Tag Archives: wine

The Crush Also Rises: On learning only Spain’s vineyard-plant exceed China’s

“Wine is the most civilized thing in the world.”  -— Ernest Hemingway, and if not, so what?

His text a Hemingway appreciation, “wine is the most civilized thing in the world,” Mike Sasges savours this week’s viticulture news. 

Sidewalks on a street in Turpan, western China, are shaded by pergolas with grape vines. Creative Commons via Wikipedia

Sidewalks on a street in the “grape valley” of Turpan, in western China, are shaded by pergolas with grape vines. Creative Commons via Wikipedia

By Michael Sasges 
May 1, 2015

Chiang was glad to see us, and shook hands and gave us good rooms looking out on the square, and then we washed and cleaned up and went downstairs to the dining room for lunch.

There are two dining rooms in Chiang’s inn. One is on the second floor and looks out on the square. The other is down one floor below the level of the square and has a door that opens on the back street that the grapes pass along when they are run through the streets early in the morning on their way to the press.

It is always cool in the downstairs dining room and we had a very good lunch. The first meal in China is always a shock, the egg rolls and barbecued pork and ginger beef and vegetable chop suey and house special chow mein, and the fortune cookies. You have to drink plenty of wine to get it all down.

Chiang is what the Spanish call an aficionado, one who is passionate about wine. All the good growers and wine-makers stayed at Chiang’s inn; that is, those with aficion stayed there. Some of them stayed once, perhaps, and then did not come back. The good ones came each year. On his desktop, in a folder he called aficionado, were the photographs of grape-growers and wine-makers Chiang had really believed in. Photographs of those who had been without aficion Chiang kept in another folder on his desktop. They often had the most flattering inscriptions. But they did not mean anything. One day Chiang put them all in the trash. He did not want them around.

That evening, for an hour after dinner, every one in town, all the good-looking girls, the officers from the garrison, all the fashionable people of the town, walked in the street on one side of the square while the café tables filled with the regular after-dinner crowd.

Chiang and Chiang’s friend, Li, were at one of the tables. Li makes wine, and it was not really the bad wine the critics said it was, although it was very poor wine.

They had their laptops open and were reading the dispatches from Paris and London about some pronouncements the other day from the International Vine and Wine Organization.

Last year, and for the first time, only Spain had more hectares of vineyard under cultivation than China. The Spanish number was more than one million hectares; the Chinese, 799,000. The French number was 792,000 hectares, making 2014 the first year the Chinese planted more vineyards than the French.

Those Chinese 799,000 hectares are double the year 2000 number, by the way.

Two years ago, and for the first time, the people of China drank more red wine than any other people in the world. The 1.865 billion bottles of red they put away in 2013 was more than double their consumption in 2008.

What happed? I asked. And if the East is Red, why?

Chiang took the first question. “The party wants China to be self-sufficient in all sectors, and viniculture is no exception.”

Li shared what he knew about the enthusiasm for red. The Chinese like the colour of red. Have a look here, old chap, he said, pointing to his laptop, read what people who should know know.

“Apart from its virtues with regard to health, which have been widely lauded as an alternative to the impact of excessive consumption of rice-based spirits, the popularity of red wine is largely due to the symbolic importance of its color,” an exhibition organizer called Vinexpo explained in a recent study displayed on Li’s screen.

“Red is a very positive hue in Chinese culture, associated with wealth, power and good luck. In business circles, these three values are fundamental. Red wine is therefore an obvious choice for business hospitality, where partners can drink to each others’ health.”

Li didn’t want me to leave his screen, wanted to me to see how the “subs” at the better English papers enjoyed the news from Paris about China’s vineyard plantings. “Zut alors! China now has bigger vineyards than France,” and “A bottle of Beijing, please: Is Chinese wine any good?” (The Telegraph), and “Rice wine? China’s thirst is for red wine,” (The Times) are vintage representatives.

I do not know what time I got to bed. I remember undressing, putting on a bathrobe, and standing out on the balcony. I knew I was quite drunk, and when I came in I put on the light over the head of the bed and started to read. I was reading a book by Turgenieff. Probably I read the same two pages over several times. It was one of the stories in “A Sportsman’s Sketches.” I had read it before, but it seemed quite new. The country became very clear and the feeling of pressure in my head seemed to loosen. I was very drunk and I did not want to shut my eyes because the room would go round and round. If I kept on reading that feeling would pass. Some time along toward daylight I went to sleep.

Copyright Michael Sasges 2015

References and further reading:

The English-language home page of the International Vine and Wine Organization is here: oiv.int

The French-language Wikipedia article on Chinese viticulture is rich in photographs: fr.wikipedia.org/wiki/Viticulture_en_Chine

Mike Sasges consulted “fre” ebook edition of The Sun Also Rises published on a website whose “host” is located in Beijing:  24grammata.com/wp-content/uploads/2013/06/Hemingway-TheSunAlsoRises-24grammata.pdf

 

China Surpasses France In Vineyards But Trails In Wine Production, by Niall McCarthy, Forbes: http://www.forbes.com/sites/niallmccarthy/2015/04/29/china-surpasses-france-in-vineyards-but-trails-in-wine-production-infographic/

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Just drink it: wine is rarely worth an investment

 

Wine cellar in Chvalovice, near Znojmo, Chekoslovakia. Photo by Petr Novák, Wikipedia

Wine cellar in Chvalovice, near Znojmo, Czech Republic. Petr Novák, Wikipedia

 

By Karl Storchmann, New York University 
January, 2015

Investing in fine wines has become increasingly popular over the past few decades as many in the viticulture industry have promoted fermented grapes as a way to boost returns and diversify a portfolio. The rapid rise in public interest has been accompanied by a growing body of economic literature. The evidence suggests it may not be wise to buy wine as investment instead of for drinking. Investing in common stocks yield higher returns in the long run – and is less risky.

