According to Professor Mahesh Kumar, and his dense Wine Investment for Portfolio Diversification, people who invest in wine don't all have butlers for alarm clocks. They don't all have different homes for different moods.
It's true that some wines have Bentley price tags. A few years ago, three bottles claiming to be the past property of Thomas Jefferson (the handwritten "Thom. J." on the label giving it the seal of authenticity) was auctioned off to a Florida millionaire for 500K. Their actual provenance is being determined in a NY court as I write. These sorts naturally get the headlines. So we, those who've never raised a paddle to a rapidly appreciating Monet, naturally think the whole indulgent scene is the domain of the moneyed set.
But ask Kumar and he'll tell you that people who invest in wine don't all have their phone numbers on congressional speed dials, and after reading his book, the parts that I could grasp, parts not requiring an advanced math degree, it not only makes sense, it exposes bagging six-figure bottles as merely big-game hunting.
By not assuming as a starting point the profitability of wine, Wine Investment for Portfolio Diversification is unique to the small population of wine investment books, like Sokolin's1987 Liquid Assets, and the new Keys to the Cellar (interesting but superficial buying and cellaring guides). Kumar first presents the arguments against wine investment (and there are plenty of these). Point-by-point he unravels them, with his Fine Wine 50 Index, a collection of a dozen blue-chip Bordeaux (the household names like Lafite, and Petrus) which, over a 21-year period, holds steady with the Dow and beat the FTSE 100 by several percentage points. This alone wouldn't make for much celebration, but taken in step with Kumar's assertion that wine prices aren't influenced by the same sort risk that affect stocks and bonds (recession, inflation, etc.), and are far less volatile, which makes fine wine "and other alternative investments" ideal diversifiers--for as much as a $50,000 per-year earner puts in his 401-K annually. That of course means he's not suggesting holding fine wine as a single asset class, but held as part of portfolio of tradition equities. Kumar also diagrams "relative value analysis." He says it's a "simple and effective indicator of which wines and vintages are under-or over-valued" that "maximizes returns by minimizing overexposure to specific labels." Seems useful enough. But simple? I couldn't tell you. Overexposure to six-inch-long math equations make my eyeballs vibrate.
Thus afflicted, the second half of the book was impenetrable. Kumar is after all a professor of finance. But it does purport to have in it calculations (like "relative value analysis") to help insure prudent purchasing, so I suggest gifting it to your financial advisor. Include a bottle to make it well rounded.
The first half was surprisingly fascinating; not what I was expecting from my experience with other wine investment/buying guides. Kumar unpacks how the alternative investment market interacts with the wider financial world--a brief education in economic and financial philosophy, and the kind of primer that engages the imagination.
The front matter includes an introduction by the iconic Michael Broadbent, a wonderful retrospective of Christie's (the British auction house for which he's director of wine) dealing in the old wine trade; and an interesting short preface by the publisher which attempts to come to terms with the "general anti-wine-investor vehemence" of wine critics.
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Wine Investment for Portfolio Diversification: How Collecting Fine Wines Can Yield Greater Returns Than Stocks and Bonds.
