Investment advice from Satan

Other than that it's dumb advice, I don't see the cause of ire. What human beings will make and sell, other human beings will attempt to trade for profit. Wine, pork bellies, first editions, none are exempt. Better wine, as far as I'm concerned, than hedge funds.
 
"Aubrey K. McClendon, chief executive of the Chesapeake Energy Corporation"

This is the guy who is planning on drilling for natural gas here in New York using hydraulic fracturing. Cheney gave him and all his friends exemption from the Clean Water Act. The possibility that this process will pollute the entire Catskill watershed (including New York City's water supply) is quite real.

When gas was $4 a gallon Aubrey had his goons everywhere trying to sign people up for drilling leases and swindle cow farmers. Glad to hear he overextended himself and had to sell off all his pointy wine.
 
This is the guy who is planning on drilling for natural gas here in New York using hydraulic fracturing. Cheney gave him and all his friends exemption from the Clean Water Act. The possibility that this process will pollute the entire Catskill watershed (including New York City's water supply) is quite real.
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Not to mention the Finger Lakes as well. I know someone who signed one of those leases.
 
The high-end collector market is interesting, but to me it's just academic. The wines being traded are generally not my cup of tea, though this may be a lack of opportunity on my part. It seems that a population of people, mostly from the finance sector, just need to treat everything like a blue-chip. Overall this is fine with me, but there is a 'all boats rise with the tide' issue - they make wines (that I'd be buying) more expensive.

Since the top price is higher, the middle prices will follow. While we won't be paying hundreds of dollars for Breton or Baudry, we will be paying pretty stiff tariffs on Bordeaux and Burgundy (these guys can keep California.)

Oh, and I love that Chinese collectors are drinking the wine. That's hilarious. I just wish I could see the look on an American investors face while they drink a 1st growth with ling cod.

In my perfect little world, people would collect and cellar wine for love, not profit.
 
I love the idea that Bordeaux futures are a good place to be.

Can any of these people spell "counterparty risk"?
 
originally posted by Jonathan Loesberg:
Other than that it's dumb advice, I don't see the cause of ire. What human beings will make and sell, other human beings will attempt to trade for profit. Wine, pork bellies, first editions, none are exempt. Better wine, as far as I'm concerned, than hedge funds.
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I don't agree, Prof. I have no great problem with the commodities market, as it represents the essence of market-based capitalism. But treating fine wine as no different from pork bellies ignores the highly regulated nature of the market for fine wine. It's really very much like the Dutch tulip economy wherein you create a luxury product out of whole cloth by exploiting scarcity to your advantage. I feel about these people much as I do about Ticketmaster and other institutionalized ticket scalpers: up against the wall, motherfuckers! The Revolution is upon ye!

Mark Lipton
 
originally posted by SFJoe:
I love the idea that Bordeaux futures are a good place to be.

Can any of these people spell "counterparty risk"?
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I can't wait to see these funds eat it.
 
originally posted by MLipton:
originally posted by Jonathan Loesberg:
Other than that it's dumb advice, I don't see the cause of ire. What human beings will make and sell, other human beings will attempt to trade for profit. Wine, pork bellies, first editions, none are exempt. Better wine, as far as I'm concerned, than hedge funds.
Click to expand...

I don't agree, Prof. I have no great problem with the commodities market, as it represents the essence of market-based capitalism. But treating fine wine as no different from pork bellies ignores the highly regulated nature of the market for fine wine. It's really very much like the Dutch tulip economy wherein you create a luxury product out of whole cloth by exploiting scarcity to your advantage. I feel about these people much as I do about Ticketmaster and other institutionalized ticket scalpers: up against the wall, motherfuckers! The Revolution is upon ye!

Mark Lipton
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I don't think investors or speculators have much effect on prices. First, investment grade wine accounts for a very limited number of Bordeaux and Burgundy, mostly. Second, although rarity creates price hikes, rarity is a relative term, at least when it comes to first growth Bordeaux, where they make ca 20,000 cases. One occasionally hears stories of someone trying to corner the market on Guigal single vineyard CRs, but I don't think anyone has succeeded even there. Finally, even if tulip style speculation could go on, that kind of thing still just punishes investors stupid enough to participate. It doesn't destroy tulips. Of course the market isn't pure since with Bordeaux, at least, it starts with the vineyard owners trying to regulate supply. But that occurs without regard to investment as part of the futures campaign, and it still seems to me merely another wrinkle in capitalism at work.

