Scarecrow Introduces M. Ètain

In an email to allocation members, Scarecrow announced a new wine called M. Ètain for 2008. Is this a luxury cuvee, or a second wine? Probably the latter. The email describes:

“The portion of juice that wasn’t included in the final Scarecrow blend was so undeniably superb that we were inspired to bottle it...M. Étain 2008, a stunning Cabernet Sauvignon which charmingly displays a perfect balance between power and elegance.”

The email goes on to say that M. Ètain won’t necessarily be offered every year. To me, it sounds like a second wine, with limited availability.

Should you buy it?

Scarecrow is coming from a big success with its 2007 offering, but consider that 2008 was a difficult year for Napa. The 2008 Scarecrow has a Parker score of (92-94), the lowest of any Scarecrow, and the 2008 M. Ètain is still unrated -and unpriced. This year’s 2008 M. Ètain offering might be fun for collectors and consumers, but it is unlikely to be worthwhile for speculators. I expect the best juice went into the 2008 Scarecrow.

Wine Market Forecast and 2009 Bordeaux Futures

Top vintage Bordeaux futures are often recognized as having delivered handsome returns, and investors may be particularly tempted by the 2009 futures when they consider the other great vintages released into recessions: 1990 (futures offered during the recession of 1991), 1996 (futures offered during the currency crises of 1997), and 2000 (futures offered during the recession of 2001).

Buyers of 1990, 1996, and 2000 Bordeaux futures did very well (around 300-400% for the first growths), but their outsized returns were powered by the internet bubble of the late ‘90s and then credit bubble of the early 2000s. Other great Bordeaux vintages, such as the 2005 have not done as well, with the ’05 first growth futures collectively delivering 5% average annual returns to date. Should 2009 Bordeaux futures follow the historical precedent of the other recession offerings, such as the 2000? Or will it be more in line with the bubble prices of the 2005s?

Investing in 2009 Bordeaux futures is not without substantial downside risk; bubble money is still chasing these wines. See the full story of how the un-popped Asian real estate bubble is inflating Bordeaux prices here.

At $1000-$1500/bottle, the 2009 first growths cannot be justified, when there is mature wine selling for less. Wine investors would be better off buying OWCs of 1982 Mouton, or 1989 Haut Brion, which trade at similar levels to the ’09 futures. Today’s situation is very different from July 2001. At that time, 2000 first growth futures were offered at $250/bottle, while the 1982 first growths traded between $400 and $500. The 60% premium for the ‘82s made sense; older vintages should cost more. Today, they don’t. Wine investors should expect either a price drop in the 2009s, or a big price jump in the mature vintages.

I wouldn’t rule out both.

2008 Harlan Allocation

The 2008 Harlan Allocation is out: $500 for the 2008 Harlan, and $150 for the 2007 Harlan the Maiden. Wine investors should probably skip this one.

Higher release prices among the cult California Cabs have forced wine speculators to make difficult choices in recent years. The 2008 Harlan hasn't been rated by Parker yet, but we still have enough information to make an informed decision. 2008 was a difficult year for Napa Valley; the worst spring frost in 35 years was followed by drought and summer heat spikes. Odds are that even the top Napa estates will have a hard time reaching 100 points. And at $500/bottle, you're going to need 100 points to make money on the 2008 Harlan.

Parker has given four Harlan vintages perfect scores: 1994, 1997, 2001, and 2002. These wines all trade for over $750 at auction. The problem is that typical vintages do not sell for these prices. In 2003, 2004, and 2005, Harlan made great wine. Scores from Parker ranged from 95 to 98, but the auction prices for the 2003-2005 Harlans range from $350 to $475.

Bear in mind that after the auction house charges you 20% commission, your 2008 Harlan needs to sell for $600 - just to break even. There's also local sales tax and shipping to consider. Without 100 points from a top critic, it will be very difficult for a speculator to make money flipping the 2008 Harlan.

The 2007 Harlan the Maiden looks like a safer bet. Its Parker score is in line with other vintages of the Maiden, and it is priced fairly -if personal consumption is your goal. As with the 2008, the auction house fees, shipping and local sales tax will destroy any chance of profit.

Bottom line: If you want to sell these wines right away, it's going to be tough to make money. But if you just want to buy something to stay on the allocation list, choose the Maiden.