 2017s.
Howard

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