The big news in wine this week is not wine. It's the Sotheby's fine art auction of Wednesday, November 7th. The total pre-auction estimates were $350-$500MM, but the actual total was $269MM. Sotheby's stock dropped 28% on the news. What does fine art have to do with wine? Everything. If you can afford $150,000 for a Miro to hang on your wall, then you can afford $1800 for a 1982 Latour to have as you cellar trophy. And you probably buy them for the same reasons: to feel sophisticated for your fine taste, and to feel the status that comes with playing in a game with very few "winners".
But when the winners start to feel like suckers, it's game over. Art and wine are highly speculative investments. They produce nothing. They do not pay a dividend. They require climate control, insurance, and security (translation: expensive to own). And of course, they are not necessary for anything.
Those wines which have been the targets of trophy-hunters (1945, 1982, 2000, and 2003 first growths for instance) will show the most dramatic price declines (perhaps 20% by the end of Q1 2008? - just a guess). Some particularly striking examples, such as $12,000 for a 1990 DRC Romanee-Conti, (up from $4000 in 2003) could probably stand to fall a little farther.
The last four years have been a great time to be selling fine wine. Perhaps the next 4 will be a good time to buy.
But when the winners start to feel like suckers, it's game over. Art and wine are highly speculative investments. They produce nothing. They do not pay a dividend. They require climate control, insurance, and security (translation: expensive to own). And of course, they are not necessary for anything.
Those wines which have been the targets of trophy-hunters (1945, 1982, 2000, and 2003 first growths for instance) will show the most dramatic price declines (perhaps 20% by the end of Q1 2008? - just a guess). Some particularly striking examples, such as $12,000 for a 1990 DRC Romanee-Conti, (up from $4000 in 2003) could probably stand to fall a little farther.
The last four years have been a great time to be selling fine wine. Perhaps the next 4 will be a good time to buy.
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