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Fine wine data from Liv-ex |
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On the 29th of December, the Liv-ex Fine Wine 50 Index broke the 400 point barrier for the first time, having been based at 100 in January 2004.
The index – which tracks the Medoc First Growths across ten different vintages – has risen almost 60% in 2010. As the table below shows, this is a significantly better performance than that achieved by other assets - outshining even gold.
All performance figures, exclude dividends and costs.
As regular readers of the blog will know, Lafite Rotshchild 1982 has shot up in price in recent years. It has increased in value by more than 60% in the last year and more than 1,000% over the last ten.
But just how "valuable" has it become? To find out it we compared its price with that of other precious commodities.
A 750ml-bottle of the Bordeaux First Growth (which weighs roughly 750g, excluding the glass) last traded on the exchange at £3,500, having risen in price from £2,170 at the start of the year.
This is roughly equivalent to the value of 10,000 litres of crude oil, or 3,000 litres of petrol.
Relative to commercial wines, a small drop of Lafite 1982 (around 1 millilitre) now boasts the same value as a standard-sized bottle of Blossom Hill - the UK’s top-selling brand (£5).
Looking at metals, Lafite Rothschild 1982 is worth eight times its weight in silver and costs the equivalent of half a tonne of copper. Gold remains exponentially more expensive than Lafite by weight, with one bottle of the First Growth equivalent in value to 4 ounces (123 grams). Yet despite the rapid appreciation of gold prices in recent years, the same bottle would each have been worth just 1.5 ounces (47g) ten years ago.
Turning to more exotic commodities, we find a bottle of Lafite 1982 is worth almost four times its weight in black truffles and twice the price of essential oil made from rose petals (the world’s most expensive). It would also be a far more valuable gift than its equivalent weight in Frankincense oil or Myrrh resin – being 14 times the price of the former and 100 times the price of the latter.
Notes:
A 1x75cl bottle of Lafite contains 750ml of wine and weighs approximately 750 grams (excluding packaging). The value of other commodities and luxury items relative to Lafite has been calculated based on their equivalent value in weight (for solids) or volume (for liquids).
The prices given represent the lowest price a UK consumer purchaser could reasonably expect to pay for the product when buying in bulk.
Further info:
Last year, Jancis Robinson described the 2008s from the Rhone Valley as “decidedly muted” – a reminder of just how exceptional the 2007 vintage was. This year, however, the region’s offerings failed to disappoint, with Jancis describing the quality of the 2009s from the north as “very exciting”. The critic puts the overwhelming success of 09 down, in part, to high standards of winemaking and growers’ “confidence in their very particular terroirs”. In all, the vast majority of red wines tasted were awarded 16 points and above, whilst 11 were accorded 18 points or more. Top scorers include Jaboulet, Chapelle Hermitage and Guigal E, Cote Rotie Turque, both at 18.5+ points.
Scores from Jancisrobinson.com
The Liv-ex Claret Chip Index ascended at a more leisurely pace last week, closing on Friday at 405.91. The index is up 0.03% week on week and 49.53% year to date.
As you can see from the chart below (which tracks the fortunes of the five First Growths independently), Lafite saw a slight dip in prices - following weeks of record highs - whilst Mouton and Margaux both pushed on. Margaux's overall performance was boosted significantly by the 1995 vintage, which sprung to life after sluggish price movement in October and climbed from £3,650 to £4,069 last week (+11.48%). Mouton 2006 also saw energetic trade and gained 6.91% week on week. The vintage's rapid rise seems to have been driven by strong demand for the 2008, which is to feature a label designed by a prominent Chinese artist.
The Liv-ex Lafite Index hit a new high at the end of November, reaching 778.7 - an increase of more than 10% in just one month. Incredibly, the index is up almost 80% in 2010.
But when does a bull market become a bubble?
Andy Xie, an ex-Morgan Stanley analyst and a notable bear when it comes to China (Wikipedia has a run down of his record), feels Lafite has now strayed into bubble territory. In a blog post bluntly titled "Sell Lafite now", he states:
"What I have seen and heard in the past few months convinces me that, not just Lafite, the whole fine wine market is a bubble. Like other assets, the force for the bubble is the low interest rate environment. Bernanke is a bigger reason for the fine wine price than 1.3 billion Chinese."
He goes on to describe the current pricing of Lafite as similar to the inflated share valuations seen in the dot com bubble:
"In the 2000 internet bubble, a lot of companies were worthless but were trading at billions of dollars of market capitalization. Some were really good companies but were priced several times higher than their intrinsic worth. Lafite is like the latter...The top Bordeaux chateaus behave like internet companies in 2000. They sell a small proportion for each release. The shortage triggers market frenzy. They then sell more into it bottle by bottle over time."
His argument is threefold. First, Lafite isn't being consumed at the rate most commentators imagine. It is actually being "hoarded" by collectors, merchants and the chateau itself. Second, the issue of fakes is of growing importance and could eventually "destroy the demand for it completely". And third, the market conditions that have enabled the Lafite "bubble" to grow - plentiful supply of money and low interest rates - is only a short-term factor; "when interest rates go up, Lafite in the cellar shines a bit less."
Xie is the second commentator to call the top of the market for Lafite, following on from Tim Atkin MW (wine writer at the Times). Following the recent ex-cellars auction at Sotheby's in Hong Kong, Atkin commented:
"Is this just Lafite mania, well attested in Asia, or is it proof of what economists calls 'the greater fool theory' (however crazy the prices, there’s always someone out there stupid enough to pay them)? I may be proved wrong, but I think we have reached the top of the curve here, or The Peak if you prefer."
More than a year after Lafite started its vertiginous run, we are now hearing the first murmurings that the Lafite bull has run too far. The market, however, has yet to show any signs of a slow down.
Dramatic price increases in both Mouton and Lafite boosted all of the LIv-ex indices in November, with the Liv-ex Fine Wine 50 Index posting the largest gains. The index rose to 391.42 by month end - up 6.42% month-on-month and 53.13% year-to-date.
The Liv-ex Fine Wine 100 Index also continued its strong upward movement and ended the month at 329.16. The index is currently up 4.28% month-on-month, 38.69% year-on-year and 37.52% year-to-date.
Having broken through the 400 mark, the Liv-ex Claret Chip touched 405.10 on the 30th of November, reflecting a change of 4.95% month-on-month (the index's most rapid rise since May). Year-to-date, the index is up 49.24%.
The value of the Liv-ex Fine Wine Investables index rose to 326.33 - up 4.25% on last month.The index is up 40.63% year-on-year and 39.14% year-to-date.
