Drinking and Driving—The Path to Wealth

Want to increase the size of your bank account? Consider drinking and driving.

According to the annual Wealth Report:

“Investment grade wine finally knocked classic cars off the winner’s podium in the 2016 Knight Frank Luxury Investment Index (KFLII). The Knight Frank Fine Wine Icons Index, compiled for us by Wine Owners, recorded blistering growth of 24% in 2016, compared with a relatively lacklustre 9% increase in the value of the HAGI Top Index, which tracks the performance of the world’s most desirable classic cars.

“Wine’s stellar performance was driven by exceptionally strong growth in key areas across the world and in particular the resurgence of the top Bordeaux chateaux, which form the backbone of most investment cellars, says Nick Martin of Wine Owners.

“In 2015 we saw growth of around 8% for the whole of the Bordeaux region, off the back of steep declines in 2012 to 2014 following the bursting of the Chinese-induced Bordeaux bubble in late 2011.

“But 2016 was completely different. The top Bordeaux blue chips drove the entire market, growing 9% to the end of June. Brexit turbo-charged the market due to the devaluation of sterling, feeding more positive sentiment into a market that had already been gathering significant momentum. The first growths rose a further 18% between June and November 2016, resulting in an annualised performance of over 30%.”

Collectible cars came in second place with a respectable 9% return on investment in 2016. However, this comes after a 151% increase in value in classic cars over the past five years.

Real Estate is back to pre-recession levels. The wine industry, particularly the upper end, is jumping. Interest rates are rising. On the one hand this all looks like a humming economy. On the other hand, after living through the Great Recession and looking at the continued increase in wealth and income inequality (The top 10% richest families in the U.S. control 76% of the nation’s total wealth. The bottom 50% of the nation controls 1% of the nation’s wealth), it gives one pause.

As would the recent headline over at Meininger’s Wine Business International: Is the U.S. Wine Boom Over?

What if prices remain flat, since more and more wines will be chasing the same number of wine drinkers? And what if consolidation among retailers, distributors and producers make it more difficult for all but the biggest producers to make an impact on those overwhelmed consumers?

Wonder no more

The slowdown in US consumption could well be underway, having started during the recession. And if no one can say for certain if or when the rest of this scenario will occur, several wine industry analysts who have parsed the numbers, as well as an influential study, say it’s more likely than not.

I’m not an economist. I’m not much of an investor. Still….

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One Response

  1. Mark.L - March 30, 2017

    Wine and Cars. Your analyze is good.


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