So, investment in wine is still just another form of investment, except that it's a stupid form of investment for most people. It won't affect the prices of virtually any wine discussed on this board. And by any definition, it has more tie to a commodity that serves a purpose than say the market in rare first editions--an absurd, rarity driven market, but a harmless one.
 
I tend to agree. I think you are correct for wine. Though as we observed about a year ago with oil prices, speculators can affect the price of the target commodity. Speculation could affect the price of Bordeaux futures, perhaps in the absence of Points. But to compare Bordeaux futures and top Chinon, you might compare pork bellies and silk purses while you are at it.
 
As an ethnic Chinese wine collector working in the finance sector I am always interested in insightful analysis of this particular asset class.

The continued presence of these investment funds will provide the necessary liquidity in the fine wine market for price discovery of what some of us regard as a demurrage currency (in its sense as a store of value). Based on a proprietary benchmark index of collectible wines, I constructed a time series of yield curves stretching back to the 1855 classification. It is indisputable that greater transactional volume has provided more data than ever across various maturities, and I have recently been able to start tracking spreads between various classes, e.g. white Burgundy and Bordeaux 1st growths. This is an especially instructive example as spreads on implied forwards for a decade hence were unerringly accurate in predicting the demise for white Burgundies from premature oxidation when Lafite et. al. would just be entering the early portion of their drinking windows.

The counterparty risk which Joe refers to has typically manifested in the bankruptcy of wine merchants (c.f. Mayfair Cellars) rather than investment funds. Insofar as there continues to be parental support for captive operations, as would be the case for most wealth advisors, I do not anticipate significant counterparty risk, pace Joe.
 
Is the author of the article the same William Hamilton who does those cartoons in the New Yorker? Maybe this is just setting him up for some more work doing funny stuff.

-Eden (I should probably renew my subscription to the New Yorker)
 
originally posted by Yixin:

The counterparty risk which Joe refers to has typically manifested in the bankruptcy of wine merchants (c.f. Mayfair Cellars) rather than investment funds. Insofar as there continues to be parental support for captive operations, as would be the case for most wealth advisors, I do not anticipate significant counterparty risk, pace Joe.
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Oh, absolutely, I don't worry about the funds. Unless they are fraudulent or some such. But their transaction costs will eat any yields. It's a dopey idea, really.

But the list of wine shops from which I would buy 2 year futures is vanishingly small.
 
originally posted by Yixin:
Price discoveryAs an ethnic Chinese wine collector working in the finance sector I am always interested in insightful analysis of this particular asset class.

The continued presence of these investment funds will provide the necessary liquidity in the fine wine market for price discovery of what some of us regard as a demurrage currency (in its sense as a store of value). Based on a proprietary benchmark index of collectible wines, I constructed a time series of yield curves stretching back to the 1855 classification. It is indisputable that greater transactional volume has provided more data than ever across various maturities, and I have recently been able to start tracking spreads between various classes, e.g. white Burgundy and Bordeaux 1st growths. This is an especially instructive example as spreads on implied forwards for a decade hence were unerringly accurate in predicting the demise for white Burgundies from premature oxidation when Lafite et. al. would just be entering the early portion of their drinking windows.

The counterparty risk which Joe refers to has typically manifested in the bankruptcy of wine merchants (c.f. Mayfair Cellars) rather than investment funds. Insofar as there continues to be parental support for captive operations, as would be the case for most wealth advisors, I do not anticipate significant counterparty risk, pace Joe.
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I'm trained to distinguish real deconstructive criticism from parodies that believe they are simulacra. Kid stuff, Yixin, kid stuff.
 
Yield curves in what dimension, Yixin? I usually think of yield curves as indicating the current price of something to be delivered in the future; is the secondary market sufficiently active to detect price variation in a first growth from the harvest until actual delivery? Call me too literal, but I have no idea what you are talking about.
 
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