Nice work if you can get it
As a former stockbroker I am constantly fascinated by the attention given to analysts’ forecasts. Analysts are paid an awful lot of money yet since the regulatory environment tightened up over the last few years, part of their skillset has been emasculated. To wit, that part which involved finding out what no-one else knows. The investigative journalist part. They are all now effectively working off the same script, and it is very hard, as a result, for them to be different.
Take a look, for example, at the Stoxx Europe 600 Index performance for 2015. 12 strategists were asked for their full year forecasts in January and the index has cruised through the lot of them to a rise of 17% and we aren’t even at the end of March yet. Cue an endless series of upgrades to forecasts. You really would expect your average gibbon to be able to do that. Having said that, the declines we’ve seen this week might induce them to revise down again before too long!
Yet occasionally someone offers something which catches the eye. It was the turn of HSBC last week, and not because of further miscreance on the Swiss front. No, they were writing about currencies.
APM clients will have read recently our observations regarding the US$. It has moved so strongly against the GBP in which our fine wine market is denominated, that in US$ terms fine wine is cheaper than it has been for some years. We have also highlighted the degree to which Euro weakness might favour a more sensible en primeur campaign this year.
Well good for David Bloom, say I, as author of this latest note. In it he offers a 5 point argument as to why the US$ is headed south, perhaps the most pertinent of which is that everyone is uniformly bullish about it. If EVERYONE is on the same bandwagon, by definition there are fewer people left to jump on, and this has a tendency to reverse the trend.
By contrast, as we all very well know, the fine wine bulls’ bandwagon is only just leaving the starting gate. There is endless scope for investors old and new to help themselves to the bargains that are currently available. Yet it is the way of markets that the majority only tend to clamber aboard when the wagon is well under way.
Let us briefly recap why you should not be left at the gate:
The market as represented by the Liv-ex 100 now seems to have cemented its bottoming last summer, with good rises across a range of wines.
Merchants’ stock levels are at multi year lows.
US$ based investors may be on the verge of compromising their fantastic opportunity. If David Bloom is right and the US$ declines from here, and we are right and the market is in the early stages of the next bull phase, they really aren’t going to be able to sit on their hands much longer. And there’s nothing like seeing an opportunity slip through your fingers for getting investors reaching for their chequebook.
There have been a series of upgrades from influential critics, and there is much excitement about Robert Parker’s re-tasting of the fabulous 2005 vintage this year.
The en primeur campaign has the chance to be the most sensibly priced for some years. If Chateau Latour’s 2003 offer is anything to go by, the producers might be heeding the clarion call for more common sense in respect of the 2014 vintage.
James Suckling has just offered up his thoughts on the 2014s. It isn’t a belter, but it is an improvement on 2011, 2012 and 2013. The combination of decent vintage and sensible pricing might just light the blue touch paper.
We will be going to Bordeaux ourselves next week to participate in the tasting extravaganza.
Any pearls of wisdom that we glean from the visit, you will be sure to hear about.