“Speculators are ruining it for everybody”

[R_Frankel]

Do folks think there is direct or indirect speculation in the lower bracket price points? E.G., $75-$250 bottle tiers? Just curious, because these prices are up substantially as well, and I assumed this was secular demand growth versus cyclical demand or speculation.

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?

[Shan_A]

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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?

[Mike_Maguire]

And then there is Bourbon.

[CFu]

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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?

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

[Greg_K]

Do folks think there is direct or indirect speculation in the lower bracket price points? E.G., $75-$250 bottle tiers? Just curious, because these prices are up substantially as well, and I assumed this was secular demand growth versus cyclical demand or speculation.

I do admit, I struggle to pay $150-250 for Burgs, when at that price/or lower I can buy really nice aged Bordeaux or Barolo or higher “point scored” Bordeaux/Barolo off a recent vintage.

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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.

[CFu]

Do folks think there is direct or indirect speculation in the lower bracket price points? E.G., $75-$250 bottle tiers? Just curious, because these prices are up substantially as well, and I assumed this was secular demand growth versus cyclical demand or speculation.

I do admit, I struggle to pay $150-250 for Burgs, when at that price/or lower I can buy really nice aged Bordeaux or Barolo or higher “point scored” Bordeaux/Barolo off a recent vintage.

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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.

[Greg_K]

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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!

[Howard_Cooper]

These recent threads remind me of cranky older surfers. (I should know, I am one.) We bemoan the fact that the good old days are gone, when there weren’t hordes of newbies crowding our favorite surf breaks.

Waves are like quality wine – it’s a bit like terroir. They require a unique set of conditions to create them – wind, swell, tide, bathymetry, etc. No two breaks are alike, and certain spots are like certain vineyards that produce best-in-class experiences. There are a small handful in the world. Malibu on a good day is the La Tache of surfing. So it makes middle-aged farts like me nuts when to see recent converts – Google workers transplanted from the Midwest, indulged Trustafarians, loudmouth talent agents – paddling out and “taking” what used to be “ours” (read: in-the-know cognoscenti who have paid the dues and know the rules of the road.) After all the work we’ve put in, it’s simply too easy for these Philistines to come in and snatch waves from the truly deserving.

My analogy starts to fall apart here: You don’t need to be on an allocation list to get a juicy peeling set wave in Malibu. It doesn’t matter whether you are hedge-fund manager or a working stiff in the lineup. You can’t buy perfection – you just need to paddle out and fight the crowds to snag one. You can’t overpay for waves at auction. They also don’t keep. You can’t store one in a locker and hope to sell it later at a profit. But the basic premise holds – too many people jockeying for a premium product, thus leaving the old-timers who know better really steamed.

But here’s the thing: Complaining about it doesn’t change a thing. You can’t do anything about it. I spent too much time agitated in the lineup, resentful of the Johnny-come-latelys surrounding me literally, cutting me off from what I thought rightfully belonged to me because of some exalted early-adopter status. I had to learn to let it go. Now, I’m like the middle-aged jackal after a big kill on the Serengeti. I let the big cats fight it out in the water and take whatever scraps are left to me. I don’t like it, but I’ve gotten used to it – and I still have a lot of fun. Some of my best sessions come from zagging when others are zigging … heading the opposite direction when Malibu is firing and finding two-foot waves at a deserted beach-break.

Same thing with wine. I may no longer be able to find and drink Rousseau Beze affordably as I once did. But there’s literally nothing I can do about that. I still have many memories and a few bottles still left to drink. So I zig when others zag, as many other posters have noted. The craziness in Burg pricing has forced me to explore other less buzzy regions, which has been good for my palate and my bank account. Who knew that Chenin Blanc from the funny little Breze hill could be so good?! And while many might choke on paying $55 a bottle for one, it feels like an absolute steal after chasing white Burgs.

Anyway, thanks for indulging my nostalgic surf tales. Keep your eyes on the horizon. There’s always another wave coming …

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.

[Howard_Cooper]

I’m probably going to horrify many here, but I don’t really find wine speculation any worse than any other type of speculation. Of course wine is for drinking, but homes are for living in, which has never stopped any of us from selling our homes for a profit. Nobody seems to complain about that.

Hardly close to the same thing. One, because the vast majority of people, wine lovers and non-drinkers alike, actually live in their homes, even if sold for a profit. The proper analogy would be if people were buying up lots of homes for the sole purpose of investment/renting, especially in high end urban markets. Second, that actually is the subject of much criticism and complaint, with far greater social ramifications than wine speculation. Exhibit A: Vancouver.

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

[Robert.A.Jr]

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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.

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.

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

[Greg_K]

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.

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.

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.

[Ledwards]

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.

[John_S]

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.

[Cris_Whetstone]

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.

[John_Morris]

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.

[Shan_A]

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?

[John_Morris]

I wouldn’t bet on it.

Here’s the S&P 500 since 2009 (on a logarithmic scale, which deemphasizes the rise visually):

Here’s the share price of Vinculum since 2008:

Conclusion: Wine asset values can fall even while stocks rise.

[John_Morris]

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.

[Shan_A]

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”?

[David_Bu3ker]

Do folks think there is direct or indirect speculation in the lower bracket price points? E.G., $75-$250 bottle tiers? Just curious, because these prices are up substantially as well, and I assumed this was secular demand growth versus cyclical demand or speculation.

I do admit, I struggle to pay $150-250 for Burgs, when at that price/or lower I can buy really nice aged Bordeaux or Barolo or higher “point scored” Bordeaux/Barolo off a recent vintage.

Sure. Juge was $50-$60 for those with allocations. Gonon is less.

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.