As if there hasn’t been enough talk of bubbles recently, we thought we would draw your attention to Alternative Investments. Two Swiss economists, Philippe Masset and Jean-Philippe Weisskopf, analyzed the prices of wine in comparison to the Russell 3000 index (odd comparison) and found that wine would have had the highest return between the two during the last 13 years (the years of the study).
This is all very well, but what does it tell us? Well, for starters it tells us that if you have been a wine investor and have sold off your investment, you probably made money off of it. Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York has another takeaway, which he told Bloomberg:
“In a world where interest rates are zero and money is being printed around the world, there’s a demand for hard assets — whether it is wine, comic books or baseball cards — because they can protect the investor from that environment,”
So, if you read this correctly you just found another place to look for the next bubble: Alternative investments. To be fair, alternative investments have always been prime territory for bubbles. In essence bubbles occur in other industries when they are treated as alternative investments, so if an alternative investment becomes popular enough, you can expect to see a bubble. In other words, if this study catches on, more and more people may start buying wines. The richest will buy the best, but others will notice that second and third tier wines have appreciated as well. Therefore many will buy until it becomes a self-fulfilling prophecy: you know you can find buyers because they will want to sell to other buyers. This, then, will all come crashing down in a wine bubble.
Of course, we are far from bubble territory at the moment. We just wanted to give our readers plenty of advance notice as to what to look out for.
Find the original study here.
