The Hidden Value of Wines and Cars!!

2015 was the setting for a mayor change in the luxury goods industry, as new technologies, digital advances, currencies, wealth, media & marketing channels prompted a gigantic power shift from brands to consumers, Baby Boomers to Millennials, traditional media to social, and West to East. This led to reductions in profitability and earnings in major fashion houses; Swiss watch makers and segments within the hospitality services.

Jewelry houses were also battered in general with their creations increasingly becoming rental over proprietary. Economic headwinds sent markets on a spin tail while investors cancelled many projects for lack of trust in the capacity of the world economic policy establishment to redress the situation. Except for India, BRIC countries seemed to befall victims of economic malaise. Bears chased the bulls away as the world welcomed the Chinese year of the Monkey which is expected the bring a bag full of surprises.

And as far as financial markets are concerned volatility continues to rule the days of main stock markets bringing daily surprises to exhausted traders. So where are investors seeking refuge this days??? The unexpected rainmakers in these daily storms are two unsuspected luxury goods items: Antique cars and wines.

Wines have long been a store of value particularly in war torn Europe. Indeed, wine production can be traced back 6,500 years. Bordeaux has been producing wine for two millennia and the UK has been Bordeaux’s largest export market for at least 900 years. The Luxury wine market is worth US$3 billion annually. Globalization broke luxury wine concentration in Europe and to spread it to North America, Japan, South East Asia and more recently to Latin America; China and Russia. 22 countries represent 75% of the trade. Hottest growing markets have recently been Hong Kong and China accounting for between 40 and 50% of the market.

And as inflation erosions value many investors have turned to wine to protect savings. The following are the most traded and stored wines worldwide, in 2014:

1. Domaine de la Romanée Conti ($8,9M)
2. Pétrus ($6,0M)
3. Lafite Rotchschild ($4,7M)
4. Latour ($4,2M)
5. Mouton Rothschild ($4,0M)
6. Cheval Blanc ($3,7M) (+85% over last year)
7. Château Margaux ($3,6M) (+57% over last year)
8. Haut Brion ($2,7M)
9. Henri Jayer ($1,9M)
10. Joseph Drouhin ($1,0M) (+545% over last year)

Luxury cars are also growingly becoming a savings device. The hobby of collecting classic cars has transitioned over recent decades as its’ enthusiast core has evolved from owning one vehicle to owning multiple vehicles. This has prompted  investors to enter the market and purchase collector vehicles as part of an alternative investment allocation.

Increasingly, individuals and institutions are acquiring classic automobiles with the express expectation of price appreciation. Of appeal to hobbyists, collectors and investors alike is the fact that these vehicles can be used and enjoyed. The prices of many high-end collector cars have made a massive leap in the past few years. Hagerty’s chart for German post-War cars in general, shows that the average values have nearly tripled since 2010:

This makes luxury collectible cars a better investment that the S&P and Nasdaq!!