In the last few weeks, we have seen Fine Wine Prices coming down rather rapidly. Reuters have just published an interesting article on this, "Global credit crisis puts damper on wine prices". Auction houses see their sell-through rates dropping and prices as compared to only 6 weeks ago are significantly down. When looking at the Livex 100, the widely quoted Fine Wine Price Index, we see a drop of 16% from the high in August.
The nervousness and uncertainty over the future direction of the financial markets and indeed the economy as a whole has lead buyers keeping their money in their pockets, not seeing a reason to buy now when they expect prices to come down further. As there are enough sellers that share this point of view, prices are indeed falling. I expect this to continue until customers and traders feel that either prices have adjusted enough to reflect the market conditions or the current level of uncertainty diminishes and a sense of the bottom having been reached starts to take over.
There is an incredible amount of cash available, waiting for an opportunity to step in. When that happens, prices will go up once more. Possibly not at the same pace as they are now coming down, but there are some very, very good buys out there at the moment and they will be snapped up quickly. Hart Davis & Hart, the US auction house, words this view nicely as noted in the Reuter's article: "We saw a lot of old faces in the audience on Saturday night that we haven't seen in a couple of years. There were a lot of us who have been through cycles before and they realize it's an opportunity,".
Over the last 50 years, investing in Fine Wine has averaged a return on investment of 10% a year, easily outperforming the main indices. As always, these percentages can be handsomely increased when you call the bottom of the market correctly. But then, that's a dangerous and difficult game to play...
One thing hasn't changed though. Ditton Wine Traders still offer the most competitive prices on top end Bordeaux and Champagne.