Claret shoots of recovery?
It’s been an interesting few weeks in the Bordeaux market. After a full three years in the doldrums, allowing Burgundy, Tuscany and Napa et al to convincingly steal the limelight, we’ve finally witnessed some activity that tempts optimism.
Firstly, in late July, the falling Liv-ex 50, which tracks the First Growths, found some stability at 263; its lowest point since December ‘09. The bottom? Quite possibly: it bounced along perfectly flat for a full month, and has now entered growth, climbing over a percent in the last week alone.
Liv-Ex Fine Wine 50
Today’s news that the Liv-ex 100 – a broader yet still Bordeaux-centric index, and the one many pundits consider the benchmark – was up 0.92% in August (the 50 is updated daily, the 100 monthly) reinforces this trend.
Liv-Ex Fine Wine 100
Now, before we get too excited, the Liv-ex 100 teased us with the odd month of modest growth during the bear market, but each turned out to be a false dawn. That said, this time round there is further evidence seeping through – both in terms of data and anecdotal feedback from the trade – from which we might take some comfort.
Most notably, Liv-ex reported in late August that bids on the exchange had increased by £1m. This is not to be sniffed at. Liv-ex keep trading volumes very close to their chest, but even at the peak the total value of bids was about £7m. So what might one guess after such a protracted period of sloth? £4m? £5m? Whatever the figure, the increase is big news.
Trading platform Cavex also reported growth, with £1.1m of new positions placed, an increase in bidding activity of 35% and overall growth of 16.7% by value to £4.8 million.
Liv-ex themselves evidently feel pretty bullish. Their analysis suggests that the market goes to growth when the ratio of the total value of bids to offers is 50%. Today it sits at 49% having grown from 46% a week ago and just 35% the week before that.
The advice?
Let us be clear: the wake-up call of the last three years stands; polarised portfolios carry increased risk. One of the great advantages of the wine market over other asset classes is that it is broad and deep, with many producers in many regions offered over many vintages. In this respect, it is very much like a mini stock market whereas, say, gold is just gold.
Investors with well-balanced portfolios have been well insulated from the Bordeaux bear market, and enjoying decent growth. We will therefore continue to advocate the re-balancing of portfolios, but will adapt our advice on a case-by case (pun intended) basis as necessary in anticipation of increasing Bordeaux prices.
BUT…we will not be betting on the turn. That’s a very different thing and more money is lost in the investment universe by those trying to accurately pinpoint the top or the bottom than anywhere else.
And so we recommend you also bide your time just for the moment before increasing your exposure to Bordeaux. It’s too soon to be sure that the Bordeaux market is back to growth, but if it is it will doubtless come as a huge relief to investors heavily exposed. We are, of course, watching the market VERY closely and will keep you informed of progress.
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APM
02.09.14