Is global uncertainty driving investors to drink, or is something else behind the recent spike in prices?
Fine wine prices are soaring once again. After five years of declines, prices reached their highest levels since October 2011 “on speculation that equities near record highs are poised to drop.”
The Live-ex 100 Benchmark Fine Wine Index has gained in each of the past 14 months, its longest winning streak since June 2010. The gauge returned 25 percent last year, beating the 19 percent made on the FTSE 100 Index of the largest companies on the London Stock Exchange. The wine index has room to rally another 18 percent before hitting its mid-2011 peak …
The last soar in prices occurred in 2009 and lasted through mid-2011, coinciding with the uncertainty that surrounded the financial crisis and “great recession.” Wine, like gold, is viewed as a safer investment during turbulent times (though, ironically, it is less liquid).
U.S. stocks fell from record highs on Thursday, with Dow Jones Industrial Index snapping its longest win streak since September 2013. Gold is heading for its seventh weekly gain in eight after prices for the metal last week hit their highest levels since November.
But something else may also be impacting prices.
The 2009 wine boom paired with the rise of Indonesian wine investor Rudy Kurniawan. In the 2000s, Kurniawan began buying up much of the fine wine market and reselling it at inflated prices. Businessman Bill Koch sued Kirniawan in 2009 for wine fraud, and in 2012 he was arrested in an FBI sting.
In March 2012 they raided Kurniawan’s house in Arcadia, California. They found a fully equipped counterfeiting workshop, complete with corking tools, labels, empty bottles and extensive tasting notes. Kurniawan had been taking cheaper wines – though still better than you will find in your average off-licence – and putting them in more expensive bottles, or altering bottles to appear more valuable.
Thanks to the FBI and a private investigator hired by Koch, Kirniawan was sentenced to 10 years in prison, but it is estimated he may have flooded the fine wine market with as many as 10,000 counterfeit bottles still in circulation.
Now fully of aware of counterfeit warning signs, uncertainty among wine collectors appears to have finally subsided as prices have risen for 14 straight months.
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