Dr Vino’s wine blog

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In 1985 at Christie’s auction house in London, Kip Forbes–dispatched by his father Malcolm to bring home a bottle of 1787 Bordeaux on the Forbes private jet–finds surprising competition from a then-upstart publisher: Marvin Shanken of the fledgling Wine Spectator. A spectacular bidding war ensues over the bottle that may have belonged to Thomas Jefferson and one of them takes the bottle back to New York in an extra seat on the plane, strapped to a mattress (read the book to discover which one) after winning it for $156,000.

Such is a great scene near the beginning of the fantastic book Billionaire’s Vinegar: The Mystery of the World’s Most Expensive Bottle of Wine. Released last month, this page-turning book that reads like fiction has already reached the extended NYT bestseller’s list. It’s a wine book that has a lot of appeal beyond simply wine geeks since the book’s verve derives not from tasting notes but a mystery over whether the bottle that Shanken and Forbes bid on was real or fake. Read more…

A special section on Wine Investment hits newsstands in today’s Financial Times and the enlightened folks on the other side of the pond have put the full contents online. Huzzah!

Even if you aren’t that into wine as an investment, the section offers a lot of bang for the free buck. The lead article by Jancis Robinson is about Hong Kong as an emerging center for wine (as we discussed here with a focus on riesling) and I’d like to return later to some of the other issues raised in other pieces. For now, I thought the round-table with three American collectors, including the “Big Boy,” Rob Rosania (his Salon 1996 strategy we also already discussed), provided a quick observation worth noting.

Older vintages are woefully undervalued is one sentiment that the collectors bring up. I have felt the same way since I bought a beautifully mature 1971 Giacomo Conterno Barolo last year for $300, which is a mere fraction of other collectible wines upon release today.

Raymund Tuppatcsh, one of the collectors in the roundtable, says that’s going to change soon. “I think you are going to see a correction to the upside like you’ve never seen – a tripling or quadrupling of prices over the next 18-24 months.” Yikes. Time to buy more wines from our birth years now?

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Rob Rosania, a 38 year-old collector aka “Big Boy,” sold off around $5 million of his champagne and still wines at auction a couple of weeks ago. And yet he still remains one of the biggest collectors of champagne around.

This factoid from a recent Bloomberg article piqued my interest: Rosania owns 400 cases of the excellent champagne Salon 1996 (minus the five he sold at auction) out of a total of 5,000 produced. Poking around on the web revealed other sources saying that there were 8,000 cases produced. And these are six-bottle cases that we’re talking about. The champagne retails for $250 - $300 (search for the Salon 1996).

It’s a fascinating strategy for investing in wine. Rosania has somewhere between five and eight percent of this blue chip wine outstanding–and that percentage rises every time a cork of it is popped elsewhere. That’s probably a good percentage of the production to have to really benefit from a future price move yet not control the market entirely. It would be hard to take an equivalent percentage of a first growth Bordeaux wine since the production volumes are higher. All it takes is a big cellar and a cool $700k or so.

Even if the economy stagnates, wine such as this will probably always have buyers. Could it double in value in ten years? Even if it doesn’t Rosania can always have fun popping open the bottles of this fine wine with his saber.

I’ve tried a tasting-sized-pour of the 96 Salon and it is a brilliant champagne. In a wine investing video game, I might be tempted to adopt a similar strategy. If, in some fantasy world, you were going to take ten percent of a wine, which would it be?

Robert Parker goes to China. It doesn’t quite have the same geopolitical impact as Nixon goes to China, but the magnitude for the wine world may be similar as Parker heads there later this month for the first time. Jancis Robinson stopped by earlier this year too. And two big auction houses have resumed wine auctions in Hong Kong this spring after a seven year drought. The removal of the wine tax in Hong Kong has driven a “thirst for top-level wines” in the city “is growing at an exponential rate,” according an auctioneer quoted in Bloomberg.

Apparently Asian buyers are getting much more wine savvy. It wasn’t long ago that they only bought wines with 100 point Parker scores, perhaps a sign of slavish following more than connoisseurship.

