Dr Vino's wine blog

“I’ve bought so much art, so many guns, so many other things, that if somebody’s out to cheat me I want the son of a bitch to pay for it,” he told me, his color rising. “Also,” he said, smiling, “it’s a fun detective story.”

Indeed it is. That was billionaire Bill Koch as quoted in the fantastic New Yorker story about potential fraud in the fine and rare auction market. The story surrounds Koch’s four bottles of 1787 Lafitte (sic) allegedly from the cellar of Thomas Jefferson. He acquired them for $500,000 total and, upon learning that their origins could not be verified, he has now spent $1 million in investigative and legal action.

Great stuff–consider the article by Patrick Radden Keefe an absolute must read. It’s got a great cast of characters ranging from a dead president, the billionaire sheriff, the possibly gullible and definitely eager auctioneer, the gumshoe, the man with a hidden past, prone to excess going by the name of Hardy Rodenstock…All written in the classic, thorough, and engaging style of the New Yorker. Pass the popcorn and savor it like a glass of 45 Lafite–a real one.

There’s a fascinating section about just how easy it is to perpetrate fraud in high-end wine since many of the wines are never opened, instead simply displayed. And when they are opened, a lot of times those pulling the corks don’t know what a certain wine should taste like, thus they can easily be defrauded, or it is many years after purchase, and the statute of limitations has passed.

Oh yeah, the rest of the issue is “the Food Issue.” Might as well pick it up and read the whole thing over the holiday weekend.

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The recent turbulence on Wall Street has caused some pain: Bear Stearns is laying off 240 people, the easy money of the yen carry trade is drying up, and bonuses are rumored to be only 25 percent of what they were last year if the year ended today.

How does this affect the auction market for collectibles? Billionaire Eli Broad recently told Bloomberg that he thinks prices will decline for the high-end art market. As the fall auction season kicks into high gear, auctioneers must be wondering if the same fate awaits them for wine.

I think not for three reasons. First, there’s gotta be a pretty limited number of people who would pay $100 million for Damien Hirst’s diamond skull, while fifty cases of 1982 Lafite can be broken down to 50 different buyers if need be. Even 25 percent of last year’s bonus still buys a lot of wine. Ferrari? Maybe that gets the ax, but wine stays.

Size matters too: total US wine auction sales last year were $162 million, strong growth year over year, but at the rate of a skull, that doesn’t even add up to an entire diamond encrusted skeleton should Hirst ever do one of those. The $1.7 trillion hedge fund industry may be down, but it’s by no means out. And if you’re trading down from big ticket art, why not shift into lower-ticket but still investment-grade wine? There are a lot of new empty cellars in Greenwich, CT and beyond just waiting to be filled up.

Finally, it’s tangible. At the end of a day trading, going home and sitting in the 55 degree cellar and looking at the wine is fun. It’s there. It’s real, unlike many mortgage backed securities or derivatives thereof. And alluring. It might even make you want to uncork a bottle. As Napoleon is reputed to have said, “Champagne. In victory you deserve it; in defeat, you need it.”

What do you think about the market for collectible wines this fall? Have your say in the comments below.

Select wine auctions fall 2007: (after the jump) Read more…

Sabretts and Vega Sicilia
Wines from renowned collector Steve Verlin’s estate are being sold this weekend in Chicago at Hart Davis Hart. He sounds like he was quite a character based on this preview tasting in New York: “In keeping with Verlin’s quirky preferences, the Sabretts [hot dogs] were served at Monday’s dinner with the 1968 vintage of Spain’s most honored wine, Vega Sicilia Unico. There was also popcorn popped in truffle oil partnered with a classic champagne, Krug 1985, and Krispy Kreme doughnuts were washed down with Chateau d’Yquem 1976.” [NY Sun]

Bordeaux sighs in relief
After getting damned and slammed by Jancis Robinson, Bordeaux catches a break from Robert Parker for the 2006 vintage. He hails it as “superior to 2004.” The Medoc lives to see another day, St. Emilion can raise their head in public but Pomerol is the belle of the ball since the wines from there are “excellent across the board.” Dry white Bordeaux bounces back from irrelevancy as the Parkermeister joins J Ro in praising the wines this vintage. But RP only hands out three potential top scores, to Mouton Rothschild, La Mission Haut Brion, and Bellevue Mondotte of St. Emilion. Needless to say, none of those were on the Jancis short list.

