Fine wine prices continue to fall, heard delegates at a conference on 2 December.
Speaking at the Global Markets Media Wine Investment Conference 2008, James Miles of Liv-ex - an electronic fine wine exchange - told financial professionals that the Liv-ex 100 Index dropped another five percentage points in November.
This follows the Index's biggest monthly fall of 12% in October. The Index now stands at 209 compared to its record high of 260 in June.
In October, blue chip red Bordeaux posted the biggest losses, with the 2005s and other more recent vintages falling most steeply. In November though, the pattern was different.
'Essentially, the rest of the Bordeaux market simply caught up with the downward trend,' said Miles.
Investors and distressed sellers are liquidating their positions in the 'dash for cash', he said, causing prices to soften further.
'The main victims are the most highly speculative stocks like Ausone 2005, which many people recognised were overpriced in the first place,' said Geraint Carter of wholesale fine wine firm Bordeaux Index.
Carter argued that the recent volatility of the fine wine market is a by-product of the closer correlation between wine and equities.
'I don't think this increased volatility is going to go away anytime soon.'
Compared to the first – and very bullish - Wine Investment Conference in 2006, the mood was notably more circumspect, but not entirely pessimistic.
'A lot of people are telling me that they are ready to invest in the market again. Many are not sure when exactly that time will be but they feel they are pretty close to it now.'
'My feeling is that the recovery is not imminent,' said Fund Manager Peter Lunzer of Lunzer Wine Investments.
'But we could see it in the first quarter of 2009.'
Have your say... To post your comment on this story, email us at news@decanter.com, making sure the relevant headline is in the subject field
My comments on the recent Bordeaux article are:
I feel that the “super seconds “ are holding up in price because they were not originally over priced, like the firsts whose prices increased out of all proportion. The saying is 'What goes up too quickly goes down the same way'.
I have been a wine investment consultant for over 23 years and we are in for difficult times, but I have seen this before in 1987,1991,1997 and even 2002, This one is more severe but shrewd investors should hold tight and ride out the storm which eventually will surely break.
Alan Rayne, Magnum Fine Wines Ltd, London
This is great news; but there is even better news to come for those of us who buy fine wine to drink!
One needs to be careful about what is meant by price fluctuations. What could easily happen is that UK prices eventually remain relatively static because they are priced in a rapidly depreciating currency. Whereas the rest of the world more accurately sees fine wine prices falling.
Notwithstanding the above caveat, prices should continue to fall at least until the real economy picks up, and that's not thought to happen for another two or three years. The massive loss of jobs amongst banking sector workers also means that there are currently far more distressed (or soon to be distressed) sellers than at any time for at least the last 15 years.
After that it is an interesting question whether prices will quickly escalate back to their current levels or will merely remain on hold.
Oh, and obviously, we'll need some sort of massive shock to the Bordeaux
market to knock some sense into it - say a few major Negociants going bust - so it's a no-brainer that next April the 2008s will be massively over-priced despite some token reduction vis-a-vis 2007.
David Lester, UK
Prices go up, prices go down. Wine investment is for the long term as the wines become rarer. The 2005s caused a huge stampede of buying, and there was big money to be made in the short term, which is unsusual. The prices continued to go up, and we all knew they would come down eventually. If investors can sit on them for longer, they will reap rewards.
The red Bordeaux vintages since 2005 have not been 'great' which of course helps the 2005 prices. Other vintages have gone up on the back of the 2005 increases, and these are also coming down, but as mentioned earlier, if the wine in question becomes rare(r) then the price will hold. Luckily for investors in wine, they can at least drink the end product, and I only wish a lot more of the wines were drunk instead of being invested in.
How much Fine Wine never gets drunk I wonder?
Leigh Claridge, UK
I often wonder whether "Fine Wine" is for drinking or for hoarding and trading. I wonder what the statistics say of how much "Fine Wine" is consummed. It reminds me of an old joke told to me by Moshe, a Jewish friend of mine, about sardines in tins that were for trading ,but not for eating. Can anybody enlighten me about "Fine Wine" consumption so that I can put aside this "doubting Thomas" attitude about "Fine Wine"?
Jan
Without being pi about the whole thing, those who invest in wine and treat it like a commodity have nothing to complain about a price drop. They took an investment which lost value- probably not as much as their shares. For those of us who buy wine en primeur to keep and drink when ready with friends and family, I am sure we will still have made the right decision. What is of much more concern is events like the closure of Trapps Wine Cellars. For those of us who live abroad the actions of the Customs and Excise Department in precipitately closing it have put a damper on our wish to store wine in UK, what was an enjoyable hobby suddenly turned into a nightmare making sure we got our wine out.
Anthony Rogers
Register on decanter.com absolutely free for news alerts delivered direct to your email inbox, and our fortnightly newsletter with advance notice of what’s coming up in Decanter magazine, offers, competitions and more.
PLUS registration is a one-stop shop for the Decanter magazine Archive and Decanter Fine Wine Tracker.
My comments on the recent Bordeaux article are:
