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Fine Wine – Preserving Wealth in Uncertain Times

  • This is the second time in just over a decade that financial markets have melted down
  • In the current COVID-19 Coronavirus Crisis, Fine Wine is again providing great value preservation. Fine Wine has barely budged in price, whilst equities have collapsed more than 30%.
  • Smart investors are all considering allocating some capital to Fine Wine, an alternative asset class with excellent proven defensive characteristic and genuine intrinsic value.

For the second time in a little over ten years financial markets are melting down. Gut wrenching volatility is destroying ‘value’ across virtually all asset classes. Global equities are down over 30% and corporate bond spreads have blown out. Supposed ‘alternative’ assets like Bitcoin have been ineffective in protecting value.

Even formerly ‘safe haven’ assets like gold have failed to preserve wealth. Aside from US Treasuries, only assets with genuine intrinsic value are providing any wealth preserving characteristics right now. Fine wine is not a speculative asset; it is not levered and it not owned by panicking hedge funds.

Although the wine industry has been disrupted by the outbreak with numerous trade shows cancelled or postponed, this spring’s en primeur tastings called off and now with wineries closing their cellar doors and visitor centres, Fine Wine is continuing to hold up at present.

A report at the end of last week stated that global equities have taken a severe hit this past week as Covid-19 has continued to spread globally. With every small piece of fresh news adding to the uncertainty, finding calm waters has been challenge. But Fine Wine has been stable.

With a low correlation to equity markets, Fine Wine moves at a glacial pace and is generally influenced by two long term economic fundamentals – namely supply and demand.

Although prices have drifted over the first three months of the year due to the coronavirus outbreak and tariffs in the US, a trend carried over from the end of last year, there has, so far, been no evidence of panic selling by collectors. Indeed, long term buyers actually seem to be popping up to take advantage of lower prices on certain wines. There has been no panic selling, quite the contrary, many people have been buying a lot more due to this.

It comes as no surprise that many are using Fine Wine as an asset to hedge the risk of economic downturn so, if anything, due to the rise in buying in the market, predictions are that Fine Wine is going to go up over the next 12 months.

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