1/2/11

Alright so I've been thinking about this for awhile and would like to hear what some of you monkeymen (and women...I guess) think about it. The price of a particular libation usually increases as it ages (obvious, I know but stay with me). How feasible would it be to buy a variety of physical, actual bottles of alcohol for speculative purposes? I've done some searches but have only found some lukewarm articles and comments on the issue so I was hoping to start a bit of a discussion about how one could go about doing this.(Posting links to better sources would be appreciated.) I'm not talking about a vice fund or anything like that. I mean physically buying bottles of XYZ and holding them for however long in the hopes that they appreciate in value. I know its been done but I'm hoping for some direction or comments about methods, etc.

PS Don't make liquidity jokes...its too easy.

Comments (29)

In reply to loki276
Best Response
1/2/11
loki276:
Matt the Tiger:
happypantsmcgee:
loki276:

imagine if it had fell during the report

Google translator couldn't help me with this...

LOL i think he was talking about the bottle during the CNBC report

yeah I was

also

Has anyone really been far even as decided to use even go want to do look more like?

You've got to be kidding me. I've been further even more decided to use even go need to do look more as anyone can. Can you really be far even as decided half as much to use go wish for that? My guess is that when one really been far even as decided once to use even go want, it is then that he has really been far even as decided to use even go want to do look more like. It's just common sense.

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1/2/11
1/2/11

I want to open a fund that invests in ferraris and mansions. I see classic ferraris selling for a lot, and real estate, despite the recent bursting bubble, has a good long-term track record. I think some art and furniture also appreciates over time, so I'll buy that too and put it in the houses. I will add wine to my list, per your post. I promise to be a good steward of the aforementioned assets ;)

Consultant to a Fortune 50 Company

In reply to olafenizer
1/2/11
olafenizer:

http://www.cnbc.com/id/15840232?play=1&video=16153...

Yes! Exactly but I want to buy the bottle earlier in the process, hold it, then unload it.

Sidenote: It would be fun to punch the dude with that insurance policy in the nose

If I had asked people what they wanted, they would have said faster horses - Henry Ford

1/2/11

you lost my focus forever when you combined "Charlie Sheen" with "100 women in hedge funds"

In reply to alexpasch
1/2/11
alexpasch:

I want to open a fund that invests in ferraris and mansions. I see classic ferraris selling for a lot, and real estate, despite the recent bursting bubble, has a good long-term track record. I think some art and furniture also appreciates over time, so I'll buy that too and put it in the houses. I will add wine to my list, per your post. I promise to be a good steward of the aforementioned assets ;)

Yes, Yes alex I get it. My question was more so how you would go about valuing stuff like that early on. I don't know its probably stupid (though it is being done to a certain extent already). Plus if it implodes, it would be mad easy to drown your sorrows.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to Midas Mulligan Magoo
1/2/11
Midas Mulligan Magoo:

you lost my focus forever when you combined "Charlie Sheen" with "100 women in hedge funds"

Damn, it was supposed to be Charlie Sheen in 100 women

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to happypantsmcgee
1/2/11
happypantsmcgee:
alexpasch:

I want to open a fund that invests in ferraris and mansions. I see classic ferraris selling for a lot, and real estate, despite the recent bursting bubble, has a good long-term track record. I think some art and furniture also appreciates over time, so I'll buy that too and put it in the houses. I will add wine to my list, per your post. I promise to be a good steward of the aforementioned assets ;)

Yes, Yes alex I get it. My question was more so how you would go about valuing stuff like that early on. I don't know its probably stupid (though it is being done to a certain extent already). Plus if it implodes, it would be mad easy to drown your sorrows.

You'd have to be an expert in valuing wines and speculating on them. You'd also have to have a place to store them, insurance, etc. Also, you are offering securities by creating a fund, so you would need a proper private placement (and all legal fees that entails), etc. The markets involved are also quite small, so you'd likely corner your own inventory, and if you have to redeem, would face liquidity problems (no pun intended). Institutions are loathe to invest in stuff like this, because it screams of fiduciary mismanagement (even when it isn't), so good luck raising capital from them. High net worth individuals invest in this stuff, but why would they pay you to do it when they can just do it themselves (or pay professional consultants every once in a while).

