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BUSINESS: Fine Wine Monitor – Is 2005 worth it?
Smart money goes on back vintages as 2005 prices make mockery of fair value assessments
Bordeaux 2005 has lived up to its billing, contributing to new June trading records on the Exchange. Overall trade was up 188% month on month and 386% year on year. However, unlike most en primeur campaigns, vintages other than the current release were responsible for 40% of total activity. The newly re-weighted Liv-ex 100 (see www.liv-ex.com) increased a robust 9.5% for the month, bringing the 12-month gain to 52%.
One has to seriously wonder how long it will be before the records achieved for opening prices in this campaign will be surpassed. Indeed, the actual prices made a mockery of both our fair value analysis prior to the campaign and market expectations as measured in our survey after the trade tastings in April.
In our fair value analysis we looked at three of the best vintages across the board in the last 20 years – 2000, 1995 and 1990 – for the top 75 Bordeaux wines. We compared the current market prices of these wines and the Parker scores and took into account the opportunity cost (in this case the cost of cash at 5%) and then calculated a theoretical fair value for the 2005 wines. As things turned out, however, only 20% of wines were released below our fair value price. The best buys were at the lower end of the spectrum and in 2005 these wines might turn out to be the best investments too, because many wines below £300, made their best wine in a generation. In aggregate, however, the 75 top wines were released 57% above our estimate of fair value and the top wines came out double or even treble our number.
Indeed, for perhaps the first time since the 1997 vintage, there seems a genuine risk that the First Growths in 2005 (excepting perhaps Haut Brion) will turn out to be lousy investments. As the table shows below, Lafite 2005 was released ex-Bordeaux at E360, a 141% increase on 2003, the previous record.
Given these very high prices, it is not surprising that many of those who had put aside money to buy the 2005s chose to either trade down or look for value in the back vintages.
© db August 2006