But now I am wondering if the locals are waking up to the joys of pairing Riesling with the cuisine. And the quality of German Riesling just keeps getting better and better. Perhaps they now have confidence to venture away from Bordeaux and cult Cali cabs.

Actually, since I am really getting into the sublime pleasure of German Riesling, dry and off-dry, young and mature, the thought of demand from Asia is something of a doomsday scenario for me. The last thing I need is to have investors pile in and run up the price in yet another category of wine!

The pace of events in the best wine story of the year has just quickened. Earlier in the year, the Wall Street Journal had a page one story revealing the billionaire Bill Koch had assembled evidence of fraud in the auction market and was preparing to turn it over to the FBI. The New Yorker followed with a fascinating story of “The Jefferson Bottles,” which laid out even more details about the story, which included such characters as Koch, described as a billionaire sheriff trying to right wrongs, an elder statesman in the world of auctions who was either culpable or gullible, and a fraudster named Hardy Rodenstock who was known fro throwing elaborate parties and perhaps being a superb blender of old wines into fraudulent bottles.

Now, the WSJ goes back to the well and reported on p. A16 on yesterday that Bill Koch has sued Zachys and collector Eric Greenberg in federal court in New York. Koch bought $3.7 million from a Zachys auction on October 28, 2005 that was sourced to Greenberg’s cellar and now alleges that 11 of those bottles were fakes. Zachys declined to comment and Greenberg’s attorney called the allegations “absolutely false.”

But now Howard “wine under $20″ Goldberg rides in with the revelation on Decanter.com that it was Eric Greenberg’s cellar that was auctioned this past weekend by Acker, Merrall. Acker had previously not named the collector who was selling, instead referring to it as “the man with the golden cellar.” It fetched $15.6 million including commissions.

Related: “Has the wine auction market peaked?” [Dr. V]
See the official court papers via scribd.com

Just over thirty years ago, Chilean wines entered the world wine stage. As with the export trajectory of Japanese car manufacturers, Chilean wine makers started by exporting inexpensive but reliable offerings. And as with the Japanese car manufacturers, they eventually became so proficient at the low end that they began to target the high end and focus on quality.

Montes is one of the more recent quality producers, more Lexus than Toyota (although they do have reliable wines at $10). Started in 1987 as a partnership between Aurelio Montes and Douglas Murray, the company now makes wines in Argentina under the Kaiken brand and in Napa, from Rutherford and Coombsville, to be released in 2008.

At a recent tasting in New York City with Aurelio Montes, a key question for me was: can Chilean wines age? With eight vintages of the Alpha M (a cabernet-dominant blend, generally about $80 retail) in front of me dating back to 1997, I tasted through to find the answer to be yes but the record is short and mixed. I also found out about the mysterious phenomenon of the “annual rhythm.” Read more…

Is bigger better?

This perennial question came up during my class on Saturday at the University of Chicago. In this context, it related to bottle size, specifically, magnums.

The tasting had two magnums, one of Pierre Peters, “cuvee de reserve” Champagne and another of Ridge Monte Bello 2002. How sweet it is to organize tastings!

Anticipating the question of size, um, arising, I asked none other than the importer of the champagne, Terry Theise, via email beforehand. Here is his reply (reproduced with permission): Read more…

Has wine reached the investment status of gold? In Romania, the answer is yes. Even though Communism had a knack for turning gold into lead, the country’s wine from that era is now taking its place alongside ingots. Roll the tape from Bloomberg (thanks, reader Mike!):

This year, the National Bank of Romania will begin storing select vintages next to the gold bars in its Bucharest vaults. The first deposit will be 300 bottles of Grasa de Cotnari made in 1956, one of the last good years during communism.

It helps that the Romanian central bank Governor Mugur Isarescu is a wine maker, trying to give new life to cramposie, a 2,000-year-old grape that Ceausescu nearly extinguished. Wow, talk about an indigenous grape variety!

“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…