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Liv-Ex Market Report
by Liv-ex.com, August 2007
As a result of a painfully long-winded campaign this year, July proved to be a bigger month for en primeur than June on the exchange. This is unusual. Just as some in the trade were looking to take off for their summer holidays, out came the First Growths! As expected, they found favour in most quarters, but still en primeur trade only managed to squeeze above 30% of total turnover . the lowest level of any campaign since Liv-ex.s inception 7 years ago. Nevertheless, turnover on the exchange was up a robust 87% year-on-year. The Liv-ex 100 (see www.liv-ex.com for details) was up a relatively modest 1.8% in July, leaving the twelve-month gain at 54% (to find Liv-ex 100 on Bloomberg: see index code LIVX100). It is up 45% year to date.
While all five of the Firsts saw reasonable trade, it was Mouton that really set the pace, opening in the secondary market at £3300 and touching £3700. The rather more exotic le Pin and Lafleur also found a market, but Petrus was nowhere to be seen. In other regions the Rhone punched above its weight as a large parcel of the highly regarded Jaboulet Chapelle 2003 changed hands.
(more analysis in the full report)
The table below highlights some of the price movers for the month of July.
Critical Corner: Bordeaux 2004 comparisons
(analysed in detail in full report)
Wine Advocate (Issue 158, 165 & 171)
Now that the 2006 En Primeur campaign is over, it seems like an opportune time to take a look at what "might turn out to be the last reasonably priced vintage" (Robert Parker's Wine Advocate 171), namely the 2004 Bordeaux vintage. When the 2004s were released En Primeur, the market had stagnated, the wines were perceived as being of good but not outstanding quality and as a result the release prices were "affordable" and "realistic". Indeed, the campaign was a success for the traditional claret drinker who could buy elegant wines without too much extraction or power; but, at the time, it was not a vintage for the speculator. Featured Wines Mouton Rothschild 2006 It has been an age since Mouton Rothschild took the First Growth of the vintage mantel, and it was duly applauded for its efforts. There were traders on the bid even before the release and it didn.t take long for the market to sweep up offers at £3,300, £3,400 and £3,500, eventually nudging £3,700. It has now settled at a spread of £3,500-4,000. The wines had been tasted with mixed reactions at the En Primeur UGC tastings. As Parker noted in his subsequent review in June 2006: "in the 27 years I have been tasting Bordeaux, this may be the first time that the initial tastings for the wine press were held entirely too soon. I was much more favorably disposed toward many wines when I tasted them in 2006."
In the latest review of the Wine Advocate, issue 171, the following wines have been selected as "The Finest Wines of the Vintage":
Angelus Ausone Bellevue-Mondotte Lafite Rothschild Lafleur Latour Palmer Pavie Pavie-Decesse Le Pin
Since the wines were released in June 2005, Parker has reviewed them twice more . June 2006 and June 2007. The table below shows how a selection of the 2004 Bordeaux have been scored over the 3 reviews and their respective market prices at that time. We took prices 1-2 months following each of these reviews.
As the wine trade returns from its summer break, everyone is going to be wondering whether .sub prime. contagion is going to spread to the wine market. The fact that fine wine is not closely correlated to either stocks or bonds is fairly well documented . most recently by Mahesh Kumar in his book 'Wine Investment for Portfolio Diversification' . but fine wine is certainly not immune to dislocation in financial markets.
The last bull market in wine was brought down by the Asian financial crisis of 1997/8 and those highs were only recovered in 2005. Similarly the Oil crisis in 1972 put paid to a violent bull market during the 1960s. Michael Broadbent has shown that the opening price of Chateau Lafite increased from approximately 115 Francs per case for the 1959 vintage to nearly 730 Francs for the low quality 1969 vintage. By 1974 the same wines could be purchased at auction for a fraction of their previous highs before recovering strongly in the early 1980s.
Indeed, fine wine is most closely correlated to the prosperity of the world.s wealthiest consumers, which may partly explain why price changes in the wine market tend to lag behind equity markets. Overleaf we have compared the number of billionaires in the world (as calculated by Forbes magazine) to changes in the Liv-ex 100 Index. As the chart shows, membership of the 'billionaire club' has expanded from 243 to 946 since 2002 making the last 6 years an unprecedented period of wealth creation. Over the same period, the Liv-ex 100 Index is up by more than 150%, most of this increase has been since the middle of 2005, which corresponds with a marked increase in wealth. Some 572 new billionaires were created between Forbes. 2005 and 2007 lists - more than twice the total number in existence in 2001!
(more analysis in full report)
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Critical Corner: Bordeaux 2004 comparisons