A Dog Chasing its Tail

Vin-X examines the circular nature of wine investment industry news

Circular nature of Wine InvestmentSharks can detect one drop of blood in a million drops of water, and smell blood from 400m away. When one shark smells blood, others begin to gather, and often within minutes there is a ‘feeding frenzy,’ attracting sharks for miles around to fight and scrape over the latest morsel of food. It is a system similar in operation to the wine investment industry’s PR machine: a story breaks in one place, and within a few hours dozens of wine news sources repeat the story and quote the quotes. This is an industry that follows itself, and in the circular nature of its coverage, is often found wanting in terms of real insight and perspective. Like a dog chasing its tail, it uses a lot of energy and is very committed to the idea, but it isn’t really breaking new ground.

A perfect example of this is the recent hype around Robert Parker’s anticipated rescore of the 2003 vintage. Many wine investment firms are excited about the upcoming event, with several running strong promotional campaigns aimed at the 2003 vintage. The idea is a simple one: Buy a case of 2003 now, wait for the rescore, and (hopefully) see some good price movement in a relatively short space of time. It’s a valid strategy, and it would be unwise to ignore the potential to be found in this vintage given the circumstances. However, all of these firms and news sources seem to have missed something vital:

They are too late.

It’s 2013. The rescore (which has already been postponed once, by the way) is within a few months. Wine is a 3-5 year investment. It doesn’t take a rocket scientist (or wine investment expert – they’re just as clever, honest) to tell you that the REAL smart strategy would have been to invest in the 2003 vintage LAST year. That way, investors would not only see the benefit of the price movement immediately following the rescore, but also see the benefit of the price increases as a result of the hype in the buildup BEFORE the rescore.

So where does this leave us? Do we simply disregard the 2003 rescore? Or do we follow blindly with the rest of the market? There is another way.

The 2005 vintage is better than the 2003, and will also be due for a rescore in 2015. Additionally, in the longer term, the 2009 and 2010 vintages, two of the best of all time, will also be rescored when the time comes. If you are an investor looking at the 2003s, would it not be even better to look ahead two years, five years, ten years? Or do you follow the current trend and buy what’s hot right now, which by the very nature of economics will come at a premium and have a higher outlay? When all is said and done, investors will make their own decisions based on the information available to them. It is time for wine investment firms to start using their own experience and their own ideas and strategies, rather than simply following the pack.