Caution: fragile. May be fake
Have you ever objected when the sommelier at a fancy restaurant uncorks your wine and tests a sample himself? Then don’t buy wines from the 18th century, which now post-Rodenstock, are getting downright molested. Quote: “A combination of nuclear isotope analysis and gamma radiation and proton beam tests conducted by experts from the universities of Bordeaux and Manchester will be used to confirm the age of each glass bottle in the Antique Wine Company collection. The wine itself � extracted by hypodermic needle through the cork – will be subjected to molecular and chemical analysis.” [Decanter]

Cameron Hughes, in the house
Yesterday’s post about American negociant Cameron Hughes sparked a comment frenzy–including several by Cameron himself. He elaborates on the differences between his wines and private labels at grocery stores, his sales techniques, and even offers readers of this site 50 % off shipping using a discount code. See the comments.

The FBI may be targeting the big boys, but does Eric Asimov sound the death knell for winecommune.com and winebid.com?

Ordinary wine lovers, even those who buy a few cases of great wines each year, are unlikely to be affected by scammers, unless they buy old wines or buy their wines from secondary sources, like brokers or through Internet auctions. [NYT]

Also:

• Wine Cops, on the Case [Newsweek]
• Winemakers Deploy Chips, Codes to Battle Fake Bottles [Elin McCoy, Bloomberg]
• What You Need to Know When Buying Wine at Auction [John Mariani, Bloomberg]

The most frequent question I get via email from readers of this blog runs something like this: “I found _____ (wine name, vintage, quantity) in my ______ (Great-Aunt’s/grandmother’s/own) ____ (basement/attic/garage). How much is it worth?/Where can I sell it?/Is it drinking OK?”

I told this to a friend the other day and he said, “But are there any good names there? It might be worth a chance.” Then we devised a business idea for Caveat Emptor Wine Co., specializing in wines of unknown provenance. “The wines weren’t ours, but the risk is yours” could be the tag line. Needless to say, we have not contacted an an attorney to start the corporate filing yet.

But some other notable collectors have contacted their attorneys. And they’re not looking to start an LLC. They’re looking to stop fraud in wine auctions and have the wine’s seller or a broker accept responsibility. Needless to say, the main auction houses do a better job at assessing provenance than Caveat Emptor Wine Co. But how much they should stand behind their lots (and cases of wines sold through fine wine stores) is a question that is now getting a public airing before a grand jury in New York City.

The Wall Street Journal reports on page one that federal prosecutors have issued subpoenas to Christie’s, Zachys and some rare wine collectors in a probe into wine fraud at auction. In what might cool off the red-hot secondary market for fine wine sales, successful businessmen and wine collectors Russell Frye and William Koch are also taking action. Roll the tape:

Mr. Koch filed a civil suit last year in federal court in New York, alleging that a German wine merchant, Hardy Rodenstock, forged bottles of wine he claimed had belonged to Thomas Jefferson and had been discovered in a bricked-up cellar in Paris. Mr. Rodenstock also claimed to have other extremely rare wines, including a cache belonging to Czar Nicholas II of Russia, Mr. Koch alleged. Those allegations were detailed in September in a page-one story in The Wall Street Journal. In a Jan. 19 court motion, an attorney for Mr. Rodenstock denied the claims and deflected responsibility to the merchants who sold them directly to Mr. Koch.

“It’s not just Rodenstock,” Mr. Frye continued in the WSJ article. “Counterfeiting is a big problem, especially in the high end. These networks need to be exposed,” and merchants must be accountable, he said.

But fraud is just one problem, estimated at five percent in the WSJ story. So add to that, say, five percent corked, x percent improperly stored, y percent drunk too late–and small wonder the excellent old wines are just so…excellent!

Related:
“U.S. Investigates Counterfeiting Of Rare Wines” [WSJ, sub]
“WSJ: fund with wine” [Dr. V]
“Wine heist, part trois” [Dr. V]

tags: wine | wine collecting

We wine lovers generally think about how to turn our money into wine. But apparently there are those who think that wine can turn into money.

