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Monitor the value of your wine

3 November 2006

"Everyone is going to be wondering whether sub prime contagion is going to spread to the wine market" says James Miles of Liv Ex, a wine price monitoring index. "The fact that fine wine is not closely correlated to either stocks or bonds is fairly well documented most recently by Mahesh Kumar in his book: Wine Investment for Portfolio Diversification, but fine wine is certainly not immune to dislocation in financial markets."

"The last bull market in wine was brought down by the Asian financial crisis of 1997/8 and those highs were only recovered in 2005. Similarly the Oil crisis in 1972 put paid to a violent bull market during the 1960s."

"Michael Broadbent has shown that the opening price of Chateau Lafite increased from approximately 115 Francs per case for the 1959 vintage to nearly 730 Francs for the low quality 1969 vintage. By 1974 the same wines could be purchased at auction for a fraction of their previous highs before recovering strongly in the early 1980s."

"Indeed, fine wine is most closely correlated to the prosperity of the world's wealthiest consumers, which may partly explain why price changes in the wine market tend to lag behind equity markets. Overleaf we have compared the number of billionaires in the world (as calculated by Forbes magazine) to changes in the Liv-ex 100 Index. As the chart shows, membership of the billionaire club has expanded from 243 to 946 since 2002 making the last 6 years an unprecedented period of wealth creation. "

"Over the same period, the Liv-ex 100 Index is up by more than 150%, most of this increase has been since the middle of 2005, which corresponds with a marked increase in wealth. Some 572 new billionaires were created between Forbes. 2005 and 2007 lists - more than twice the total number in existence in 2001!"

Major Movers - La Mission HB 95 up 30% and Mouton 98 28%.

Mission Haut Brion 1995

Having shared the wine of the vintage status in 2005 and now 2006, the market began to look back at La Mission's record in other vintages in an effort to identify pockets of value. In June it was the 2001, in July the 1995. Like the 2001, the 1995 scores only 91 points (Parker), but this has been no impediment to demand. Recently offered at £1,150, it provides a good pointer as to where the 2001 is heading.

Mouton Rothschild 2006

It has been an age since Mouton Rothschild took the First Growth of the vintage mantel, and it was duly applauded for its efforts. There were traders on the bid even before the release and it didn't take long for the market to sweep up offers at £3,300, £3,400 and £3,500, eventually nudging £3,700. It recently settled at a spread of £3,500-4,000.




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