Sterling Wine Auctions Australia

Grange 1971: Worlds best Investment; Lawn Bowls: Worlds Most dangerous sport

The evergreen topic of wine investment is back in the headlines with clever folks suggesting that shares and bonds are passé.

Yes Penfolds Grange 1971 was released in 1976 at a retail price of $10 and today, in good condition, you can pocket over $600 a bottle at auction. Don’t worry about percentage returns, this is a huge story: Or is it?

All that glisters isn’t gold, (that’s another story) and things are not always as they seem.

Most dangerous sport? Solo cave diving? Base jumping? Freestyle rock climbing? Full contact cage fighting? Big game hunting?

No it’s Lawn Bowls. Of course its lawn bowls; more sports folks die playing lawn bowls than all other sports put together. The difference of course, is how they die; not being chewed up by a big cat or falling off the Matterhorn, they die of old age.

Most Lawn bowlers are pushing 80 years of age and they pop their clogs doing what they love!

Less than 10 years ago some very creditable research, would compare how a wide range of investments had performed over the year just past.

It must be time for this wonder to make a comeback. I must say I love indexes. Clever extrapolation compared investing in Art, houses, factories, banknotes, taxi plates, race horses, wine, gold, the stock market etc etc.

The fun started when this clever stuff gave the big lever to the winner on the latest lap.

Clear demonstration that investing in Banknotes or Horses or Art or Wine was the “right now” smart quick road to riches; because the research said so!

Believe it or not; Thoroughbred race horses were running hot as a preferred investment according to the reading of the “indexes” around 2003. Funny thing; anyone I know who has invested in a horse has lost their shirt!

I have been round the block a few more times than most and have lived through some remarkable days.

I will never forget in the genius Investment fund manger (British Coal Board Superannuation funds early 1990’s?) who decided that collectable wrist watches should be a large part of the portfolio.

Investment return numbers looked great for a few years and this guy was the toast of the investment community.

Sadly all the Rolexes, Patek Phillipes and Aedemars Piguet had started to swim together and our Investment manager friend was doing a “Bunker Hunt” and controlling supply and driving up prices. Of course, one day the clever Investment manager had to start selling up the portfolio to pay out and BANG!

There went the market. He flooded it and sadly; he and collectable wrist watch prices went down the toilet.

We hear all these amazing Penfolds Grange stories, how a 1951 sells for $50,000 a bottle and how the 1971 is the must have investment.

An educated guestimate places fewer than 40 bottles of 1951 Penfolds Grange in the worlds supply. If, all in perfect condition, and; If all went onto the market in a perfect demand preserving process, the total market is valued at about that of a smart capital city residential address. That is ONE single $4m house.

Let’s say there are 1000 bottles of 1971 grange floating around out there to be had.

Same story bring them to market, just right and we have a pot worth enough to go out and buy a nice house in an outer city dormitory suburb. That is one 4 plus 2 home 50km from the CBD.

Think about the guy investing in the wrist watches, I reckon more than a dozen bottles of 1971 Grange sold in Australia each month and the prices would crash.

Investing should be fun and every portfolio needs bling, get your rocks off with a classic Ferrari or a good old convertible MG TC or Jaguar XK140.

Looks like the Gold bugs may well have the last say on the subject.

Back in 1976 instead of buying Grange you bought good old Gold Bullion; you would have been paying around $US150 and ounce. (Aussie dollar got close to one to one parity with the green back way back then.)

The rest is history at $800 an ounce that’s better returns than just about anything legal and gold is so easy to store. The best feature, short of cashing out the national debt of a Banana Republic, (reminds me of Treasurer Keating attention seeking) you can sell gold by the truck load without moving the price one cent.

Investing in Wine does have its moments and Gold is easy to steal.

There are some simple “wine investment” tips that we at Sterling have been pushing since 1998. We will re-run that editorial below.

We all understand that investing in wine involves significant cool storage space and the “hobbiest” interest. The cost of holding wine for over five years can dent even the most substantial price rises.

Commercial cellarage is real money going out the door each month. At least you see the bills, doing it at home feels better, but power and setup costs still can be hefty.

At least a serious home wine cellar is a good asset and selling feature for a home.

The hobbiest thing is the key. If you love the Art market and follow the sales and the players you are well placed to understand the market recognizing bargains when they turn up. Same with race horses, coins, property and wine.

If you get a thrill from spotting the bargains in the local wine barn and backing the upcoming “top vintage” there is money to be made. More likely; less money to be lost.

Bargains are out there even today. One of our vendors, who can sniff out a bargain in a cyclone (the guy loves buying and collecting wine but doesn’t drink!) found a liquor retailer in Brisbane who has 1998 D”Arenberg Dead Arm in the store room marked at original retail.

Just last month our man was buying in Brisbane, selling at auction and, after costs, pocketing $20 a bottle!

Years gone by the Penfolds Bin range was a sure thing “investment”. 128, 28, 389, 407 and even 707 vintage in and out have shone on the auction block. We all love the 1996 Bin 389 story. Released in 1999? for just $20 a bottle (many retailers dumped it with discounts), today we are moving this timeless beauty for $60-80 a bottle into a very hungry market.

