Wine: does it pay?
When I first was approached to write for this esteemed organ I asked the editor: “How do I pitch my copy … to the connoisseurs or to the guys looking for good value plonk in Tesco?”
Miles replied: ‘You are a cricketing man, Algy?”
“I have been a member of the MCC since 1979 .”
” Well then you have seen Trueman, Willis, Botham, Anderson, Lillie, Holding and Warne bowl. Do they ask the coach to set the field?”
I was suitably chastened but nonetheless confused as readership figures appear to oscillate between 29 and several thousand. However I realized that there were no advertisers nor readers to please so do what everyone else was doing … their own thing.
Today, I’m considering wine as an investment. I invited Bob Tickler and Alice Mansfield to lunch as I was interested in their views in investing in their fields as well as mine. Bob has been a successful trader in shares for 40 years. Let him take up the story:
“Financial markets are totally unpredictable. Look at the FTSE 100 today . There is a tremendous mood of uncertainty post-Brexit but it just goes up and up. There are some rational reasons for this: the pound is weak so it’s cheaper to buy in, its a global market weighted to mining and certain British companies like Unilever are still performing strongly. I would say it has 4 advantages over art and wine. It’s regulated. It earns on average a 3% yield on dividend whereas bank are paying 0.25% on deposit and wine and art nothing at all. It also is liquid, meaning you can sell a share quickly and finally when you do the dealing costs are much less than wine or art.”
Alice defended art on the basis it gives so much pleasure on your wall to the eye but conceded the risks. There are lot of forgeries about there as that entertaining programme Fake or Fortune shows. Condition can be bad. The work may not sit in the general corpus of the artist. There is insurance. Dealing costs, both in buying and selling at auction and through a dealer, are high and reputations can fluctuate. Recently a Seago – an artist much favoured by the royals and haute bourgeoisie – did not reach its reserve. He has always been popular, as is Ken Howard, though not rated by their peers or critics. I personally do not think Damien Hirst will be with worth 10% of what you pay today nor will any of the famous rock musician artists like a Bob Dylan or Ronnie Wood who are currently attracting high prices.
I found this fascinating. I did mention in defence of fine wine it does not attract Capital Gains Tax as it’s defined as wasting asset as it is deemed to have a lifespan of less than 50 years. If kept in bond, you do not have to pay VAT either. The London International Vinters Exchange tracks the movement of 100 sought after fine wines and this has increased sharply since the beginning of 2016. According to the Knight Frank luxury index, fine wine out performed in 2016 the classic car market by 15%. A fine Bordeaux like the St Julien Chateau Leoville Poyferee, bought in 2005, would have earned a return of 81%. Bob’s eyes began to burst! Storage costs are not onerous (£12 per year).
However you need to take a long term view. A 2014 Chateau Leoville -Las Cases is 4% down since 2014. The “en primeur” (to be bottled) is a future market and you can now buy 2016 vintage, generally reckoned to be an outstanding one, at about £ 700 for case for a decent Leoville. The release price for the legendary Mas De Doumas Gassac was 10 francs in 1982 it will now cost you £120.
To sum up, you really have to be first interested and then educate yourself. Also it’s essential to find a reliable trustworthy merchant. Berry Bros are very good, though expensive, and they also runs an online wine brokerage service and I like Lea and Sandeman.
I hoped to invite a friend of mine Rob Corsan to the lunch as he is qualified accountant and financier who has done very nicely thank you as a racehorse owner to give his take on that sporting investment. He promises to put pen to paper. I will drink to that and an excellent lunch consummated by me ordering a vilely priced Chambolle Musigny.
