I spoke to a VERY prolific auction buyer recently, and this quote really stuck with me. Essentially, he believes that the market for luxury goods is so bananas right now (stock market going nuts, reduced spending on vacations, no inventory of cars to spend money on, etc) that we’re in a period of simply re-setting what wines are worth that will stick going forward because winemakers (not named Rudy) are forevermore unable to generate more supply to match demand and these wines don’t come up often enough to have a “correction.”
Obviously, he does not mean you should go bid up a readily available “investable” wine - like a current release first growth BDX with a very established market price and plenty of supply - well beyond the market pricing. But he was talking about back vintages of limited production Burgundy (of course) and Rhône as well as older California that nobody ever thought would be worth any money 50 years ago.
So what say you? With a wine that may only come up for auction every so often, can you just bid freely knowing that each auction hammer of a rare wine essentially re-sets the “market” for that wine or can you still “overpay?*”
*Within the bounds of reality. Of course you CAN spend $250k on a bottle of 1990 DRC if you want and Sotheby’s will happily cash the check.
With all due respect to this buyer, I couldn’t possibly disagree more. There is only so much marginal demand for wine, and the younger crowd in particular is looking elsewhere for alcohol (whiskey, craft beer, and seltzers mostly). I think its far more likely that wines, on average, cost significantly less in the future than they do today, absent something like global warming making permanent changes to production.
Those people are not, and will never be, buyers in the same market as what is being discussed (i.e., back vintage fine and rare). Prices are rising along with the rise in wealth concentration. Any billionaire can individually buy up the annual auction volume of high-end collectible wines. When multiple compete over the same subset of wines, prices go up. Further, information flow has improved so greatly over the past two decades that anyone can find out what “the best” wines are. That only increases the market of potential buyers for the same subset of wines. I don’t see any of these dynamics changing anytime soon.
FWIW I disagreed as well (though less so than you) but I wanted to withhold my judgement from the OP. I think the millennial aversion to wine is overstated. I didn’t get into wine until my 30s. I think for plenty of people its 40s or 50s.
I do leave open the possibility, though, that there’s ENOUGH ultra high net worth individuals building trophy cases as opposed to drinking cellars to essentially support an upward spiral for a long time.
Not sure … he didn’t make his money in agriculture. More seriously, the thrust of the argument is that for an exceptional wine in an exceptional vintage, they simply cannot produce anymore. As opposed to say a watch or car where, while production may be limited, they can make more.
Yes, the ultra wealthy are not going to buy to cellar for 30 years (well, at least, that won’t be their sole strategy). When they drink a wine they like somewhere and then want a case, they (or, rather, their wine consultant) will go buy it at auction for whatever it costs. In addition, at least in the burgundy market, there was small production to start and increased consumption over time (see, e.g., the stories of boomers talking about paying $30 or whatever for a bottle of DRC in the 90s that was just sitting on shelves with no takers). So the number of well-stored bottles with good provenance from the 70s and 80s (and, to some extent, 90s) continues to dwindle.
I was looking at boats yesterday, which has always been a bad investment. They basically had none to sell, happy to put you on a list though. Even the $185,000 pontoon boat
The world has gone crazy.
I felt like pulling out the Vincent Vega line about $5 shakes to the salesman on the pontoon. It’s still a couple of oil barrels on plywood right…
Based on what I see happening at auction I have to agree with Justin G’s friend. Prices for the kinds of wine he listed are not even remotely stable - they are going up seemingly every month. There is clearly a whole bunch of people participating in HDH, Zachy’s, Acker steadily, and who are dipping into K&L, Winebid, Spectrum, etc. as well, whose bids seem to have no limit. Or at least none that are comprehensible based on recent prices. Can it go on on forever? Of course not! But wealth has a long lifetime and fashions like this remain persistent. While I agree that there can only be so much marginal demand for fine/back vintage wine, the current market is nowhere near satisfying that demand. Price increases will continue.
I’m wondering what the top names in Burgundy (and to a lesser extent, Rhône, Piedmont, etc.) do when one of these billionaires shows up at a tasting and wants to buy 20 or 30 cases. Producer: “Apologies but we’re sold out.” Billionaire: “Ok, for next vintage, I’d like 20 cases again, at any price. Name it.”
I mean, maybe, and that’s certainly the current trajectory. But the world is unpredictable. Maybe there will be another pandemic, one that does crash the economy. Or some other huge shockwave. You never know what the future holds.
meh. there are some people for whom overpaying never existed anyways. those are the only people who would say something like “there is no such thing as overpaying anymore” in the first place.
but I feel like there is a fairly objective definition of overpaying, especially for 99.9% of wines out there where recent prices are fairly well known.
Of course. But I think we’re talking about the .1% of wines that are going crazy. There are how many wine makers in the world? 100,000? So 0.1% is 100? That sounds about right. Maybe .2%.
Well I for one hope that we have a long time before another pandemic or global economic crash. My preference would be that the auction market keeps growing until it satisfies demand and prices level off. It would be nice if it happens sooner rather than later. And for sure the auction companies are growing as fast as they possibly can because business is awesome and they can’t actually grow any faster. If there’s a plateau out there, they will do their best to find it.
I have no idea what the prices on these things will be a month, or six months, or a year from now.
That said, I do know that there’s a historical pattern for asset prices, eventually, after the general consensus develops that they can only go up and never go down.
But is it? That’s the question. FWIW I think you can reasonably make the case that no bottle of wine is worth more than $1000, but that ship has long since sailed (and I personally own bottles “worth” more myself, so while I can make the case, I’m also a bit of a hypocrite).
‘97 Bryant is a legendary/infamous/famous/something bottle in terms of the 97 Napa/Parker/etc story, and it’s only been trending upward into the previously low 1000’s. A serious “Cali collector” probably has to have a bottle. Provenance (original buyer/pro storage) was also very good on this example.
Top wines position as an investment class / collectible is probably irreversible, even though I wish it wasn’t true. I’d much rather it all crash and become affordable.
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