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market report

Liv-ex is an electronic exchange for fine wine used by professional merchants and collectors. Market Report is part of a package of services offered to subscribers of Liv-ex, with subscriptions starting at £49.95 per year. Below is an 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, December 2009

Trading
Confidence in the fine wine market built steadily throughout 2009 and December rounded off the year on a high. Trading was up 20% on December 2008, with the exchange busy right through the festive period (and the surprise arrival of heavy snow in the UK). It was top-class Bordeaux that garnered the lion’s share of demand, with traders undoubtedly keeping one eye on the approaching Chinese New Year. December saw prices continue to climb, with the Liv-ex 100 Fine Wine Index moving up to 237, an increase of 0.9% on the month. The index finished the year up an impressive 15.7%. The best-performing Liv-ex index in 2009, however, was the Liv-ex Claret Chip (which tracks topscoring First Growths from the last 15 years); its rise of 19.8% being largely driven by strong gains for Lafite and Mouton. (See www.liv-ex.com for details or find the Liv-ex 100 on Bloomberg: see index code LIVX100.)


(more analysis in the full report)

Major Movers
The big names of Bordeaux are once again pushing to the front of the pack, with the 1998 vintage in particular putting in a strong performance (a subject we will come back to in next month’s report). Petrus 1995 makes an appearance for the second month in a row, and is now fast approaching its 2008 high. Lafite refuses to cede ground, however, with the uplift for the 1989 vintage a signal that the rapid price increases seen for the brand in the second half of 2009 look set to continue into the new year. Those on the downward slope are a far more eclectic bunch, with five different regions represented. A sign, perhaps, that the market remains relatively soft where the Far East isn’t playing.


(analysed in detail in full report)

Critical Corner: Robert Parker on Napa and Australia
The Wine Advocate finished 2009 with two large reports covering the New World. Robert Parker looked at the latest releases from the Napa Valley, while Jay Miller tasted through Australia’s latest offerings. Starting with the former, Parker claims that “2007 is no doubt the greatest vintage for Bordeaux varietals in Napa since 2001 and 2002”, and awards six wines from the vintage the full 100 points. The 2007s are not as “tannic, backward, or powerful as the 2001s”, nor as “exuberantly opulent and voluptuous” as the 2002s, but do possess a “freshness, delineation, and laser-like focus”. The 2006 vintage is described with less enthusiasm, mainly due to instances of green tannins. “Those that possess fully mature tannins are very successful, but tend to have massive structures and broodingly backward personalities.” On pricing, he states: “It seems to me there remain considerable stocks of unsold, high-end California wines that have yet to be dumped into the marketplace. We will continue to witness a correction in California wine prices, and the elimination of back stocks, especially for the very large wineries for at least another 12 months, possibly longer.” Over in Oz, Miller awards three different vintages of Chris Ringland’s Shiraz a perfect score (the only wines to achieve this). The latest release of Penfolds Grange, the 2004, pulled up just short with a 99. On pricing, Miller is pessimistic. As he says: “Many producers have taken across the board price cuts but between the market psychology and the reality of the economy, who will be buying their wines?” Below are all the wines that scored 100-points, along with selected others. (See erobertparker.com for the full reports and tasting notes).


Final thought — fine wine and the noughties, a wise investment?
Despite a slow start and a sharp correction towards the end, the last ten years can be considered extremely positive for fine wine investors. In the decade dubbed the noughties, prices for the top Bordeaux wines increased 178% (as tracked by the Liv-ex Fine Wine Investables Index). This strong rise hides a wide variation in performance between different wines, however – so what was the best performing wine of the decade? If we take the wines in the Liv-ex Fine Wine Investables as our basis (and limit ourselves to those wines available for purchase in December 1999) the clear winner is Lafite Rothschild 1982. Priced at £2,613 per case at the end of the 90s, it hit a price of £25,000 just ten years later; a return of 857% and a compound annual growth rate of close to 26%. Those who had held onto their money for a year and a half and bought Carruades de Lafite 2000 on release in July 2001 would have achieved a marginally better return of 888% (£200 to £1,975). Although the additional costs involved in storing multiple cases of Carruades (at up to £10 per case per year) make Lafite’s performance marginally superior if the same amount of capital is deployed. So how does the performance of Lafite 1982 compare to other assets? The best-performing equity on the London Stock Exchange (British American Tobacco) increased in price 454% over the same period, while gold prices were up 297%. Even Google’s IPO (which launched in mid 2004) fails to come up to the mark, having provided returns to its investors of just over 600%. Indeed, the only assets to have performed better appear to be a handful of emerging market equity funds.
(analysed in detail in full report)


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