From the BBC:
Prices of some of the world’s most revered wines are falling sharply…he price of the 2005 vintage of Bordeaux’s famous Chateau Lafite Rothschild has dropped 25% since the summer.
Remember, folks, only buy the best vintages. ’82 and ’85 are great claret years. My view is that ’86 has been consistently over-valued so I tend to ignore it, leaving just those two for current drinking. The ’89 and ’90s will be ready soon. The best ’95s and ’96s will probably need ten years. Goodness only knows when the 2000s will be ready.
Tasting 100 August 12, 2008 at
I have been meaning for a while to blog about a post on VOX about wine pricing. To paraphrase heavily, Parker determines the en primeur price, but the price at maturity depends on how good the wine really is. Given that Parker isn’t a really great judge of how a wine will mature, and weather charts are better than him, there is an arb. The most obvious example I remember is the 86s, which were clearly overpriced in their youth, and now have faded to over-oaked oblivion while the 85s are still going strong.
I have two conjectures for today. The first is that Ambrose Evans-Pritchard needs to drink better Rioja. He presents a bearish blog in the Telegraph, backed by a second class Reserva. I would suggest at least a 904 GR for such musings, and ideally the Murrieta.
Secondly and rather more importantly, it can be suggested that the loss trajectory for European banks will be rather different from their American cousins. Suppose we believe Evans-Pritchard’s loss figures: $123bn for Eurozone banks compared to $144bn for the US, and ignore for a moment the rather important distinction between bank and non-bank risk holders. (The US has far more of the latter.) My guess would be that most of the US risk is fair value accounted. So the Americans have taken or are in the process of taking their losses. Most of the European risk is probably accural, so losses will depend on the bank’s projected loan loss reserves rather than current fair value. At very least that will spread them out over many years – remember RMBS is often 30 year paper. Moreover if actual experienced defaults are better than the current fair values predict then the losses will be lower.
One could argue that this cancer will eat away at the European banking system for many years, long after the Americans have taken their medicine and moved on. Or one could argue that right now it allows European banks to keep lending and hence to both protect Europe’s economy from the worst of the losses and make themselves some money to pay for the losses. But certainly the bearish case for Europe is less convincing than that for the U.S.