Nice article about building and selling a cellar - probably no new info for most people here.
Apologies if this was already posted, I couldn’t find it in a search.
And BlakeGray has this to say:
Tom
Investing in wine, is like investing in anything. It all depends on what you bought, when you bought it and how much you paid.
I think both articles suffer from the same basic (although somewhat unstated) assumption: that a “wine collector” is somewhat who buys and collects wine with the primary motivation being the investment return of the wine. I’ve known a lot of wine collectors over the years who buy and cellar wines without regard to whether the wine will be more valuable down the road. Or, at the very least, they don’t make all their wine-purchasing decisions based on investment return…
Bruce
Without having read any of the above articles: If you are thinking about “investing” in wine, then be forewarned that the middlemen have rigged the system so that you will be absolutely KILLED by transaction costs.
And that goes for the taxes too - apparently wine is classified by the IRS as a “collectible”, so you do NOT get to use the capital gains tax rate - it’s taxed at your income bracket tax rate.
LOSE, LOSE, LOSE and LOSE.
It makes no sense that he didn’t profit handsomely in his collection:
I bought multiple cases of Petrus for $50 per bottle, and multiple cases of First Growths for $30 per bottle. I also bought deeply in the '83, '85, '86, '89, '90, '95, '96, and 2000 vintages from Bordeaux. I developed a love affair with Rhone. I bought Cote Roti from Guigal; Hermitage from Jaboulet, Chave, and Chapoutier; and Chateauneuf-du-Pape from Rayas, Bonneau, Beaucastel, and Caillou. I bought the '78, '85, '88, '89, '90, and '98 vintages in quantity. I had in my cellar an ocean of “100 point” wines, the maximum points critics bestow on a wine.
How the hell did he not make huge profits from the sale of these wines, plus all the wines he bought in the 60’s and 70’s when he started collecting??
Nice Brad Trent photo in the Barron’s article!
+1
I’ve seen so much of his work on here and FB that I think I actually recognized the style, enough to take a look at who took the shot.
IIRC, he walked away from that shoot with a nice bottle from the cellar (as a gift) Maybe he’ll do a blog post about the shoot?
Storage costs and income taxes apparently reduced his outsized returns significantly.
I find the lament a bid odd - he’s simultaneously complaining about the superrich driving up the prices of certain wines yet profiting from the fact that those same people are willing to pay outsized sums for his wines at auction.
Sure–we’d all like the great wines of Bordeaux and Burgundy to be affordable as they were 20-4o years ago, but that’s not happening in the immediate future. Meanwhile, as he notes, there are plenty of other high quality wines from elsewhere that have not seen their prices driven up.
like a well respected southern california gentleman? ![[snort.gif]](/uploads/db3686/original/2X/b/bdc3944606213c4dca6c1169cf0a166c8bc4f8c9.gif "snort.gif"){kind=small}
He says - “Fine wine has ceased being an elegant beverage to drink with a great dinner. It has become a glittering trophy. Could any rational person, even an absurdly wealthy one, drink a $15,000 bottle of wine with a clear conscience?”
As long as the wine is understood and appreciated as to why it holds so much value. You could argue that the bigger crime would be to sell it at auction for $15,000 and risk having someone drink it who has no or less knowledge than you do. Likely the case here with these bottles being sold but I guess if you can’t drink them all you need to offload them.
Your link allowed me to stumble upon the mind numbing blog post “I don’t mind Rudy Kurniawan’s crimes” by Blake Gray. What a travesty.
Tom
Interesting that in his recommendations the are no CA or OR Pinots.
It is strange that someone buying with intent to sell at a profit later would not consider this up front and keep track of it. Maybe he was just buying and justifying the quantities to himself as an investment.
I’m on guard against all sorts of insane justifications from myself.
I doubt there are many true investors/speculators anymore. There are people who buy expensive wines, and some who sell portions of it at various times because they need the money, have too much wine, don’t like certain wines as much anymore, have run out of storage space, etc., but for all the ink we give to the subject, are there really many people out there nowadays who buy fine wine primarily in the hopes of selling it for a profit in the future?
Tyler Rico and Jordan Whitehead, for two.
Very good article, and W. Blake Grey’s attacks on it really twist what it said.
Interesting. I thought the article was terrible, that the writer is totally incoherent and inconsistent throughout, and mainly comes across as someone who wants to brag about how smart and awesome he is.
He claims at the beginning that “My goal was to create a great wine cellar to drink through the years with close family and friends. In those days it never occurred to me that wine might be an ‘investment.’” If that’s the case, why does he spend so much time complaining about what a mediocre investment it turned out to be? If he was buying wine to drink and inadvertently bought too much, he should be happy that he was basically able to recoup his costs on his excess inventory without taking a loss, not be upset that he managed merely a single-digit annualized return after costs and taxes.
As Patrick points out above, he simultaneously complains that a) new money has driven the prices up too high, and b) he didn’t make the profit he wanted on his recent sale. He can’t have it both ways. And he complains that the Bordeaux chateaux have stolen his profit by raising the prices too high. What right does he have to profit off their wine? At least they actually, you know, make the stuff. I don’t like that first growth bordeaux prices are so high either, but I don’t like it because it means I can’t afford to drink it, not because I’ve lost my arbitrage opportunity. Prices are determined by the market not by the Chateaux, and if anyone’s going to profit I’d rather it be the producers than guys like him.
I’d also like to point out that it’s these collectors buying far more than they can ever drink who drive the cost of the top wines up so high in the first place. If you’re in a position where a sale of several thousand bottles is not enough to reduce your cellar to a reasonable size, as this guy was, you’re part of the problem.
It’s also a bit much when someone who spends $30k on three magnums of 05 romanee-conti writes, “Could any rational person, even an absurdly wealthy one, drink a $15,000 bottle of wine with a clear conscience?” Talk about pot calling the kettle black. Now if he was buying the R-C purely for investment purposes that would be one thing and we could have a separate argument about the justification for speculation, but he claims not to do that. Personally, I see no principled distinction between $3,700/glass and $1,250/glass. Both of them far exceed what anyone who’s not very wealthy could afford to pay for a glass of wine. If you’re rich and want to blow your money on expensive wine, I have no problem with that, but at least be honest about it and don’t pretend like you’re the principled one while all the other rich guys have no conscience.
Basically the point of this piece seems to be “I’m an absurdly rich collector who spends too much on wine but I’m not like those other arrogant douchebag collectors who spend too much on wine”. Based on this evidence, I think this argument demonstrably fails.
Also he doesn’t know how to spell Cote-RotiE.
Haven’t you heard about Cote-Roti? It is an up and coming appellation in the grape growing region of Maharashtra in India.