

The Case for Investment Grade Wine as a Strategic Alternative Asset (2012) [pdf] - pappyo
http://www.fa-mag.com/userfiles/docs/whitepapers/2012/Investment-Grade-Wine-A-Strategic-Alternative-Asset-Class.pdf

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Imao
I seriously looked into doing this years ago as I have a friend who is really
into wine.

Many popular California wineries only sell to those on their list, and often
the prices are much below what you can get on the open market.

If you're on the list, every year you get a certain allocation. If the
wineries are having a good year, usually you can turn a profit on every
bottle. If they're having a bad year (where you would lose money) and you
don't buy your allocation, they will reduce it in the future and if you don't
buy anything that's when you likely get removed from the list. Sometimes in
bad years you'll get an increased allocation, and if you buy it, they will
increase your allocation in the future.

The wait times to get onto a list, or even just the waiting list can be
substantial. For one winery, my friend has been on the waiting list since 1992
and he said getting on the waiting list itself was an accomplishment. Since my
friend truly enjoys wine and is good with people, he's often able to move up
in the waiting lists or just convince the proprietor to put him on the list
even when there are other people waiting. He's also been able to call them up
and convince them to increase his allocation.

He also spends time looking for new wineries that are going to blow up, much
like hunting for startups.

My friend could easily make a nice little profit, or even just make enough to
pay for his consumption, but chooses not to.

I chose not to do it because I hate wine and it's too much of a time
investment. There's also the issue of not legally being allowed to sell the
wine privately because it's not old enough. Nobody's going to bust you for a
few bottles, but at a certain scale I could see it being an issue.

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danieltillett
One of the problems with wine as an investment is it is not very liquid -
sorry I could not help myself with this one :)

Actually the bigger problems are storage costs (the back of your cupboard just
won’t cut it) and the less than reliable advice you will get buying in the
futures market (the number of “vintages of the century” we have had in the
last 15 years defies statistical plausibility). Of course if you like fine
wine then even if it turns out to be a disaster of an investment you can at
least drown your sorrows.

~~~
paulmd
That's really true of many small assets. I collect historical collectibles and
my purchases a decade ago have done extremely well just based on a lazy "buy
at a price you can't so no to, then hold" strategy. On a basis of probably
$2.5k I've had the average asset appreciate a ballpark-guess ~100%, which
outperforms the DJIA over a similar timeframe.

Is that the right valuation? Yes. Is it liquid in the sense that I could get
cash for it tomorrow? Nope. What are the storage costs? On the scale I'm
working at - a lot of manual labor and some home shelf space.

It's not a scalable strategy. Could I park a couple grand, maybe tens of
grands into it per year? Yes. Could I park millions into it? No way, that
would have a noticeable impact on my purchasing markets.

Of course - in the Plutonomy strategy [1] [2] [3], it's wealthy buyers who
really determine the value of assets. And they like good wine.

[1]
[http://delong.typepad.com/plutonomy-1.pdf](http://delong.typepad.com/plutonomy-1.pdf)

[2]
[http://delong.typepad.com/plutonomy-2.pdf](http://delong.typepad.com/plutonomy-2.pdf)

[3]
[http://delong.typepad.com/plutonomy-3.pdf](http://delong.typepad.com/plutonomy-3.pdf)

~~~
danieltillett
This is true. The one thing about wine compared to other collectibles is wine
is perishable. It really is much more like speculating on agricultural
commodities like corn or pork bellies than buying other collectables like
antiques or artwork.

The super rich (and the not so super rich like myself) do like good wine. The
problem with wine is once you know and appreciate good wine it is hard not to
spend to what you can afford. I guess I am lucky in that I can find at least a
few wines I like under $20.

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justincormack
Why is this on HN? From memory the market fell a lot just after this was
written. By the time you throw in management fees, storage and fraud costs it
was never a good investment anyway let alone as an active management strategy.

~~~
danieltillett
It is actually great to look back on investment advice a few years after it
was made to see how the advice lines up with reality. If you do this a bit you
become both a better investor and more cynical person :)

~~~
justincormack
Not for bullshit stuff like this. I used to work in investment management I am
already cynical though.

~~~
danieltillett
Yes, but the only way people get cynical about investment advice is either by
being burned or by check how the advice panned out. Personally I favor the the
second option :)