As you might expect, the wine trade considers its product the ultimate asset. Industry insiders have argued that wine generates above-average returns, helps to diversify an investor’s portfolio (thus lowering its risk) and – if all fails – the owner can still drink it.

Zachy’s, a major New York wine retailer and wine auction house, for example, claims that auction prices of top Bordeaux wines have increased 25 per cent to 50 per cent annually in the past few years. And back in 1998, Peter Meltzer of the Wine Spectator, the world’s largest wine magazine, wrote that the wine market outpaced the Dow Jones Industrial Average throughout the 1990s.

A would-be investor should know that the majority of wines are not “investment-grade” – a financial term signifying relatively low risk – and will not benefit from being stored for more than two or three years. Experienced wine investors concentrate on only the finest growths from Bordeaux and Burgundy and selected wines from California.

Even among fine wines, the data on investing aren’t favorable. One of the first economic analyses that looked at the rate of return for storing wine over a period of time was conducted in the late 1970s by William Krasker. Drawing on 137 observations of red Bordeaux and California Cabernet Sauvignon from 1973 to 1977, he found that the return for holding such wine was not much better than that of risk-free US Treasury bills – which typically offer the lowest yields in the market.

To explain some of that difference it’s worth noting that stocks often yield dividends, while wine only offers capital appreciation. In addition, investing in wine incurs storage and other costs.

The Liv-Ex Fine Wine 50 – comprised of the last ten vintages of the five Bordeaux first growths – performed better than stocks listed on the Dow Jones Industrial Average during the financial crisis but since then wine has slumped. Liv-Ex, Quandl

Elizabeth Jaeger of the University of Virginia, appeared to counter that poor performance with her own study, published in 1981. She reported that a wine portfolio similar to Krasker’s outperformed Treasury bills by 16.6 per cent. This large difference, however, mainly comes down to sampling different periods of time (1969-1977 in Jaeger’s study) and her use of substantially lower annual storage costs than Krasker’s $16.60 a case.

In a seminal study that focused on a single year, Princeton economist Orley Ashenfelter developed the “Bordeaux equation,” which enabled him to predict the quality of a wine vintage based on winter rainfall and growing-season temperatures in the famous French wine region of that name.

He found that the real return on holding a range of Bordeaux wines in 1991 was 2.4 per cent , a pittance compared with a 30 per cent gain in the Dow Jones Industrial Average. A similar study by Gregory Jones and me in 2001 on Bordeaux wines for specific chateaux were significantly below those for common stock.

Another study from that year, this one by Benjamin Burton and Joyce Jacobsen, analyzed the semi-annual returns from storing Bordeaux wines from 1986 to 1996, focusing on repeat sales of the same wine and comparing them with various financial assets.

They discovered that a portfolio of first growths – a designation considered among the best – returned 6.8 per cent over the period, barely better than the 5.8 per cent gain on Treasury bills but about half that of the Dow Jones benchmark index. Even a portfolio of William Sokolin’s first investment-grade wines didn’t do much better, returning an average of 9.4 per cent at auction. And that’s before including sales commissions, insurance and storage costs, which would make them even worse.

Not only does wine generally perform worse than equities, it’s also riskier. The standard deviation – a measure of variation when analyzing a variety of data points – of a wine portfolio consisting of grand cru selections is more than twice as high as that of the Dow Jones Industrial Average. Portfolios focused on first growths or the 1961 vintage exhibit an even larger degree of variability between the highs and the lows.

While wine may not be a great investment on its own, it can work as a sort of hedge, or way to diversify a portfolio of assets and provide some protection during market downturns. Researchers analyzed Bordeaux auction prices before the financial crisis hit in 2008 and found that the changes in the two assets, wine and equities, bore little or no correlation to one another and moved independently, suggesting wine would be a good way to hedge or offset stock market risks.

In fact, Philippe Masset and Jean-Philippe Weisskopf of the Ecole hôtelière de Lausanne studied the profitability of wine investments during the financial crisis, finding that adding them to a portfolio boosted returns – as well as risk. The study didn’t clarify whether this recent positive outlook on wine is a permanent phenomenon or was merely due to a bubble in prices, as suggested by NYU economist Boyan Jovanovic.

The latter explanation, though, has proven to be more accurate. Since June 2011, the Dow Jones Industrial Average has jumped more than 50 per cent , while fine wine prices have slumped more than 40 per cent, according to the London International Vintners Exchange Fine Wine 50 Index.

So this New Year’s might be a good time to dust off that Bordeaux you’ve been holding onto and enjoy it with your loved ones. Don’t buy another one in order to make money on it.

Creative Commons

The Conversation

This article was originally published on The Conversation. Read the original article.

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