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Jun 10, 2014 08:18 AM

Wine Futures

Hello all,
I am thinking of dabbling in wine futures and was wondering if anyone could recommend some books/articles/web sites I could peruse to learn more about it. Perhaps someone would be willing to share their own experiences?

Many thanks!

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  1. I strongly recommend studying the book "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay. Of recent incidents of a like nature are Beany Babies and McMansions.

    It is extremely difficult to outperform the S&P 500 over time. Especially with such a subjective commodity as wine.

    4 Replies

      I recommend also reading "A Random Walk Down Wall Street," or go read some stuff by John Bogle.

      It's difficult to out perform the S&P over time without adding significant risk.

      1. re: EatFoodGetMoney

        I do understand that there's risk involved, which is why I'd like to learn more about it before I actually invest any money. I certainly have no intention of spending my entire retirement fund on it, I just thought it might be fun.

        1. re: medrite

          Definitely not saying "don't do it," just be careful, and be ready to potentially lose all you put in (not likely, but just be prepared). I'd read A Random Walk Down Wall Street first, it will go over basic concepts and you'll probably learn a few things that will be useful elsewhere too.

          1. re: EatFoodGetMoney

            Oh, I'd say "don't do it." Indeed, I *am* saying it . . .

    2. "Perhaps someone would be willing to share their own experiences?"

      Yes, I've bought wine futures periodically for 30-some years, always based on past personal experience with the wine, and factors that support expectation of good quality in the particular future vintage. For example, 1978 Bordeaux and some contemporaneous California wines before they were released. Suitable preparation for the undertaking is personal experience with the wines and others like them, and general background reading about wines. (I have never bought untasted wines on the basis that some fashionable critic liked them -- that's a fool's game, since such publicity guarantees higher market price -- to the contrary, the best wine values often were among wines _not_ reviewed by such critics.)

      These are futures as the term has long been used in the wine world, which is to say, contracts for future delivery, for use.

      2 Replies
      1. re: eatzalot

        Thank you for your insights.

        Must you buy a case, or is it possible to just get a few bottles? Do you recommend storing them at a professional facility (like a wine store), or would my home wine refrigerator be OK?

        1. re: medrite

          1. Very few people -- save for friends and close acquaintances -- will want to buy *bottles* . . . the futures market sells in case lots¹, and wines in OWC² are *always* more highly prized than those in repacks. Were I to buy wines on futures ***with the intent*** for investment and later resale, I absolutely would buy by the case and would make sure I was getting my wines in OWC ONLY!

          2. I would never store wine for long-term aging in a home wine refrigerator, *IF* what you are referring to are those small, 36-or-less bottle capacity, under-the-counter or stand-alone models. I do store a small portion of my wines for long-term aging in the larger ~144 bottle capacity units, those which are a) temperature controlled, b) humidity controlled, and c) dampened in terms of vibration. That said, for true long-term storage -- and *especially* when the wine is in OWC -- I would store my wines³ in a professional, temperature-controlled facility where I can simply store cases untouched in their sealed boxes.

          ¹ Some retailers will sell in case or half-case minimums; a small number of retailers will sell in 3-bottle lots, particularly so when cases are in fact 6/750ml rather than the standard 12/750ml.

          ² OWC = original wooden case.

          ³ In truth, since I do not personally buy wine for the purposes of investment, but rather for personal consumption, I don't care about buying in case lots. I have twice -- once in the mid-1970s, and once again in the late-1990s -- rented space from a temperature-controlled, professional wine storage company. But since the late 1960s, I have overwhelmingly relied on storing my wines in underground, passive cellars with great success (i.e.: I have never had a wine go bad due to improper storage conditions). But in terms of preserving the provenance of the wines, were I looking to resell for investment purposes, I absolutely positively would use a professional storage facility.

      2. Sure be careful, and l suppose it is now a lot more difficult to buy, hold 15-30 years and sell for great profit, but that is exactly what l did with a case of 1970 Petrus, 2 cases 1982 Mouton-Rothschild mags, and a case of Cheval Blanc 1982.
        The profits on these four cases has allowed me to drink 'free' for my entire wine drinking experience and the future of my experience as well. Consider my self lucky and well timed.

