For this month’s Monthly Wine Writer’s Challenge we’ve got to write something along the theme of “bubbles”. I was wracking my brain and thinking about what line I could go down, and then it hit me. Something I’ve been looking at for the last few weeks, something that’s been bothering me the more I see it. And hey, it fits the bill. I’m going to have a quick natter about what I think is a Fine Wine Bubble!
When it comes to finance you talk about bubbles being something that grows artificially, on a lack of real value or knowledge, and eventually pops leaving everyone involved a bit shocked and usually a lot poorer. There have been some fascinating examples over the years. The Tulip Bubble in 17th Century Holland. The South Sea Bubble in 18th Century Britain. The DotCom Bubble in modern time USA. All saw plenty of investors pile in without a full idea of what they were doing and, more crucially, how tough it’d be to get out again!
Fast forward to post-Brexit Britain. The GBP is getting crushed across the globe. British wine investors who have been sat on stocks of wine investments that have been stagnant at best for the past few years all of a sudden have a huge amount of foreign buyers desperate to pick up a bargain, 15-20% lower in price due to the FX bump. They sell, of course they do. But even a rise of 15-20% in the “value” of fine wine on the UK exchanges like LivEx are only taking the prices back to parity in other currency terms.
Now this is where the bubble gets going. This is where the press leap in. Headlines galore telling us all how much money can be made in a short space of time. More headlines arrive that alternative asset investment is the future in uncertain times. To an extent I agree. But it’s not the silver bullet.
I used to work with plenty of guys and girls who own a shit load of “fine wine” that they’re sat on and can’t get rid of. Some people even start fancy clubs to flog their stocks to the punters. Individuals couldn’t sell their modest cellars, what happens when the investment funds get stuck in?
When it comes to investments, there’s an old saying about how long do you hold onto that rising balloon. The problem with alternative investments is that sometimes you’re strapped to that balloon and you can’t get off. The smart money doesn’t get stuck.
I’m not saying don’t do it. Just be warned. Bubbles always burst…eventually.