Wine tastings: Everyone for themselves

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In theory, the wine tasting is a wine lover’s utopia; dozens of bottles of (potentially) great wine free for the taking. So when an invitation arrives on my doorstep asking if I’ll attend this tasting or that, turning it down would be a sign of insanity, surely?

Well, yes. And, well, no.

The decision to go to any wine tasting is often made under the assumption, and anticipation, of how good it is going to be. Endless tastes of wine! Fine Bordeaux, Burgundy and everything else! Every sip a winner!

And so along I go, effervescent with excitement.

Seldom, if ever, does the mind consider the reality of many big public tastings:  a room of punters packed in tighter than the Northern line at rush hour. The Lingering Larrys who hover over the bottles, preventing anyone else from receiving a sample. And then there is that inevitable crowd of people who arrived drenched in a fog of cologne.

So what do I do? As a newly anointed British citizen, I do what everyone else in my adopted home does: I tut and mutter under my breath.

I have learned, over time, that there is a critical mass for wine tastings. Too few people and it can be sparse and awkward, particularly if a proprietor keeps hovering over your left shoulder, curious to know what you think following every sip. Too many people and it can seem as though you’ve waited 10 minutes just for a thimble full of wine (the retailers Naked and Virgin spring to mind).

A wine tasting needs to be just the right size. One in which you can lose yourself in the crowd but not feel as though you’ve waited so long for a sip that when you return home you’ll find your children have grown up and left for university.

The reason I write about this is because there is one tasting that I’ve been meaning to write about for more than a month now. Back in September I found myself at the Berry Bros & Rudd Wine Club tasting, held — where else? — in the Long Room at Lord’s Cricket Ground. It was a warm evening, the room looked onto the pitch and the late-summer breeze could be felt through the open windows. It was a very Berry’s crowd, too, which meant that my Canadian twang and lack of red trousers almost certainly marked me as an outsider. But no matter.

The list of wines was generous — 24 in all — and the group was big but not heaving. Perfect.

A British wine critics recently said that there is no venue better for a wine tasting than Lord’s Cricket Ground. I would tend to agree, even if it means my journey home is slightly convoluted.

And so what of this tasting? Much to my long-suffering girlfriend’s chagrin, this was one where I wrote detailed notes for each wine. I loved the Old World white wines, from the Le Caillou Blanc de Chateau Talbot 2012 (grassy, light and floral with a hint of caramel) to  the Bianco dei Colli Della Toscana Comitale 2013 (bright flavours of lychee and passion fruit with wet stones).

Then there were the Old World reds, such as the Domaine Jean Fournier Marsannay Clos du Roy 2011 (brambly fruits with a great mid-palate and a long finish) that ticked nearly every box for a good pinot noir, or the Celler de Capcanes Cabrida Garnatxa Vinyes Velles 2009 (deep, dark, black fruits with notes of cedar and a broody complexity) that showed how much great wine can be found in Spain.

Perhaps the most interesting wine on tasting was Chile’s Bodegas RE Chardonnoir 2012. This is a white wine made from 60% chardonnay and 40% pinot noir that smells like a Champagne, giving off nutty aromas of yeast and biscuits as a result of spending two years on its lees, while the mouth is lush and full, offering subtle hints of oak and a well-rounded finish.

These were but a few of the two-dozen wines around the room. And even though I didn’t like everything I tried (the Santa Celina Torrontes 2011 and Mullineux Kloof Street Chenin Blanc 2013 both left me wanting), I walked away happy in the knowledge that I found at least six that I loved without having to partake in a rugby scrum to try them.

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Wine investing: Time out of the market

It’s time in the market that counts the most when trying to make a decent return on an investment, the experts say. This may very well work for equities and bonds, but when it comes to wine I’m inclined to say that not being in the market at all has been one of my best investment decisions to date.

If anything, I consider it redemption following my decision several years back to invest in a gold mining fund at a time when it was near its peak. One quickly learns the phrase ‘throwing good money after bad’ when faced with losses that exceed your age by a distressingly wide margin.

Considering that during my day job I’ve spent much of this week observing a bit of a meltdown (I’m sure I’ll eat my words over this) in the world’s financial markets, I decided that it might be fun to see how bad equity investors have fared compared to wine investors.

(Coincidentally, over at Sediment Blog there was also a feature on investing in wine this week, but you can rest assured that their piece is much more entertaining than mine and, mercifully, does not contain any charts.)

With my financial hat on, I decided to pull up some charts using data from Wine Owners and take a closer look at the situation.

The nifty chart below shows the performance of the S&P 500 (green line), FTSE 100 (orange line) and Wine Owners First Growth Index (blue line) in the three years to 4 October 2014 (the latest date for wine data). In terms of recent wine investment performance, it speaks volumes about how the market has responded to those over-inflated en primeur campaigns in recent years.

chart (2)Source: Wine Owners as at 10/10/2014

What we see here is a three-year loss in the region of 25% for investment-grade Bordeaux wine. This is in contrast to the approximate 18% gain for the FTSE 100 and 56% rise for the S&p 500.

I know where I’d rather have my cash socked away. And I know what I’d rather be doing with my wine: drinking it.

Of course, a little perspective does help with things and, as everyone knows, wine investment stretches beyond just three years. So here are the same indices over a five-year period.

chart (3)

 Source: Wine Owners as at 10/10/2014

Things still aren’t looking good for wine then.

See that little peak in the blue line? That looks eerily similar to the point at which I invested in that gold mining fund all those years ago. Lo, I have learned much of these many passing years.

But what if we looked at the data in a way that made it tell an entirely different story?

Thanks to the benefits of hindsight, we can all look back into the past and find a chart that will make us want to kick ourselves for not wagering everything on Lafite and Latour.

Like this chart, for example, which shows the performance of those same three indices between 31 January 2007 and 4 October 2014.

chart (4)

 Source: Wine Owners as at 10/10/2014

Thanks to its lower correlation to global markets during the financial crisis of 2008 (millionaires cut staff but not wine budgets, perhaps?) wine has grown by 110% compared to the rather weedy 5% for the FTSE 100 (not including the most recent meltdown) and the slightly more respectable 37.7% return for the S&P 500.

[EDIT: While wine had a ‘lower’ correlation to global markets, this does not mean it is not correlated. Indeed, a longer-term perspective of wine investment performance shows that wine is still correlated to global economic events and has experienced its own downturns during times of market pressure. Moreover, as an asset class it is not immune to peaks and troughs, and the value of wine can go down as well as up.]

So what does this tell us? Well, if you’re an equity investor who has been sweating bullets this week as markets around the world have dipped, rest assured that you’ve done better in the past few years than someone who invested in wine.

If you’re a wine investor lamenting your losses, hold in there and hope for the best. I’ll be sure not to tell you about how cheaply I’ve been buying 2010 Bordeaux lately.