The Wall Street Journal had a big story on page B1 over the weekend about the new phenomenon of wine investing (no free link to the story, “Fine Wines No Longer Just Tempt Collectors”). In London, the Fine Wine Fund has been set up with the goal of investing in wine. They charge fees similar to a regular fund for alternate investments with a two percent annual management fee and 15 percent of the profits.

Is making money out of wine a panacea? Post your thoughts in the comments! One thing is for sure: while the story doesn’t mention the size of the Fine Wine Fund, if a lot of money sloshes into the relatively small market for investment-grade wine, prices will likely go to even more eye-popping levels. Let’s just hope that some corks get popped along the way too.

* * *

Steve Bachmann was quoted in the story talking about inefficiencies in the wine market. You can check out his thoughts on how to value wines on his blog, The Wine Collector. He’s also the CEO of Vinfolio, a fine wine retailer.

tags: wine | wine collecting

OK which would you find the most shocking?

A) A teetotaler puts his name and image on a wine label
B) That teetotaler would give said wine to his underlings on his birthday
C) A 1943 “schwarzer tafelwein” could be sold at auction last week
D) That bottle sold for almost $8,000

In case none stood out and you answered all of the above, then you’re right! The bottle of 1943 Fuhrerwein bearing the image of known teetotaler Adolf Hitler was originally given to Nazi officers on the occasion of the dictator’s birthday. It was sold at Plymouth Auction Rooms in England last week for £3,995 (including the auctioneer’s commission). No word on who was the buyer.

Sources:
“Hitler wine fetches £3,995 – but don’t mention its taste” [thisislondon.co.uk]
“Hitler’s wine up for auction” [decanter.com]

tags: wine | Hitler | Nazi wine

With incredible speed, Peter Meltzer, author of Keys to the Cellar: Strategies and Secrets of Wine Collecting replies to your questions. His answers follow in italics:

At 1:33 PM, January 29, 2007, Anonymous said…
Just this weekend I opened the first bottle of ‘90 Figeac purchased at an HDH auction last year. It was flawed. It tasted more cooked than corked. What, if any, are my chances of recourse from HDH, and should I try to return the rest of the lot? I have purchased from HDH both at auction and at retail and this is the first flawed bottle from them.
Rick
Chicago

At auction, in most instances you are buying “as is,” and if the wine is off, you’re stuck. However, it sounds as if you have a pre-existing relationship with HDH, so why not contact them and dispatch an “offending” bottle of the ’90 Figeac for them to sample. Auction houses are not generally in the business of making enemies, so HDH might make an exception. In the future, however, don’t wait a year before sampling your purchases. Try a bottle right away so that you can detect potential problems in a timely fashion.

At 2:15 PM, January 29, 2007, Anonymous said…
I’m just starting to think about collecting, and I don’t have a fancy cellar or anything in place yet, just a cool (but probably not constant-temperature) basement. Should I invest in a wine refrigerator before proceeding?

It all depends on your game plan. While a temperature and humidity-controlled storage unit is always preferable, if you plan to focus on wines for immediate consumption, you can probably get by with your existing basement space. (However, if you have any intention of selling your wines at auction, a climate-controlled facility is preferable to a passive one.) If you plan to lay down fine bottlings that require extended aging, you should definitely invest in a wine refrigerator. It’s always best to choose a unit with a capacity that exceeds your present stash so that you have room to expand. If you have a modest starter collection, however, you may want to consider a small unit like the Haier (whose 93-bottle unit costs about $1,000) for your better or best bottles.

At 2:16 PM, January 29, 2007, Kasie said…
How do I know when I wine has peaked? I have a ‘94 that recently went up in value, but does that mean it’s time to drink it?

Price is really not an issue here, as many wines (including oldies like 1982 classified Bordeaux, and select California bottlings from 1985 and 1987) continue to escalate in value but are not yet past peak. Vintage charts and “drink” recommendations are always helpful in determining a wine’s shelf life. Ultimately, you and your palate are the best judge. Periodically open a bottle that you think might be approaching maturity. If the color has turned to mahogany and you detect an earthy aroma and sweetish taste, it’s time to drink up.

At 2:18 PM, January 29, 2007, Anonymous said…
Maybe I’m a cynic, but it seems that people can get really competitive at auctions, and rational pricing can sometimes go by the wayside. Is there any systematic way to get real values at auction?

