When I was a kid, we collected baseball cards, but as I grew older, my taste in collectibles shifted to wine. Purchasing cards was a gamble since the cards were hidden behind packaging and a piece of bubble gum, but wines are a little less uncertain. Either I had enjoyed previous vintages or I liked the winemaker. Or, at the very least, I knew the variety or region where the grapes had been grown.
The goal of purchasing baseball cards was to collect entire teams or at least my favorite players and perhaps trade a few between friends. When it came to collecting wines, my hope was that they’d provide me and my loved ones enjoyment and give me a few bottles to store away to see how they might age.
How naive I was!
How foolish to waste my time and money “collecting” cards and wine. With the advantage of hindsight, I realize I could’ve instead joined those savvy few who were “investing” in the same items all the while.
Today, nearly everything that was once worthy of collecting—from baseball cards and comic books to Pokemon cards and wine—has transformed into possible investments. Heck, the market now seems to say, why stop there? Why not make anything and everything investment-worthy? With the push toward fractional homeownership, cryptocurrency, partial-company share purchases and other such offerings all gaining momentum, the entire future of commerce appears poised to do just that.
Under such an anything-as-a-possible-investment umbrella everything imaginable has the potential for generating future monetary gains.
This makes perfect sense to many. For the last 50 years, these folks have noticed that many venture capitalists (VCs) have made a fortune, having provided the early-stage funding for companies such as Apple, Google and Facebook. Under such a VC-type economic model, the goal is to find items, ideas, companies, people and concepts that might be more valuable tomorrow than they are today. They purchase shares — or fractions — of these items with the hope that they might be sold in the future at a profit.
Of course, there are those who call this type of investment strategy just another form of Las Vegas-style betting that lacks the guardrails of taste, class and refinement and is devoid of anything other than a profit motive. But, hey, a modern investor might say that some say tomato (long A) and others say tomato (short A). These people might point out that the goal of betting is to win and that these other characteristics (class, taste, etc.) are unrelated. Besides, they might point out, this form of betting/investing is fast becoming the dominant mode for anyone interested in successfully playing within the financial markets.
The California 50 index
In 2018, I wrote about a growing phenomenon. Five California wineries—Screaming Eagle, Opus One, Dominus, Harlan Estate and Ridge Monte Bello—had been newly added to Liv-ex’s “California 50” index, which tracked the combined value of 10 vintages of these five brands. Liv-ex—a London firm that tracks the fine-wine market—had historically focused on wines from France and Italy, where it tracked the fluctuation of a wine’s value on the secondary market.
My point at the time was to highlight that the California 50 index was off to a good start, nearly keeping up with the increases of prices seen in the Liv-ex Bordeaux 500 index.
Today, the list now includes many more California wine brands and according to a 2020 article by Vino Joy News, “Along with its growing market share and popularity, California wine prices have been increasing slowly and steadily. Since 2003, the average prices for leading California wines have risen 220% over the 18 years. In July 2021, the California 50 index broke its all-time high record by an increase of 8.7%. Predictably, Cabernet Sauvignon-based wines from Napa Valley account for the majority of trade. Average case prices of Napa’s leading estates soared over five years with Screaming Eagle (40.7%), Opus One (36.6%), Dominus (33%) and Harlan Estate (23.4%).” The less expensive, non-Napa-based Ridge Monte Bello saw even higher growth rates, recording a 76.6% price increase over five years.
Does a shift from collectors who are interested in consuming wine toward investors who are primarily interested in making money from the wine have any effect on the business of winemaking and selling? Of course, it does. How does a company intrigue and entice a VC-type firm to invest? Two ways—either market your product based on exclusivity (e.g., future appreciation) or pitch your product on the massive volume of present-day sales potential. Either way, one thing is certain: The days of the old-fashioned collector are waning if they’re not already gone.
