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A Correction Might Help

James Laube
Posted: February 3, 2000

A Correction Might Help
By James Laube, senior editor

IT WAS A wild ride on Wall Street last week, as investors -- starting in the Far East and spreading west -- began to reexamine their outlook for the future and suddenly it didn't look so bright and cheery.

The market's abrupt downs and ups hardly amounted to anything more than a minor correction, but it did underscore investors' concerns about the market being overvalued.

Many wine lovers -- including myself -- know wine prices are too high, and most of us wouldn't mind a correction.

A 10 to 15 percent decline in prices for Bordeaux, or California Cabernet, would do wonders to stretch our holiday wine-buying dollars.

AT IT IS, the wine market seems capable of moving in only one direction the past few years -- upward -- and that makes it tough on consumers.

That the stock market correction began in the Far East was apropos, since buyers there have been the driving force behind the soaring prices for Bordeaux wine futures, especially from the 1996 vintage.

That Asian buyers -- who are new to wine -- seem willing to pay any amount to secure classified-growth Bordeaux has seriously inflated Bordeaux wine prices.

There are real parallels between what's happening with the wine market and world trade markets.

IT USED TO be that the U.S. market accounted for about 40 percent of Bordeaux wine sales, but that percentage has dropped to about 20 percent now, with the Far Eastern market picking up most of the slack.

Early reports from Bordeaux are that 1997 could be an excellent vintage, and that should have a positive impact and stabilizing influence on wine prices.

VINTNERS FROM BORDEAUX -- Margaux, Lafite, Mouton-Rothschild, Latour and Haut-Brion -- were ecstatic about the quality of their 1997 harvest and encouraging consumers at the New York Wine Experience to buy, buy, buy.

They're hoping that the new vintages -- after a string of ordinary vintages in 1991, 1992, 1993 and 1994 -- will make a furious rally and bring back the glory days of the 1980s, when there were five "vintages of the century" stacked up in one decade.

If 1997 is anywhere near the quality of 1995 or 1996, it should not only drive down Bordeaux prices but also give jitters to those who bought 1996 futures at record-high prices.

Buying wine futures is risky business as many Asian investors have now learned.

IF THEY PAID $100 to $200 a bottle for 1996 wine futures and 1997 ends up being a better year, there might be a big sell-off.

Meantime, if Asia's economy tightens, watch where the Bordelais focus their marketing energies next spring.

The message from Wall Street this past week is rather simple: All markets have a down side, so bear that in mind if you're thinking about speculating in fine wine.

This column, Unfiltered, Unfined, features the opinionated inside scoop on the latest and greatest in the world of wine, brought to you each Monday by a roster of Wine Spectator editors. This week we hear from senior editor James Laube. To read past Unfined, Unfiltered columns, go to the archives. And for an archive of Laube's columns, visit Laube on Wine.

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