you was a royal you 
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The original question was whether wine was a good hedge against inflation. Certainly the S&P is relevant. Questions about investments are all about relative performance. Is the S&P a good hedge against inflation? Better or worse than wine? My guess is that the S&P is still a better hedge against inflation, but admittedly that is a SWAG at best.
Here’s a good site that lists inflation hedges. Doesn’t specifically discuss wine, but commodities as a broad category are there.
And an article from 2012 on the subject of luxury products, including wine, as hedges against inflation.
Certainly my wine. Would you like to buy?
Secondarily this, but you missed the (sail)boat.
Otherwise, NGDMFW.
I have never bought wine for investment purposes and so am not really an expert on this. But, it seems like wine would not be a good hedge because wine prices seem to go up and down more with economic conditions rather than up and down with inflation rates. So, wine prices have been flying the last 10 years or so when inflation rates have been low. I don’t see any reason why wine prices would vary with inflation rates unless that is accompanied by an economic boom. Did wine prices soar from say 1978 to 1983 when inflation was high?
I could see why lower end wines that are priced based on costs would go up with inflation, but investible wines - I think you would want to see how whether prices for say Grand Cru Burgundy or Classified Bordeaux have correlated with inflation rates historically before investing.
I’ve never purchased wine as an investment, and prefer to drink it. I’m sure there is some lofty place (far above where I exist) where the wine market begins to resemble that of the art world, where you really are making investments with almost solely financial goals. That said, one of the biggest issues I see with investing wine for financial purposes is its relative lack of liquidity. I can’t sell ten cases of Ch Margaux (or insert wine here) nearly as easily as I can an equivalent number of shares of a commonly tradeable index fund, and commissions on those who could sell that wine for me would eat into any potential earnings.
I’m also a bit skeptical that the inflation we’ve seen in Bordeaux and Burgundy will continue at the same pace it has; much of the increase in prices seems have to come from an explosion in Chinese wealth and demand. Not sure that will keep going at the same rate it has over the last 20 years or so.
Time will tell. In the mean time, I’ll keep laying wine away for my own consumption in future years.
I don’t know what the Acker chart is, but everyone I’ve seen like that – from those of Bill Sokolin to the wine investment funds – is misleading in some way. Either the set of wines, or the time period skews the return calculation.
Why do we attribute the increase in demand as solely a Chinese phenomenon? Sure, the Chinese market will saturate at a certain point, but there are many countries out there that are still developing and will continue to grow over the coming decades. There are probably billions of people in the world today for whom a bottle of Burgundy is an unattainable luxury, but over the next several decades it might not be.
you put up the gas fees and i’ll split the winnings with you 50/50
For wine, transactions costs are way too high. Big margin to buy wine, so many markups, then storage and insurance, then fees to sell if you happen to be right. You have to be incredibly right, that’s hard to do.
I have no view on bitcoin either way.
There are many direct inflation hedges, easiest one is I believe there are ETF’s that own inflation linked bonds and are short nominal bonds against. Buy those levered and you have your hedge at a much lower transaction cost. Or. Just replace your holdings of nominal bonds with inflation linked bonds and you have the same result (w/o the leverage).
Mainly my own speculation, based on reading second-, third-, and fourth-hand accounts, so take it with a big grain of salt. Certainly there are other developing countries out there. Anyways if I knew which region was going to be ‘the next China’ I’d be investing my money there as opposed to in wine! As it is my international investment funds have lagged (pretty badly) behind domestic funds.
Money might be printed but more and more wine is grown and made every year, so…
And today?
Assuming global warming is real, imagine a day when shitty climate makes Bordeaux and Burgundy inhospitable to wine making. French wine would become priceless relics.
This is the only post where I see an attempt to directly answer the question “how should I hedge against inflation?”
As Peter said, there are various hedges against inflation, most involving real assets (commodities, gold, etc). Blue chip wine is a scarce real assets so part of it does make it a candidate as a hedge against inflation - the question is, how much of the price volatility of wine is attributable to fluctuations in inflation vs other things? If the other things really affect the price of wine, you would need to hedge those out of wine for the inflation hedge to work. In practice that might, in total, be more expensive than alternative hedges.
Inflation is a misleading word. There are different types of inflation:
- supply deficit inflation due to supply chain disruptions
- excess demand inflation due to speculation, hot economy, and loan creation
- fiat currency debasement due to interest rates artificially held below “Taylor Rule” equilibrium
Different instruments will perform differently under each scenario. IMO, fine wine is correlated with the # of global millionaires, and this number will increase under all 3 scenarios. So yes, fine wine is a good inflation hedge.
EDIT: Only a 2008 GFC style deflationary crash would be bad for wine investment.
A thousand times this. Add in insurance as well. Factor these into the true returns and it’s going to be a different picture.
Ceteris paribus, which as mentioned above, it ain’t.
I beg to differ. As a Bordeaux collector, My BDX portfolio has outperformed my gold.
Good for you.
Most people collecting wines, even fine wines, aren’t going to come out that far ahead once factoring storage, insurance, and consignment/auction fees. Add in liquidity risk and it becomes even less of an attractive option for most.
I saw on a post above that BDX index lost 5% in the last 10 years, which is obviously bunk. An index based on capturing ALL BDX wines would be a terrible choice for wine investing. Imagine buying a portfolio of BDX bottles ranging from $30 to $1200. Who wants to invest in $30 no-name wines?
A BDX index focused on first growths + super seconds — I want to see how that performed in the last 10 years. Its definitely not -5%.
I’m not sure I undderstand the question?