OCTOBER 2002 Newsletter: The prevailing market

Believe it or not that great Bordeaux Chateaux from legendary vintages can be much more expensive in the well known stores of New York and California, than in London. We will be offering a service to correct this anomaly shortly - watch this space!

At the end of September we have the latest forecasts from Merrill Lynch and UBS Warburg that the FT100 will be at 4500 by the end of 2002 and we started the year at 5217; this seems like a Hans Christian Anderson story as it is currently around the 3700! Take this, the jittery world stock markets and concern about a war with Iraq and it easy to realise why there is a lack of investor confidence in the financial institutions. Throw into the pot the relative debacles at WorldCom, Enron, Tyco and Railtrack and it is quite easy to see why investors are running for cover and diversifying their portfolios at an accelerating rate. One client remarked to me recently à la Michael Caine " Not many people know that when the New York stock market crashed in 1929 it did not recover to its previous level until 1954." I knew that it took quite some time, but not 25 years!!

The UK wine market is a little restrained with the previous factors in mind, although there have been good sales of the superb 2001 vintages from Germany and Southern Rhone. There is also the prospect of the 2001 Northern Rhone's which when selected carefully are also very good. The recent news from the 2002 vintage from Bordeaux has not been heartening. Bordeaux vintners are praying for fine weather in the build-up to harvest - after a worse-than average ripening season. There was a lot of coulure and millerandage (unformed flowers and fruit) this year. Rain and lack of sunshine throughout August have inhibited the ripening process. Some vineyards suffered as much as 110mm of rain in August, though in others only 50-60mm of rain was observed. Average rainfall in August is 30-40mm in a normal year. Lack of sunshine, too, has been a major setback. This year, just five days exceeded 30°C in August, as opposed to the average of 10 days. So all things being equal, after disease, under ripe fruit and swollen grapes from excess rainfall, at best another average vintage is in prospect. Sixty centimetres (24 inches) of water have fallen in just 12 hours in the same region as Châteauneuf-du-Pape. Daniel Brunier of Châteauneuf-du-Pape producer Domaine du Vieux Telegraphe said, "We've had 14 inches (35cm) of rain in two days, the vineyards are lakes, we haven't brought in a single grape yet. If it could be dry for two days, we might be able to pick the white grapes. But the dilution this year will be severe, obviously."

As a result of the storms in France, there will be a very serious retrospective look at previous vintages. For Bordeaux, that will be 2000, 1996, 1995, 1990, etc. We will have seen 2 years - 2001 and 2002 that are certainly not out of the top drawer, the truth be known - anything but! The problem is that stocks are low of the very best wines and prices are robust, and with a dearth of great wine for at least the next 2 years from Bordeaux, I feel that prices will just get higher. For example, Lynch Bages 2000 is available in the UK at around £585 per case. The 1989 and 1990 regularly sells for around the £1000 mark; the wine is of the same quality, in fact the 2000 vintage may even be better. The 2000 1st Growths are an even better bet, and it will not be long before they are shipped ex Bordeaux. However, be very careful, you are purchasing a promise to deliver, be wary, only buy from a well-respected source - this late in the en primeur cycle for the 2000's there can be many links in the supply chain, and all it takes is for one to fail and all you are left with is a piece of paper. There are many pitfalls for the unwary or the uninitiated, BE WARNED.
For you Rhone lovers (me too), fill your proverbial boots with 2001 Southern Rhone. However, please bear in mind that the best wines were made by properties that had vines with deep roots, there was a drought and it was only these vines that were able to access the deeply occurring moisture in the water table. So do your research or better still purchase through a broker or merchant who REALLY knows their stuff, there are very differing qualities of wine from 2001 Southern Rhone.

People who have purchased top class, investment quality wine during the past few years should feel very secure, in that the rest of the world for some time to come, are going to have to compete for what is out there already.

A gentleman contacted me recently to appraise his small collection of wine. It transpired that the cases were worth about £150 each, the problem was that he had paid about 9 times this a couple of years ago to a dubious wine supplier. Apparently, some thousands of "investors" were taken in by these people. There are a number of scoundrels out there, so if offered a deal, please check first. We all know what a washing machine or a can of baked beans costs, but the vast majority of the investing public do not know that Chateau Gloria 1994 is worth about £150 (trade price) and absolutely not the £1300 that he was charged. If you feel that you may have a similar problem, please do not hesitate in contacting me. As always take professional advice from people with a high degree of transparency.

I do love the following quote from John Ruskin (1819 - 1900)
These words may have been written well over 100 years ago, but they have as much relevance today as the day Mr Ruskin put "quill to parchment."

"It is unwise to pay too much, but it is worse to pay too little.
When you pay too much, you lose a little money ... that is all.
When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the things it was bought to do.
The common law of business balance prohibits paying a little and getting a lot... it cannot be done.
If you deal with the lowest bidder, it is well to add something for the risk you run.
And if you do that, you will have enough to pay for the something better!"

The words "Caveat emptor" spring to mind.

If you are looking for Fine Wine that is ready to drink, please consider the wines featured on the recommendations page, where you will be able to order quality wine at terrific prices supplied by some of the UK's finest wine merchants. To get the project off the ground I have chosen 5 wines that I think are great value and these are Dunbar Fine Wines Recommendations of the Month. The list may change during the month if a particular wine has sold out, or if there was little quantity to begin with. I want to see wine that I would want to drink, at a price that I think was remarkable value on the page, nothing less will do! You will be able to order quickly and safely. Let me know what you think and what you would like to see.

Whether you are a wine lover, an investor or indeed a bit of both - please do not delay. Interest rates are down and set to remain at historically low levels for the foreseeable future. Fine wine as part of a properly balanced portfolio of investment can be capable of offsetting troubled times in other financial areas, and the rewards are absolutely tax-free.

Call in to our website at http://dunbarfinewine.co.uk/investment.html to see for yourself how fine wine has historically been a first-class and consistent investment, when the wine is sourced from reliable suppliers and not some of the cowboys that have given our business problems in the past.

STOP PRESS: Click here for this month's selection of fine wines for purchase

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December 2001 Newsletter - click here
March 2002 Newsletter - click here
August 2002 Newsletter - click here