finalanalysis

News that the LivEx 100 index is in the toilet presents me with an opportunity for schadenfreude:

Fine wine prices are at 18-month low, according to recent figures from Liv-ex.com. The Liv-ex 100 Fine Wine Index fell 12.4% in October with highest-end wines being hardest hit.

I find the entire idea of a trading index in wine to be pretty repugnant. Yes, wine is an agricultural commodity and other agricultural commodities are traded on futures indexes all the time. But whereas pork bellies and FCOG are fungible commodities, wine is not.

The value of wine is, in no small part, tied to its provenance. As such, I believe, the wineries should realize the bulk of the profit from sale of their wine. Traders like LivEx create scarcity in the wine market through speculation, driving up prices and realizing greater profit than the producers in many cases.

(Critical acclaim plays a large role in high prices too, but that’s another blog post.)

Plus wine is…wine! You’re supposed to drink it. You want to hoard something precious, buy gold. LivEx traders are the hedge fund managers of the wine world, and I have a hard time feeling sorry for them when half of the properties in Bordeaux are in bankruptcy.