Yes. Probably the best recourse is to place realistic absentee or “order” bids instead of attending the auction in person. That way, you don’t risk getting swept up by auction fever. In addition, consult the Wine Spectator auction index (available online to website subscribers) which contains thousands of prices for frequently traded wines. It’s a powerful tool to cross-reference estimates against recently realized prices.

At 4:21 PM, January 29, 2007, Bruce said…
What is the best single source for tracking the progress of specific vintages of specific wines (most importantly Bordeaux) so that I know when to pull them out of the cellar? (I know, I know, depends on storage conditions, etc., but let’s assume they are “perfect”)

See above.

At 2:28 PM, January 30, 2007, Mike said…
I’m curious if you have a rule of thumb as to when a pre-auction tasting is a good value? Or perhaps how to make the most of such a tasting?

A pre-auction tasting is a wonderful opportunity to sample wines from diverse regions and vintages, many of which may be unfamiliar. It gives you a heads up on wines you may contemplate acquiring, without having to go to the expense of buying a bottle before the sale. Most auction houses list the roster of wines to be presented at the tasting (either in the catalog or online) so if you see something interesting, don’t hesitate to attend.

At 5:34 PM, January 30, 2007, Ben said…
Does the auction site matter? E.g., do you get better values at Chicago auctions vs. New York auctions?

It’s difficult to generalize, as prices will vary from lot to lot and location to location. Overall, Zachys has a large number of high winning bids – but it also has quite a number of low ones. Prices at Bonhams & Butterfields (San Francisco) can be lower than the Manhattan competition, and Hart Davis Hart may offer great value. But when HDH auctions a 20 year vertical of Château Lafleur this weekend (estimate $300,000-$400,000), don’t expect any bargains.

I have a case of 1989 Mouton in my basement (cool but passive storage conditions). How can I check the value? And what is the best way to sell it?
Thanks,
Kevin
Boston

According to the Wine Spectator second half 2006 auction index (printed bi-annually in the magazine and updated monthly for website subscribers) the average price for Mouton-Rothschild 1989 was $258 per bottle or $3,096 per case. Its high was $373 per bottle. At retail bottles range from $245-$489. If you have a friendly local wine merchant, see if he will make you an offer. Otherwise, contact one of the major commercial auction houses.

• Acker Merrall & Condit, (877) 225-3747
• Aulden Cellars-Sotheby’s (New York) , (212) 606-7050
• Bonhams & Butterfields, (415) 861-7500, ext. 307
• Edward Roberts International, (847) 295-8696
• Hart Davis Hart, (312) 482-9996
• Morrell & Co., (212) 307-4200
• NYWinesChristie’s (New York), (212) 463-8600
• Zachys (New York), (914) 448-3026
• Winebid.com

At 11:50 AM, January 31, 2007, Schliecker said…
I just bought a house and have a basement where the temp is between 60F and 65F with humitity between 30%-45% depending on the day. I have some wines I want to keep cellared for a while (not anything like an ‘82 Lafite mind you). What are your thoughts on those conditions. Good enough or would you go for a Vinotemp or something like it.
Thanks – Dave S. – Brooklyn, NY

These conditions are acceptable for short-term storage of good wines. However, have you any idea what the temperature rises to in the summer? The humidity level is on the low side.
(See second answer above for more details.)

tags: wine | wine collecting | peter meltzer

Peter Meltzer, author of Keys to the Cellar: Strategies and Secrets of Wine Collecting, joins us this week for a Q&A about wine collecting. In Keys to the Cellar, Meltzer draws on his twenty years as Wine Auction Correspondent for Wine Spectator to craft a thorough book about the ins and outs of collecting, storage and investing.

Meltzer will respond to your questions just as the auction market heats up for 2007. After a record year of $167 million worth of wine auctions last year in the US, the auction market kicks into gear with a big auction at Hart Davis Hart in Chicago this weekend. Next weekend, Sotheby’s and Morrell have auctions in NYC. In fact, almost every auction house has one in the next month or so.

So post your questions on auction strategy, wine cellars, and general wine collecting here in the comments. I’ll close the comments at 3PM Eastern on Wednesday. Peter Meltzer will then reply here on this blog later in the week.

UPDATE: here’s the link to his replies