        2 Replies
        1. re: Delucacheesemonger

          Yes, you were incredibly lucky and well timed. Continue to have a wonderful life!

          1. re: Delucacheesemonger

            May we all be as lucky (and knowledgeable) as you!

          2. Historical background:

            One of the main reasons that the wine trade is centered in London, as opposed to Paris, is that the British controlled Bordeaux for nearly 100 years and during that time developed a nearly unslakable thirst for claret -- what the Brits often call Bordeaux.

            As the business evolved, the owners of the various châteaux offered their wine on futures because, while they may have been land rich, they were cash poor. So the practice of selling wines which were still in cask was a way to raise much needed funds. Wine merchants in Bordeaux, Libourne and London bought these wines -- again, still in cask -- and set about offering them to their clients, be they other merchants farther afield or consumers. This is still primarily the way the Bordeaux trade operates today -- with wines offered in three waves prior to their being bottled and sold. Each tranche was offered at a premium over the prior one, and all three were below the final sales price.

            Also, keep in mind that it wasn't until the 1970s that the French regulations that comprise the appellation d'origine contrôlée ENFORCED château/domaine bottling¹. Prior to that point, it was completely optional and voluntary.

            Enter the 1980s and the "ME" decade . . . this is where the idea of "the world" offering and investing in wine futures-for-profit came into being. Now futures were being offered not merely as a means for the estate to finance the next vintage *and* for consumers to save money on their purchases; NOW the wines were offered as an investment opportunity.

            People who bought 1984 Futures got f*****d! That's just one example. People who bought 1982s did great! But it depends upon a) the wine, b) the vintage of that wine, and c) the overall market conditions. I know far more people who have lost money -- or at the very least, didn't make much if any -- on wines than have cleaned upend made a bundle!

            >>> It is extremely difficult to outperform the S&P 500 over time. Especially with such a subjective commodity as wine. <<<


            ¹ When Ridge Vineyards was relatively new, for example, they used to buy Bordeaux and Burgundy in barrel -- if I recall correctly, they purchased eleven barrels of 1967 Château Montrose and 2-3 barrels of Pierre Bourré Gevrey-Chambertin . . . just so they could get the oak!

            2 Replies
            1. re: zin1953

              I'm not looking to beat the Dow, I just figure that there will always be a market for certain types of wines like a great Bordeaux, and if worst comes to worst I'd have some decent bottles to drink myself, at lower-than-market price.

              1. re: medrite

                Or HIGHER than market price . . . depending upon economic conditions, quality of vintage, how the wine ages, etc., etc., etc.

            2. I personally believe the ship has sailed on making real money on wine futures. I have collected and sold wine for decades.

              I have certainly outperformed the stock market, many times over ...but most of my purchases were from the mid 70's through the mid- 90's. The US market got hot for wine for quite some time (for various economic and specific cultural reasons) which we will likely not see again.

              However, Asian countries are still pretty hot. They are looking for older vintage wines NOW however, and there is "no telling" how long they will be on this trajectory in wine auctions. They are just too new to the scene to make a guess about it.

              The Hong Kong market is hot. I sold some last year and will again this year. Then, I am likely done ( but I keep saying that!). Take a peek at the Acker site and see what they are moving (still mostly 80's and 90's French) not "whatever is cool" in CA....French Burgs are hot right now....but that could change..... if you're a gambler ;)

              If you just want to "play around" with trendy CA or WA wines (real gambling) and see if you can flip a few bottles within 10 years or so....then it can be fun. CA verticals are popular at auction. Maybe it will pay for a few cases. Buy what you want to drink though, you probably will spend more money than you think!

              1 Reply
              1. re: sedimental

                I tend to agree. For the last 10 years or so, Bordeaux futures have not really been that great a deal. The prices for the wines once released were not much higher than the futures prices, and you didn't have to tie up your money. That said, if you are looking to buy futures to ensure that you can have wines to cellar and drink at a reliable price, go ahead, just don't expect to make much money at it. I will occasionally buy futures of wines that I buy on allocation, but that is to guarantee that I get as much as I want. Since I tend to pay for my allocations several months prior to delivery, I guess that is using "futures" but as an investment, there are better ways to make money.