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Premium Wine Market Crashes

With luxury spending in free fall, it is no surprise that the wine market has crashed. The Liv-ex 100 Fine Wine Index, which tracks the performance of 100 mostly premium Bordeaux wines less than 25 years old, has plunged by 22% since its 2007 high, and there is no support in sight. The market is coming off a spectacular run up which saw prices nearly triple in the previous five years. Gone missing from the market have been newly wealthy Chinese social climbers, hedge fund managers, and former corporate titans. Typical is Chesapeake Energy (NYSE:CHK) CEO Aubrey McClendon, who resorted to a distress sale of his multimillion dollar wine cellar after a highly leveraged bet in his own company’s shares went wrong. With the recession driving many wine wholesalers out of business, more inventory is being dumped on the market, driving prices lower. For the brave at heart there is the Cayman Islands based Vintage Wine Fund which invests in a portfolio of fine wines and charges hedge fund type 2%-20% fees with quarterly redemptions. The fund has posted a 26.8% annualized return since its launch in 2003. As for me, I am happier as a wine consumer than a wine investor. See you at Costco.