To Save or Savor: The Rate of Return to Storing Wine
Published Jun 1, 1981 · E. Jaeger
Journal of Political Economy
101
Citations
17
Influential Citations
Abstract
For $28,000 one can buy a Jaguar XJ6, 308 shares of McDonnell Douglas stock, a one-tenth interest in an Oklahoma gas well, 4i years of undergraduate life at Stanford, or one bottle of Chateau Lafite, vintage 1806. "That's $1,166.67 an ounce. At this moment gold is worth only $275 an ounce, and you can't smell or drink it" (Saturday Review of Literature 1979, p. 38). Nine years ago, $70 could persuade a Paris restaurant to part with this same bottle of liquid gold (Goldwyn 1979, p. 4). But for balance admire the growth of a slightly more pedestrian vintage, a 1959 Beaulieu estate-bottled Cabernet. Today a case of it may be purchased for $1,200. For the more modest budget, $950 will buy a case of 1970 Beaulieu George Latour Private Reserve Cabernet. All this goes to show that wine, the right wine, in the last 10 years has provided the prudently daring investor with a spectacular return. The virtues of wine as a liquid asset have been tested recently by Krasker (1979). Krasker cannot reject a hypothesis that wine offers no extraordinary rate of return; the wine investor can expect no greater return than that which accrues to riskless assets. While Krasker finds the concept that an investment in wine outperforms Treasury bills in nominal return "incompatible with the way economists believe most assets are priced," his result seems counter to intuition. Wine as a subcategory of riskless assets seems contrary to wine's very nature. Wine is a living substance. Its maturation process extends well beyond the bottling day, lasting as long as 20-40 years in the case of some reds, while a few others refuse to retire at 65. But the proper age