It wasn’t that long ago that Bin 707 1990 was retailing for under $30 a bottle. The 1994 was around $50. We all know that Bin 707 prices have skyrocketed with current releases retailing fro well over $150. This has dragged the back vintages up with them. The demand for 1998 Bin 707 is hot and prices are still on the move.

I have always advised against buying big ticket wine for re-sale. The theory being; that returns are usually lower, risks higher and availability strictly controlled.

If you are looking for a “capital neutral investment” and have limited storage space, heck its not Gold but a six pack of Grange doesn’t take up much space.

Penfolds Grange is the “Jack” out of the box. How on earth can a bottle of grape juice get so much attention and ramping? National Trust registers and Super Gago aside, there are some powerful forces behind a wine brand that can command SO MUCH attention and nutty prices.

The big tip from me is to sell the old BIG ticket collectable Granges. Any complete 1951+ sets and all or the nutty priced 1950’s and 1960’s wines in particular. There are changes coming and this bubble is so thin, it just can’t last.

I will give it a few years; max, and we will see big buck old, old Grange do a Seppelt Para Port implosion.

For those not old enough to remember the 1978 release of the 1878 Seppelt Para Port, it hit the market for over $3,000 a bottle. (yes $3,000 1978 dollars!)

This amazing story has gone badly for investors so far with current auction price around $1,000

The smart and sophisticated Mr Nathan Waks is just the man to push this story to a happy ending.

After all, as the new owner of the Seppelt Para repository, Nathan is following in Benno Seppelt’s visionary footsteps. Benno decided in 1877 to set aside, every following year, a barrel of every vintage port for release in 100 years.

My opinion Para Port is going to be like Gold, easy to store and very valuable. It’s the only business in whole wide world that has the ability to release a 100 year old vintage every year.

Take Care. All visionaries are best understood by the next generation. Nathan will make Para a world name and push mega buck prices (a perfect 100pt score from James Haliday and now Robert Parker doesn’t hurt)

The warning.. The vision splendid might not materialize in the next ten years

There is room for wine in any sensible investment portfolio.

Beware quick fixes and big retail margins.

The Grange story also needs to be viewed in context.

The Grange hype took on a life after the release of the great 1990 vintage Grange in 1995.

This great wine was recognized by US Wine Spectator magazine as the world’s best that year.

Funny stuff, as the ramping began all the old fossils who had been buying a dozen of Grange every year for ever; From the Club or their man at the local bottle-O; decided enough was enough and boycotted the 1990 because, at a retail of $100 a bottle, this was the first time Grange had cracked the three figures. And it was just too much, just not cricket!

1990 Grange went on to sell in 2009 for around $500 a bottle and 1991 and 1992 have also delivered some returns.

Hype? The 1992 was retailing for over $200 on release and the 1993 for over $250.

Loud and Clear all vintages of Penfolds Grange since 1992 maybe 1993, that were purchased with a retail margin have not yet delivered a positive return if sold in the secondary market.

Some of the buy and sell numbers are close, but you can’t ignore the cost of holding these bottles. For my math’s if you are not making $20 a year on a Grange (any expensive bottle) you are going backwards.

Its worth noting that the 1998 Grange is the current auction darling, and it’s in a very bright spot light.

We just can’t get enough. 1998 Grange is selling at auction today for around $500.

Don’t forget this wine was released in 2003 with MEGA hype and some greedy retailers relented and sold bottles to customers, shameless enough to beg, for up to $800 a bottle.

I reckon that most were sold between $450 and $550. Unless you were one of the lucky ones who queued at Woolies to buy a bottle at the run out 10% margin, you have lost money on this most iconic of recent Granges. (PS it’s supposed to drink pretty well!)

You have to hand it to Grange Meister Gago and his slick team of winemakers and wine spin masters;

The price just keeps on going up and up. Will the 2004, to be released in May 2009, crack the $700 a bottle mark?

If you were going down the small high value collection path, there are some names that should feature.

The predictables; Penfolds Grange, Henschke Hill of Grace, Jim Barry Armagh, Penfolds Bin 707, Moss Wood Cabernet Sauvignon, Mount Mary Quintet should all have a jersey.

Little left of field but hard to ignore, Greenock Creek Roennfeldt Road, Rockford Basket Press and the might Torbreck Run Rig should be given space.

My bet for price advance is Noon Reserve Shiraz and Cabernet.

The leaders of the rank and file (usually destined to be PM) D’Arenberg Dead Arm, Penfolds St Henri, Hardy Eileen Shiraz, Henschke Mount Edelstone, BVE E&E Black Pepper, Penfolds Bins 389 and 407 should be put on the bench.

If you are into backing jockeys, there are a couple of names in the wine race that are bigger than the horses.

Chris Ringland and Sparkie Marquis are very backable. They always end up in the winners circle.

The Mollydooker range is blitzing the US and the R range, is a must for those who want some Ringland magic without selling off a few children to buy a single bottle of Three Rivers SUPER shiraz.

We are in the magic business and the X or sex factor can’t be undervalued.

