Don’t Believe the Hype (The Market Certainly Doesn’t!)

Steve McConnell - Vin-X Wine InvestmentIt was Halloween, and true to form for this red-letter day in the horror calendar, a truly terrifying sentence rolled across the tickers of financial news services worldwide. “Global  Wine Shortage?Wine Shortage!” the papers howled. “Demand already outstripping supply!” screamed the financial news channels. “Weather and Global Warming to blame!” shrieked the wine industry PR machine. It was zero-hour, crunch-time, and as wine investment firms everywhere prepared to do battle over the last few drops of the world’s fermented grapes, a sense of anticipation hung heavy in the air.

Only… nothing happened. There was no price rise, no huge increase in demand. The Liv-Ex Indices continued to tick along smoothly just as before. Indeed, within a couple of days, the story was debunked (by, among others, illustrious fellow Vin-X blogger – Richard Boyle), and everything seemed to go back to normal. “That’s that then,” we all thought. But was there more to the story?

Imagine, if you will, that the government announced tomorrow that there were to be no more government bonds issued for the foreseeable future. Or if a story about a global gold shortage emerged. The turmoil would be immediate and devastating: Just as credit dried up in the credit crisis causing widespread chaos and years of subsequent economic pain, this kind of ‘worldwide shortage’ story would send any other market into a tailspin of spectacular proportions.

So why has this not happened with wine?

As I have previously alluded to, wine is nothing if not stable. The volatility and unpredictability seen in other markets simply is not there for wine: year on year, decade after decade, it has delivered a stable, safe return for long term investors. The recent story about a global wine shortage and the subsequent lack of reaction from the market speaks volumes about the investment’s robustness and steadiness, and it would take a good deal more than a few rumours to derail what has always been an extremely steady investment area.