Friday, November 14, 2008

Even fine wine declines 

I had no idea that there was a fine wine index. Mostly it's a list of 100 very good French wines, over 90% Bordeaux.
It represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market and is calculated monthly. The majority of the index consists of Bordeaux wines � a reflection of the overall market � although wines from Burgundy, the Rhone, Champagne and Italy are also included.
Now, it turns out, you can even go long or short on the fine wine market via inTrade. (It so far has only one trade.) Liv-Ex comments:
Liv-ex�s cooperation with Intrade to create a cash settled futures market in fine wine is a ground breaking development. At a time of heightened uncertainty in the market it will give all participants including producers, merchants, wine funds and collectors an opportunity to hedge their exposure to the underlying market. It will also allow investors to benefit from changes in fine wine prices without having to take delivery of the goods, pay storage charges or worry about provenance.
That is, you can bet on the wine market without actually having to store the stuff. Alas, after a good run, fine wine prices are falling as are the prices of almost all commodities.

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Tuesday, June 24, 2008

More trade, more wine! 

My friend Omer Gokcekus is a very curious economist (and I mean that insofar as he plays in more areas of economics than I do, and that he joined me in an Indian restaurant in Yerevan, Armenia one night -- now that's curious!). He also writes interesting articles, but I don't think he sent me this one before:
Our findings show that globalization has benefited the American wine drinker. We find that there is an overall decrease in the real price of a shopping cart of all 100 wines from year to year. For instance, the real price (in 1988 prices) for the basket of the entire Top 100 list was $4,313 in 1988; $3,132 in 1993; $2,533 in 1999; and $2,421 in 2004. That is nearly a 44% decrease in prices from 1988 to 2004. At the same time, there was no significant change in the quality of the wines on the Top 100 list...

Our econometric analyses show that the decreasing wine price over the past 17 years can be explained by the loss of shares of the Old World countries: Replacing a French wine with a U.S. wine lowers the average real price by 1.0%; an Australian wine by 1.1%; and a wine from non-incumbent countries by 1.5%. To put it differently, replacing an Old World wine (French, Italian, etc.) with a New World wine (US, Australia etc.) lowers the average real price by 1%. Replacing an Old World wine with a New-New World wine (Chile, South Africa etc.) lowers the average real price by 2.5%. The increased presence of newcomers puts significant downward pressure on prices.
h/t: Marginal Revolution. His paper on corruption due in my book this fall will be a highlight.

UPDATE: #1 is a local cook at a number of places, most recently he's been cooking at a local bistro that wants to sell good wine and food. I was invited to stop for coffee yesterday and walked in instead on a wine salesman pouring some samples of his latest ideas. Wines from Spain and Australia -- one of the latter an incredible shiraz -- and only one Old World of the nine we sampled. (Nine, by the way, is too many, but that's another post.) How little time has passed since these wines were almost impossible to get.

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