Recently I was alone in the cellar with a beautiful young lady consigning some stock.

When I happened across a leaky bottle of 1990 Henschke Hill of Grace (sadly not the first, looks like Prue and Steven were dudded by the cork supplier) I couldn’t resist asking this sweet young thing if she liked the worlds best perfumes?

Dabbing the ozzing sticky “Essence of Grace” with my finger I put it to her nose for a reaction. Her big brown doe eyes softened and moistened, she was truly amazed at just how good the scent was. It was a moving, life changing experience for her.

The legend grows!

Yes we have seen well cellared 1990 wines with cork problems, suppose they are approaching 20 years, but a quality cork should be good for more years.

More important, many trade buyers don’t want to stock wines older than 1995. Couldn’t believe an American expert in print last year, he was warning punters about very old wines. He had put on a tasting of 1996 American and Australian premium wines as an example!

Don’t hold too long. Legends like 1970 and 1982 Bordeaux are the stuff we all dream of (more Essence of Grace?) but who wants to see their 1982 Petrus come out of the cellar with a failed cork? It happens!

Running with the rich crowd is a dangerous business. Usually the fun makes up for the risks, but all fun comes at a cost.

Last year you had to have a holding of 2003 or 2005 Bordeaux or Burgundy to be taken seriously as an international wine collector.

WOW how those prices soared, a fearsome joy to witness.

We are talking about $US20-40,000 a case for the total loony stuff.

Well as the good folks at NASA will tell you, what goes up will come down, it’s just a matter of time.

Well the “satellite of love” has come back to earth with a mighty thud and what a mess. The ramped 2003 prices, yes, there was an index, (told you before how much I love indexes) came back by up to 50%. Maybe back to what they were really worth. Who knows?

Ramble over, time for the tin tacks

Auction prices are still very strong for the strong, in demand, collectables. As a rule, (a few exceptions like 1998 Penfolds Grange and 1998 Bin 707 excluded) prices are sitting at the bottom of ramped estimate ranges from 2008

Reminder. We did see in 2008 a period where back vintage collectable prices, driven by conspicuous consumption and gorgeous statistics like the 2003 Bordeaux index spiked and auction catalogue estimates were blown out to up to 40% of value ranges.

Wine investment is real.

Don’t treat it as an alternative to cash in the bank. Keep a 12 to 36 months unload period in mind. Selling quickly when the market is cool is Bad.

Buying the right stuff at the right price is the trick. (WOW Rocket science!)

Leonard Coen summed it up talking about the poker dealer who dreamed of dealing a card that was so high and wild the he would never need to deal another.

There is the Next Henschke Hill of Grace to be discovered out there. Get in the time machine and go back to 1992 when you could buy as much 1990 Hill of Grace you wanted for under $50 a bottle!

Problem. Finding the next big thing is tough and how much risk do you take?

Remember my Friend in Brisbane who sniffs bargains over the border? He is onto a winner, it takes time and expertise to find gems and them you need to hold them.

The current market presents a Bonanza for cashed up investors. It’s probablely a good idea to stay away from the Shares and property until the experts tell us that the good ship Economy has landed (soft or heavy? We are yet to see)

How about putting aside $10K or so to play the best game in town, Wine auctions!

Vested interest? Maybe. But I have been doing this for fifteen years and I know what an unforgiving lot of neo-liberalismist you all are.

Makes sense to me.

Robert Holmes a Court RIP made millions every other afternoon playing around with BHP shares, futures and what ever derivates of BHP were available way back then.

Get to know the market and spot bargains.

Look for “BHP wines”. Look for strong stories that will weather the economic storms on the horizon.

Stay away from the speckies and the roughies, go with top names and top vintages. I suggest you become an expert on the very best of 1996 and 1998. If you share my love of indexes do some modeling on Penfolds Bin 389!

The plan. Play with your $10K wine portfolio at the expense of all other markets until the storm clouds are well and truly out to sea. 2011?

This will give you a great, easily converted, investment cellar and save you a fortune. I want 10% of the savings. Remember me for saving you from squandering today’s good money on shares and “toxic assets”

I think we are taking about investment “Diversional Therapy”. Stay away from danger; play with wine and have some fun; meet some nice people.

The last gem to be shared. Get with the birth year wines.

Banged this drum before. Look at how the 1939 1949 1959 1969 1979 wines have jumped in price this year.

Buy big names in near perfect condition, which isn’t easy which wines that are over fifty years old.

Next year is the round numbers 1940 / 50 / 60 etc. Shoot for the next five years 0’s, 1’s, 2’s, 3’s, 4’s.

Think 2nd to fourth Growth Bordeaux, Good sauternes, Names from Porto and Aussies that have continuous lines. Seppelts Para and Hardys Show ports are perfect. Wynns Cabernet is another that has been around since the Ark and still available.

I want you all to read the 1998 editorial we wrote on wine investment. Here is a link http://www.sterlingwine.com.au/98news.php

Funny not much has changed

Sterling Wine Auctions & Exchange conduct monthly fine wine auctions. For dates and more information, here’s a link http://www.sterlingwine.com.au/calendar.php

March 2009