Basically, even if you did have a "$2.5M nose", it would be quite difficult; and without one, essentially impossible.

Consultant to a Fortune 50 Company

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1/2/11

I know of a PE shop that invests in horse farms and wine. They are out there, but the niche is very small.

Interesting idea though. Definitely not an efficient market with opportunity for mis-pricing.

1/2/11

First of all, there are Bordeaux futures, so if the vintage turns out to be an especially good one, you can flip it as soon as they're delivered. Of course the issue is, unless you're selling it directly to another collector, your wine dealer (or auctioneer) is going to take a decent spread.
Another option is to buy and hold. Issue with this is unless you're a well known collector, a purchaser can't really verify that you've stored it in a dark, vibration-free location at the correct temp.
Single Malts have risen in price substantially the past few years. Same issues as collecting wine.
Everything has been going up in price because the Chinese are buying so much of it. My advice is don't buy it to invest, and buy what you like to drink. Bordeaux first growths are now overpriced, there are definitely some very good third growths out there, reasonably priced (still not cheap). Also many California/Pac. NW wines are very good.

1/2/11

How about trying to speculate for the next Four Lokos? I'll work for 40k with unlimited research funding.

In reply to Im with Busey
1/2/11
Im with Busey:

How about trying to speculate for the next Four Lokos? I'll work for 40k with unlimited research funding.

Yea...when you research a potential Real Estate investment, do you live there? Didn't think so. Weak attempt at humor...Plus, could you imagine if someone had to decide whether or not to invest in Four Loko based on taste? Probably wouldn't have heard of it if they had.

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to happypantsmcgee
1/2/11
happypantsmcgee:
Im with Busey:

How about trying to speculate for the next Four Lokos? I'll work for 40k with unlimited research funding.

Yea...when you research a potential Real Estate investment, do you live there? Didn't think so. Weak attempt at humor...Plus, could you imagine if someone had to decide whether or not to invest in Four Loko based on taste? Probably wouldn't have heard of it if they had.

I apologize for offending you.

1/2/11

Liquidity is restricted and professionals need to be conselled often. Not recommended.

In reply to Im with Busey
1/2/11
Im with Busey:
happypantsmcgee:
Im with Busey:

How about trying to speculate for the next Four Lokos? I'll work for 40k with unlimited research funding.

Yea...when you research a potential Real Estate investment, do you live there? Didn't think so. Weak attempt at humor...Plus, could you imagine if someone had to decide whether or not to invest in Four Loko based on taste? Probably wouldn't have heard of it if they had.

I apologize for offending you.

Don't let it happen again..just kidding. SB for humility

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to happypantsmcgee
1/2/11
happypantsmcgee:
Im with Busey:
happypantsmcgee:
Im with Busey:

How about trying to speculate for the next Four Lokos? I'll work for 40k with unlimited research funding.

Yea...when you research a potential Real Estate investment, do you live there? Didn't think so. Weak attempt at humor...Plus, could you imagine if someone had to decide whether or not to invest in Four Loko based on taste? Probably wouldn't have heard of it if they had.

I apologize for offending you.

Don't let it happen again..just kidding. SB for humility

I was so close to taking the plunge into just becoming an outright troll, but you just reminded me that their can be non-douchers on this site.

1/2/11

imagine if it had fell during the report

In reply to loki276
1/2/11
loki276:

imagine if it had fell during the report

Google translator couldn't help me with this...

If I had asked people what they wanted, they would have said faster horses - Henry Ford

In reply to happypantsmcgee
1/2/11
happypantsmcgee:
loki276:

imagine if it had fell during the report

Google translator couldn't help me with this...

LOL i think he was talking about the bottle during the CNBC report

In reply to TNA
1/2/11
ANT:

I know of a PE shop that invests in horse farms and wine. They are out there, but the niche is very small.

Interesting idea though. Definitely not an efficient market with opportunity for mis-pricing.

probably due to the ability to evaluate CF to some extent. Is it like a smaller family money fund?

