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market report

Liv-ex is an electronic exchange for fine wine used by professional merchants and collectors. Each month Liv-ex publishes a detailed Market Report analysing fine wine prices and trends in the marketplace. The Market Report is part of a package of data and services offered to subscribers of Liv-ex, with subscriptions starting at 39.95 per year.

Below is just a brief extract from the latest Market Report. For the full report and to access Liv-Ex's services, sign-up with them at www.liv-ex.com

Liv-Ex Market Report
by Liv-ex.com, February 2007

Trading
January typically takes a week or two to get going and even then the secondary market tends to play second fiddle to the release of the latest Burgundy vintage - in this case the much-admired 2005. This January, however, trading seemed to take its cue from the financial markets and buying was energetic. Trade for the month was up 117% on December and 120% year on year. The Liv-ex 100 (see www.liv-ex.com for details) set another new all time high with a 2.0% rise for the month, leaving the twelve-month gain at 48.5% (to find Liv-ex 100 on Bloomberg: see index code LIVX100 or to have a spread bet on the index go to www.spreadfair.com and then specials).

Breaking down January's trade by region, Bordeaux's market share remained below the 90% level for the second month in succession, with Burgundy recording its strongest month in a year. The Bordeaux vintage of the month was 1996 with 18.6% of the total market. While First Growths featured, it was activity in the Seconds that lead the way, suggesting a broadening of activity. Other vintages to feature were 1998 (10.6%), 1982 (7.4%) and 1986 (6.6%).


(more analysis and charts by region in the full report)

Major Movers
The table below highlights some of the price movers for the month of January. Jaboulet Chapelle 1989's surge had as much to do with rarity as anything else. But with the 100 point Jaboulet Chapelle 1990 trading at 3600, there is some sense to it. Other strong performers were to be found amongst the widely admired 2nd to 5th Growths. The poor performers were dominated by the currently unfashionable Sauternes and Italians.


(all featured wines are analysed in detail in full report)

Final Thought
The Liv-ex 500 Index has just posted its 21st monthly gain in a row and the bull is showing no signs of losing momentum. Last year making money in the market was simply about holding high scoring Bordeaux. This has been backed up by our analysis, which has shown that in Bordeaux the higher the score the bigger the return. This year, however, we suspect that the market is going to get a little more sophisticated and that investors will have to work a little harder to enjoy superior returns. Fine wine lends itself nicely to relative value analysis and below we have tried to identify some anomalies that might provide moneymaking opportunities.

We have picked three wines that all look undervalued relative to comparable peers, both vertically (i.e. relative to wines of similar quality from the same Chateau) and horizontally (i.e. relative to wines of similar quality from the same vintage). We have then measured how these wines have traded against each other over the last five to ten years to identify wines that have got out of whack with their historical average.

Top of our list of unloved and overlooked is the legendary Mouton Rothschild 1982, which has consistently scored 100 points from Robert Parker. He is convinced that the wine will still be drinking at the end of this century! Despite this the wine is not only trading at below its average premium relative to the 1986, but at a record low against Lafite 1982 (both 100 point wines from Parker). The slippage against Lafite 1982 is particularly interesting, because traditionally Mouton has always traded at a premium. Since January 1997, for example, the average premium has been 9% (and 15% since 1983), yet currently it is trading at close to a 40% discount!

Both Chateaux are currently victims of fashion. As we have discussed in this piece before, brand Lafite has gone from strength to strength over the last couple of years. The conventional wisdom on Mouton, however, is that it has struggled to produce wines to match the top First Growths in recent vintages. But quite why this should effect the price of the 1982, doesn't really wash. A case of Mouton 1945 magnums, for example, recently sold at auction in New York for US$345,000! Like the '45, the 1982 is one of the all time great wines from the estate. Lafite 1982 is currently offered at over 12,500 per case, Latour 1982 is 11k+, while Mouton is under 8,000. This is just plain stupid and is not sustainable. Logic dictates that Mouton 1982 is worth at least 10,000 per case and probably more.

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