Wine is the new gold

Coming back to the basics

In this article from the Financial Times, the chief of the JPMorgan Chase has announced uninviting prospects in the year ahead. Mr Dimon has predicted deterioration of the economy in 2009, with the rising worry that shares on both sides of the Atlantic will have fallen, that banks might need more capitalization and consumer retail will sag further. JPMorgan, which has fared better than its rivals, has just reached break-even in its 4th quarter results.

Mr Dimon has told the FT that JPMorgan was prepared for an expected deterioration in consumer-oriented businesses but added that if things were to get worse than expected it would have to cut costs again. He further added that the bursting of the credit bubble would force the banking industry to refocus on its traditional businesses of advising on deals and lending to companies and individuals.

With the current state of affairs, more and more industries are going back to the fundamentals of economic principles. We at Assetton have always believed in the value of REAL PHYSICAL INVESTMENTS that follow REAL ECONOMIC PRINCIPLES that yield REAL SUSTAINABLE RETURNS. We offer the best wine, art and land investments that will give you the safest and timeless investment vehicles that ensure no such deterioration that banks and indices report these days.

Bordeaux: A trip to the land of fine wine

Bordeaux wines are the most extensively tracked wines in the world because of their importance to the market. The wines are rated three times before they ever reach the consumers, twice before the wines are bottled.

The name Bordeaux is synonymous with wine investments. This is attributable with the rich history and strategic location of the region. Red Bordeaux wine has an established resale past and is primarily the investment medium. Red Bordeaux remains the leading investment grade for wine auction prices. Also, the value of a Bordeaux wine is more readily identifiable, the 150-year old 1855 classification providing a framework for evaluating wine most widely held and traded.

Through centuries, the top Bordeaux wines have proven an exceptional ability to live long lives. IT is the foundation of their attractiveness among consumers and the foothold of their success among investors. A 50-year-old Bordeaux are as young and vibrant today as the day they were released. Bordeaux’s amazing ability to age enables investors to trade these wines repeatedly, from collector to investor, to finally an end consumer who is willing to pay up for a distinct rarity of the best Bordeaux.

The longevity and predictability of Bordeaux give collectors and investors the conviction that young wines will age gracefully and be worth more in the future, and gives them the confidence to buy and hold other vintages, knowing that they will improve in flavour and appreciate in price. History has shown that investment-grade Bordeaux dependably trends higher with the passage of time. Ultimately, no other region can be proud of so many wines that possess both the longevity of Bordeaux and the huge, established market for back-vintage wines.

As a result, as of 2008, the 118 Bordeaux chateaux account for 90% of the entire dollar volume in the investment-grade wine market, which includes the finest wines from every other region in the world. Amazingly, 25 of Bordeaux best chateaux account for approximately 80% of the dollar volume in the industry.

In fact, the new index Liv-ex Claret Chip Index, that is comprised of only the best, the Bordeaux Left Bank First Growth, has outperformed not only the Liv-ex 500 and Liv-ex 100 indices, but also the S&P 500 and FTSE 500 indices. This is evident in the graph showing the relative prices of the mentioned indices below.

We at Assetton primarily trade the region’s First-Growth wines that have the best winegrowing potential including Haut Brion, Lafite Rothschild, Latour, Margaux and Mouton Rothschild. These are the most sublime, sought-after luxury goods in the world, with the most solid, bankable track record.

Source: David Sokolin and Alexandra Bruce’s Investing in Liquid Assets: Uncorking Profits in Today’s Global Wine Market, Liv-ex, Bloomberg

2008 round-up of the wine industry

Wine trading is increasingly popular as shown by the fact that the Liv-ex Fine Wine Exchange had a strong year, with trade up 78% on 2007. Trade was again dominated by the Bordeaux First Growths.

Trade in Bordeaux was concentrated on the 2000 and 2003 vintages (accounting for 23% and 20% of trade respectively) as some of the top names turned over at reduced levels. Interestingly, trade in 2005 also increased significantly, as recent price falls of as much as 30% encouraged buyers to step in. The vintage’s 15% share of turnover was the highest we have seen since the heady days of June.

The Asian market has shown optimism despite the economic downturn. In Japan, the recent strength of the yen is a push-factor that enables Japanese to buy from Europe with less. Wine shops cleverly advertised this as one very good reason for wine lovers in Japan to buy now. Consumption continued although in a less public manner.

A new breed of rich investors and wine drinkers in China, India and Russia have sent en primeur prices so high, even bypassing the influence of the Robert Parker scores.

The tax on imported wine in Hong Kong was scrapped in March, after dropping from 80% to 40% last year, further boosting Asian demand. More specifically, there seems to be an apparent valuation paid to the brand than the quality. Lafite, for example, is particularly popular in China because of its status.

Assetton is a company that deals with wine investment on the widely-tracked wines from Bordeaux, France. We primarily trade the region’s First-Growth wines that have the best wine-growing potential, including Haut Brion, Lafite Rothschild, Latour, Margaux and Mouton Rothschild. These are the most sublime, sought-after luxury goods in the world, with the most solid, bankable track record.


Sources
Liv-ex December 2008 Report
The Impact of Credit Crunch on the Asian Fine Wine Market, from eRobertParker.com
‘Buyers and Cellars’, The Economist
The Henley Centre, Consumer Research Unit
‘The Grapes of Math’ from Investing in Liquid Assets by David Sokolin and Alexandra Bruce

Krugman explains the malaise in the economy/An important reason why REAL ASSETS tick

Paul Krugman, the 2008 Nobel Prize winner, wrote a very interesting and honest article published on Today this past weekend. He talked about the Wall Street using the recent $50 billion Madoff scandal as a good exposition of the incumbent problems in the global financial industry.

In the article, the notoriously-frank erudite made clear the degree of risk and corruption involved in the Wall Street - loss is incurred by investors even though financial managers keep their high fees. The only difference between Madoff and the rest of the fund managers was that the former philanthropist-cum-investor was not in such a formal arrangement.

Paul Krugman also talked about the corrupting effects of the attractive remuneration on the society, estimating $400 billion a year in waste, fraud, and abuse, not to mention that the brilliant minds in the society have been attracted in rent-seeking rather than creating wealth.

Krugman just uncovered one risk unbeknownst to many. The economic zeitgeist in the US can never be dwarfed in its effect on the global economy and the global financial industry is an outright reflection of the numerous risks involved in various financial instruments. The widespread consequences are yet to be fully discerned for governments to conclude the right fiscal policies that will lead to the end of the global economic meltdown.

It remains, after all these uncertainties involved in attractively-packaged investment vehicles, prime to invest your money in REAL PHYSICAL ASSETS that follow REAL ECONOMIC PRINCIPLES and give REAL SUSTAINABLE RETURNS.

We, at Assetton, specialize in safe alternative investments that won’t give you a headache whenever gloomy economic predictions are pronounced in the news. We offer avant-garde investment-grade wines from the chateaus of Bordeaux. Wine, one precious commodity that has always been a luxury item, snowballs in value in scarcity and offers the lowest risk possible. In fact, it has been historically established that the average annual return for those who invested in Bordeaux wines was between 7.5 and 9.5 per cent higher than would have been predicted by factors that account for risk.

The grim prospects in the next year call for alternative ways of investments. While many have lost faith in the financial markets, wine (especially the red Bordeaux) remains amazingly resilient to these effects. Assetton champions the fine wine’s attribute as an investment treasure and seeks to pursue widespread popularity of wine as an intelligent investment in these times.


Source:
Bloomberg
TODAYonline, 20-21 December 2008
University of Wollongong research
Yahoo! News