Since the collapse of cryptocurrency as an investment option, wine has looked more and more attractive.
If you invested in the stock market in 2022, I have bad news for you. Should have bought wine instead.
While the S&P 500 is down 19.6% in 2022, London-based Cult Wines reports a 20.5% rise in its fine wine index.
Those who bought Burgundy and Champagne made even more profit than those who bought Meta or Netflix shares. The Cult Wines Burgundy Index rose 31.3% and the Champagne Index rose 19.4%.
At this point, it’s important to point out that unlike Meta or Netflix stocks, or S&P index funds, you can’t actually buy Cult Wine Index stocks. They are intended to be indicators of the wine market. To make a nice profit on Burgundy, you would have had to actually buy a bottle of Burgundy.
Tom Gearing, co-founder and CEO of Cult Wines, said the company’s goal with the index is to use Wine-Searcher’s data to find more than the other major organization, Liv-Ex, is tracking. The aim is to create a broader view of the wine market. According to Gearing, the Cult Wine Index looks at his 5,000 most-searched wines (not just brands, but specific vintages) on wine searchers. Filter out wines that people want but aren’t commonly available (eg Screaming His Eagle’s first 1992 vintage). Cult Wines’ core business is helping people buy and store wine for investment purposes.
If you’re not hoarding fine wine in 2022 and are daunted by paying higher prices now, we have some good news for you.
Gearing told Wine-Searcher: “This suggests that price growth is slowing across the broader market. We are not seeing price declines, but we are definitely seeing a slowdown.”
Cult Wines’ Bordeaux Index is only up 5.1% in 2022. Gearing said no, saying he thinks the price rise in Bordeaux is sustainable, but not Burgundy and Champagne. .
If you pay $100 today for a wine you plan to drink 10 years from now (let’s say Château Sample 2020) and it increases in value by 8% a year, it will cost you about $200 in 10 years. If in 2033 you were given the opportunity to buy a Château Exemple 2020 for $200, you might do it. Given that we didn’t have to accept the risk of doing so, we would consider the price to be reasonable.
Instead, a 30% annual increase in Château Example 2020 will cost over $1000 in 10 years. Great if you want to resell that wine, but that’s assuming there’s an unlimited market for $1000 bottles of wine. Clearly at the top of the market, but for all burgundies in the wider range, the question arises as to how many $1000 bottles the market can hold up to.
“Looking at the scarce end of the collectible market, if you see burgundy at $3000 or $4000 a bottle, at some point things have to slow down.” said.
However, Burgundy prices are driven by supply and demand, and Burgundy is breaking out of consecutive small vintages. Gearing also said champagne is limiting the tonnage of grapes it can harvest during the pandemic, reducing its current supply.
“Places like Champagne and Burgundy are dealing with supply issues that will not be resolved within the next 12 months,” said Gearing. “I think burgundy prices will slow down, but not when there isn’t much wine on the market.”
Gearing expects a bigger vintage this year, when many Burgundy vineyards have lost a lot of crops to frost, as the grapes store up energy, but those wines will not hit the market. It will take some time.
We asked if the ongoing cryptocurrency market crash is affecting investment in fine wine. Gearing said the potential is there because both are alternatives to traditional investments such as stocks and bonds. If anything, the collapse of cryptocurrencies may encourage more people to invest in wine.
“Fine wine as an investment is almost the antithesis of crypto,” Gearing said. “Crypto is a virtual asset that does not exist in the real world. Fine wine is a physical product that exists in the world with utility. These are real bottles of wine that someone can open and enjoy.” Wine is much less risky than cryptocurrencies A bottle of Mouton Rothschild will always have value in the market, while FTX coins are currently worth zero A bottle of Mouton Rothschild is worth 150 years After all, even when people say the bottle has turned into vinegar, someone buys it. It’s still worth it.
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