“Speculators are ruining it for everybody”

This a good question, a clear statement of what I’ve been wondering about myself. Speculation for top Bordeaux and Burgundy is what most people talk about (and things like LVX seem to focus on). And yet many many wines (both new and back vintage) have gone up a lot in price the last few years (e.g. CA cabs like Dunn and Ridge Monte Bello, a wide swath of Piedmont producers far beyond G.Conterno, Giacosa and Gaja, grower Champagnes, N. Rhône, etc. etc.). It’s hard to believe that these have become targets of speculators.

If the explanation is indeed secular demand (and constrained supply) perhaps we should be blaming the Internet and its damned explosion of information rather than speculation. Is a better educated & larger audience to blame for the massive widening of the pool of wines undergoing major cost growth?

Those are pretty low productions, right? I edited my post to make it more broad-based/institutional vs. low production wines that can become culty. E.G., is there rampant speculation, in a broad swathes of Burgundy 1er crus or more reasonable priced Burgundy GCs e.g. Faiveleys? Or in Piedmont and Rhones overall that have driven prices higher/so quickly?

And then there is Bourbon. [soap.gif]

yeah, production level for juge is tiny, gonon is fairly high. But the pricing of both those wines in the secondary aren’t at the numbers speculators would want, considering the limited allocation one even receives in it. Could make more selling one DRC La Tache that you purchased at release pricing at auction then selling a 12 bottles of juge. So i don’t believe it’s speculators for those, just limited market access

I think that’s market demand rather than speculation. I can’t imagine anyone is holding onto a cache of Gonon. Juge is a simple issue of scarcity - he won’t be making any more wine, so naturally the remaining stuff is more expensive.

Robert is just a simple swampland esquire, these economic terms of scarcity, speculation, market demand, it’s all like an alligator in a children’s pool for him — confused.


I buy Gonon so I’m not happy at the price escalation either, but I can’t think of anyone who’s hoarding the stuff. It’s just not reasonable at $100 a bottle. It’s SoCal hipsters who’ve driven up the price!

I understand your analogy (and in fact see the same thing in the travel forum with people upset about cruise ship passengers the way you are about Johnny come lately surfers).

But, I see a big difference between what is happening in wine and these other things. If the price of wine is being driven up by new enthusiasts for wine willing to pay more - whether newly rich people, people from countries where citizens had not previously drunk much fine wine, youngsters (even heaven forbid millennials) - to me, this is just what you are talking about and these people have just as much right to buy wine and enjoy it as old farts do. We were once the youngsters, although many of us seem not to remember that.

However, I see the speculator as a different type of animal. I hate to see wine that is lovingly made and really outstanding to sit forever in temperature controlled warehouses and never be drunk. It is as if somebody went in and didn’t let anyone ride your waves in Malibu. Buy stocks, buy bonds, buy gold, buy bitcoins for investment. But, wine is to be drunk. Certainly it is legal for people to invest in wine, but I find it sad that many of the greatest wines in the world will never be enjoyed - even by youngsters.

That was tried during the housing boom and a lot of the speculators ended up bankrupt.

That is all true! I’ve been saying for years I’m just pure country down here. But, I am sitting on a shit-ton of these wines, having accumulated before you fanbois awoke to the party. The difference is, I will drink all mine. :wink:

PS. Us yokels call it whale in a mud pond, but I like your metaphor, too.

Or trade them in 15 years for some nice magnums of 2003 CdP so that you can appreciate true flavor.

I agree with Jay and Howard. This type of blunt speculation tends to be the final “blow-off” top after we have realized the affects of this secular shift- that is, the fixed supply from top domaines being spread thinly across a much larger base of buyers based on changing demographics. This, over time, sucked in “trend following” speculators for profit- which will be cyclical. This cycle of speculation will end, maybe even over-shoot on the way back but the secular shift remains.

Being a financial markets guy, I have never believed that speculation or investment (would love it if someone could explain the difference to me) is evil or bad. Certainly can creates imbalances and cray high or low prices. But there are always choices and nobody is making anyone buy or sell anything here. I always figure to each his own in these things.

I think wine is generally a poor investment and I “invest” accordingly.

I thought the 2008 economic crisis would shake out wine speculation. While it brought some Cali Cults back to reality it clearly didn’t put a lasting dent in the overall ‘investment’ type wines from areas like Burgundy and Bordeaux. We’ve also seen this trend blow through huge counterfeiter scandals,

The wine speculation seems more like the high end modern art market to me. The people that appreciate the actual product are not the ones driving the market monetarily. But those with money are paying attention to those that appreciate the product, looking for trends.

Looking at the returns of wine funds, it’s not clear that they’re pushing up prices. I found return figures for two and they’re dismal. Their assets don’t seem to be appreciating.

They boast that the asset class isn’t correlated with other markets – a useful thing in building an investment porftolio. But you’d hope wine fund values would correlate with market prices for top wines, and they don’t seem to be. [snort.gif]

If the S&P 500 is down twenty five percent over the next two years, would you expect 2016 barolos to be priced higher or lower than 2013s? I’m guessing most would still say higher?

I wouldn’t bet on it.

Here’s the S&P 500 since 2009 (on a logarithmic scale, which deemphasizes the rise visually):
S&P since 2008.JPG
Here’s the share price of Vinculum since 2008:
Vinculum Wine Fund share price.JPG
Conclusion: Wine asset values can fall even while stocks rise.

Or you could look at these two charts – the S&P 500 and the Liv-ex 50 (most traded Bordeauxs of the last 10 vintages). They suggest that wine prices can fall when equity markets are down.
S&P since mid-2018.JPG
Liv-ex Fine Wine 50.JPG

What did Vinculum own from 2011 to 2014 that caused their entire portfolio to -30%? My understanding is since 2011, Bordeaux, Burgundy, Piedmonte, Rhone and California prices have only gone up, up and up? Would an entire portfolio of Sauternes (weighted towards Yquem presumably) even be down 30% over that period?

Perhaps this is explained by the deviation of new release prices and older vintages (with the idea being Vinculum is tracking a portfolio of static/older vintages, versus the price appreciation seen in newer vintage releases)? E.G., older vintages have perhaps declined 30%, while all the price appreciation has rushed to newer vintages. And thus, these two charts above, demonstrate the answer to “are older vintages cheap or are newer vintages too expensive?”, with the answer being “newer vintages are more correlated to the stock market”?

And then someone bought a ton of Juge, ostensibly because he liked it, then turned around and sent it to auction, fueling the run up.