Chateau Brent

There's an interesting article in the latest print of The Economist titled Fluid logic - Here's the gist of it:

"A bottle of Chateau Petrus '82 can cost over $5,000, whereas the equivalent volume of crude oil sells for less than 50 cents. Wine experts usually explain price movements by supply-side factors such as the effects of the weather and age, but research by two economists at the IMF, finds that supply has only a small impact on prices.

Between 1998 and 2010 there was a correlation of over 90% between changes in oil and wine prices. Emerging economies have accounted for more than 100% of the increase in global oil demand since 2000, while oil consumption in rich countries has declined; likewise, rising incomes in emerging economies have spurred wine drinking, whereas consumption in Europe has fallen. China overtook Britain last year as the biggest export market for Bordeaux wines.

In the West, investing in fine wine instead of equities, bonds, or commodities has become something of a faddish way to diversify one's portfolio; but, if wine prices closely track traditional commodities such as oil, buying wine will not reduce overall risk. In contrast, much of the increased demand from Asia is for imbibing, not investment."

GB