1/2/11

just buy some Bordeaux and auction it off in China.

there is at least one system where people can invest in a group of artists and earn returns on their artwork. it gives artists the initial investment they need to get off the ground and gives investors the opportunity to find a diamond in the rough without as much risk.

1/2/11
In reply to Matt the Tiger
1/2/11
Matt the Tiger:
happypantsmcgee:
loki276:

imagine if it had fell during the report

Google translator couldn't help me with this...

LOL i think he was talking about the bottle during the CNBC report

yeah I was

also

Has anyone really been far even as decided to use even go want to do look more like?

1/3/11

I feel this is a bad idea.

It seems you want to focus on buying and holding liquor over time, which is problematic because once you get to any non-trivial size, you are going to need proper storage, which isn't cheap, and shipping bottles of liquid anything isn't so cheap. Your holding periods are going to be very long, and if you want to become a fund and take other people's money, you are going to have real liquidity problems if you need to fund withdrawals. Selling off the stuff is going to be problematic in general... high end bottles like that usually get sold at auction, with the auction house taking a big piece.

A possibly better idea is to take advantage of potential inefficiencies in the wine market. I know some big wine people, and they have a large collection in the basement on the order of hundreds of bottles. They have no interest in adding to their collection any more, since they want to downsize their house and probably move to a warmer climate in the next few years, but they are still on a bunch of wine lists for CA wineries, some of which take years to get on, and those lists are often the only way to get special releases and vintages from a winery. They don't want to be taken off some of these lists, so they just flip the bottles after they get them. They can often turn a 20-30% profit instantly, and in some cases can double or triple their money. Of course this is only some of their bottles, the nice gimmick of a wine club from a producer standpoint is that you are required to buy a number of bottles that are chosen by the winery, and in a given shipment you will probably get one gem, 2-3 "standard" bottles, and then often get stuffed with a bottle or two of experimental (ie shit) varieties they made. Add in shifts in tastes (merlot and pink chardonnay was big in the 90's, ignored now, while napa cab's are all the rage, but I could see a shift towards sonoma pinot noirs in the next few years). There are lots of pitfalls.

1/3/11

French reds, single malts and yaks are the only liquors very likely to substantially appreciate.

In reply to ShreddiesBrah
1/3/11
Omoba De Jonz O:
loki276:
Matt the Tiger:
happypantsmcgee:
loki276:

imagine if it had fell during the report

Google translator couldn't help me with this...

LOL i think he was talking about the bottle during the CNBC report

yeah I was

also

Has anyone really been far even as decided to use even go want to do look more like?

You've got to be kidding me. I've been further even more decided to use even go need to do look more as anyone can. Can you really be far even as decided half as much to use go wish for that? My guess is that when one really been far even as decided once to use even go want, it is then that he has really been far even as decided to use even go want to do look more like. It's just common sense.

you have just been further even more decided to use even go need to do look more like in a most far even as decidedly awesome manner.
and so i have rewarded your decision to use even go want to do look more with a really been far even silver banana.

but back to topic, i see one serious problem with this, as has been mentioned already - liquidity and the size of the market (which is obviously one of the reasons for lack of liquidity but a factor in itself as well).

the only way i can see this working in some way is investing in the industry. buy a winery, distillery, or whatnot, manage the hell out of it, and reap the profits from the product or from selling it on.

=========================================
"... then, lobbest thou thy Holy Hand Grenade of Antioch towards thy foe, who, being naughty in My sight, shall snuff it."

1/3/11

To make any sort of 'real' money, you would have to focus on the very high-end. I'm talking Petrus and Romanee-Conti. Your exit could take a long time and would be in the form of an auction which depends heavily on current market conditions (not unlike PE evidently). The problem with buying your typical grand cru first growths is that they aren't that rare but if you're trying to trade size after a few years, bids are rare because the big buyers bought when the wine first hit the market. Your best bet is new, very high-end restaurants but that's a small market where connections are paramount. A buddy of mine was at a 3-star restaurant once where he got to visit the wine 'cave' and taste some Petrus. They had a bottle of some Bordeaux from 1799 as well that was absolutely priceless.

1/3/11

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1/4/11

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