French Proverb

Musings on Runaway Wine Prices - September, 1998

Updated - August, 2002

I'm lying in my hammock on a beautiful Oregon afternoon, thumbing through this month's wine mags when I see it - Colgin Cabernet Sauvignon Napa Valley Herb Lamb Vineyard 1994 sold for $16,100 the case. That's $1342 per bottle for a wine that was released for $50 last year!  If only I'd known! I'd've taken all the money that I had invested in Russian Mutual Funds and bought the entire production (which I probably could have covered, given Colgin's tiny production and how well the Russian market was doing last year). Oh and look! Screaming Eagle 1994 and Dalla Valle Maya 1991 both brought over $1000 a bottle.  And I thought that Dalla Valle stuff was pricy at $100 a bottle; silly me.  If only I'd cleared out my Asian stock portfolio I probably could have bought up the entire production of those two wines, too!  And by now I'd be...lying in a hammock somewhere instead of typing keys for a living.  And maybe I'd even open one of those bottles some day and drink some darn good wine.  Oh well....an opportunity lost forever.

So what makes wine go up like that?  Mr. Samuelson (remember Economics 101?) say's its called supply and demand.  There are a lot more people that want those wines than can have them, and some people really want that wine. They want that wine more than they want money.  After all, they already have lots of money.  Of course someone out there wanted the money more than the wine, but he (or was is she?) wanted a lot of money before they'd part with their treasure.

My fantasy of instant wealth disappears completely when I recall that Ms. Colgin never actually gave me the opportunity to buy up her entire production of 1994 Herb Lamb Cab.  Or the folks at Screaming Eagle or Dalla Valle either. Those wines are only offered to people on their mailing lists. So I call. "I'd like to be put on your mailing list, please" I ask in my most deferential voice - trying my best to sound like a good life-long customer-to-be.  And life-long is pretty close to right when I find out how many years it will take to work my way up through their waiting lists and reach that Promised Land of being allowed to actually buy a bottle.

So okay, I'm not getting any Colgin or Screaming Eagle or Dalla Valle Maya any time soon.  But what about that great little wine I had last night?  I loved it, so I'm sure other people will, too.  And I'd never heard of it before, so there must not be much of it and I probably can buy lots of what there is for a good price. Sounds like a plan.  Now let's see, my European stocks haven't all tanked yet.  I could take that money, rush down to the wine shop and... Wait a minute - think this through, Dave.  If I hadn't heard of that producer, how is that runaway demand thing going to get started before my investment becomes vinegar?  Well... after I corner the market on the stuff, I'll just wait for Bob to give it a great review (which I'm sure he'll do because I liked it, and since I like all the wines he does, he must like all the ones I do...) and then the world will beat a path to my door. Hmmm. Well, it might happen.  Now how much is it going to cost to store the stuff while I wait?  And auction houses want a piece of the action when it's time to sell - how much was that?  Pooofff. Maybe I'm better off putting the money back into Russian Mutual Funds.

Well, what about those First Growth Bordeaux I see listed all the time?  And that Petrus and DRC and D'Yquem stuff? They look like sure bets.   The wine shop owner keeps telling me I can get them really cheap if I buy futures on the 1997 vintage.  When I pick them up (in the Year 2000 I think he said), I'll be laughing all the way to the bank, he assures me.  Oh yes, he'd like cash up front, as in NOW.   And his definition of "really cheap"  gives me this strange little tight feeling in my chest.  Is he really sure that this is a sure thing?  And how good is the 1997 vintage, anyway? "Trust me", he says.  Funny.  That's just what my stock broker said last year.

Suddenly making money on wine doesn't seem so easy (right up there with hitting it big in the stock market and typing on a keyboard for a living, probably).   But people do it successfully and consistently, and have a lot of fun along the way.   How?  I sure don't have all the secrets, but in the coming months, maybe we can figure it out together. In the mean time, here are

Dave's top ten reasons NOT to buy a wine.

10.  Your uncle can get you a great deal on it.

9.   A wine writer you never heard of gave it a "93".

8.   The bottle was signed by Princess Di's driver.

7.   Your wine shop owner tells you that since it's from a good vintage, it has to be a great wine.

6.  It was given "99 points" by the same outfit that's selling it.

5.  Your Significant Other likes the "pretty label".

4.  It's a Merlot.

3. The bottle has real dust on it.

2.  You can't stand looking at all those empty racks in your new wine cellar.

1.  Since it went up 2684% last year, it has to go up by that much again next year.

It's been a wild four years since I last had time to write about wine investments (or to lay in a hammock for that matter).  With your help, we've grown from nothing in September, 1998 (we collected our first dollar October 1 of that year) to become the largest wine retailer in the northwest third of the country, and one of the big 6 wine auction houses.

What else has changed since then? 

- The Dow Jones Industrial Average was just breaking 8000 when I wrote this back in September, 1998. Today, the Dow has just crossed back above 8000 again. On average, your investment in the stock market has gone exactly nowhere in the last 4 years. It sure has caused some excitement, though.

- Colgin Herb Lamb 1994 Cabernet averaged $469 per bottle at auction for all of 1998, and averaged $518 per bottle for the first half of 2002. That's a 10.5% increase. The poor guy who spent $1342 a bottle for it back in 1998 could have done worse.  He could have invested in any number of dot-coms, highly leveraged energy or communications companies, or maybe stodgy old Montgomery Ward, but paying that much was his own fault. Paddle fever strikes again. By the way, I was party to conversation with Ann Colgin asking Stephen Tanzer's opinion on how to price her 1999 Cab. They agreed it would be around $150-175. So don't blame her for the astronomical prices.

- Screaming Eagle 1994 Cabernet averaged $697 per bottle at auction for all of 1998 and averaged $1271 per bottle for the first half of 2002. That's an 82.5% increase. Not bad. 

- Dalla Valle Maya 1991 averaged $308 per bottle at auction for all of 1998 and $306 per bottle for the first half of 2002. About as good as the Dow Jones, eh?

And if you had put $10,000 into those three wines in equal amounts at average purchase prices back in 1998, your investment would be worth $13,072 today, (if you resisted the temptation to taste it).  Thirty plus percent appreciation on wine sure beats zero in the stock market.

- The 1997 Bordeaux vintage was not well received and was universally avoided. Many purchasers are sitting on stocks that they can't move, or have to sell at a serious loss. However, if you had gotten in early on the 1998 or 2000 vintage, you made very good money. 

All value quotes are courtesy of the Wine Market Journal. A subscription is heartily recommended as the best way to stay on top of the wine market.

Do you have any questions or comments about wine collecting or investing? E-Mail me at dave@brentwoodwine.com.  If you'd like to join our wine investment special interest group, drop an Email to specialinterestgroups@brentwoodwine.com.

To health and wealth!  In that order.

David Parker

You can read the October, 1998 Investment Trends article The Stock Market Sure is Scary here.

Click to read the first installment of Storing Wine.

You may also enjoy reading the first month's installments of Tasting Wine,  Entertaining with Wine and Wine-Friendly Cooking.  Click on what you'd like to see.