It’s said history tends to repeat itself. In the world of finance, that’s often true. No matter how many times markets soar or plummet, we never seem to notice or remember the telltale indicators. Afterward, we lament how we should have seen it coming. No matter. After six or eight months, like clockwork, we forget again.
Last week, a report came out signaling inflation was returning. That makes sense. If workers who formerly made $9 an hour at a fast-food burger joint all of a sudden begin being paid $15 an hour, the cost of the burger they sell will soon rise from $3 to $6. When that happens, people will contend $15 isn’t enough to live on and the cycle repeats. It’s the pure definition of inflation.
When inflation gets too out-of-control, as it did in 1979/1980, people panic. At that time, investors turned to tangible investments such as gold, stamps, diamonds coins and such. In times of uncertainty, we humans seem to find financial solace in things we can touch.
In 1978, inflation hit 13.3 percent. By 1981, mortgage rates had skyrocketed to over 18 percent. The allure for tangible investments became insatiable.
In 1980, gold climbed to $850 an ounce (the equivalent of $3,100 today). Silver soared to $50 an ounce. The New York Securities firm Thompson-McKinnon formed a diamond trust in which people could buy shares. Rare books and Chinese porcelain flew off dealer’s shelves. Even seashells climbed to astronomical prices. The irony of the latter is that seashells are continually being created in the oceans....
Last week’s report from the Department of Labor reported a five percent jump in the Consumer Price Index (CPI) over the past 12 months. The forecasted inflation rate of 2.1 percent is now more than double that. With bonds paying barely one percent, people are again talking about alternate investments. Enter the hucksters and alarmists.
To the ultra-rich, alcohol is a popular investment. Those with extra cash have always purchased hard to find bottles of wine. POTUS Thomas Jefferson is known to have had an extensive wine cellar. A few bottles from his collection still exist and sell for astronomical sums.
For celebrities, in addition to buying and collecting rare vintages, some have taken to producing their own offerings. Matthew McConaughey is the name behind “Wild Turkey Longbranch Bourbon.” Bob Dylan is to thank for “Heaven’s Door” Whiskey and Jamie Foxx is attributed to “Brown Sugar Bourbon.”
The big draw is Tequila. Kendall Jenner, Justin Timberlake and George Clooney are all purveyors of their brands of Tequila. Who knows? One day they may become collectible. Pasión Azteca is among those brands that already are collectibles. It is currently priced at $3.5 million for one bottle. The price may not be a reflection of the spirit inside but to the container. The platinum and white-gold bottle is adorned with 6,400 diamonds.
Whatever the draw for vintage alcohol it all goes back to the admonition of every collectible – the assurance of owning the genuine article. Just ask wine connoisseurs who purchased rare and expensive bottles from a purveyor to the stars, Rudy Kurniawan. Rudy was the darling of the rare wine world until it was revealed he was selling counterfeit bottles filled with cheap wines.
His “sophisticated” buyers were humiliated because they professed how fabulous his “rare” wines were. Rudy eventually spent several years in prison and was deported. Still, the damage had been done.
It’s the same with so many sellers of gold and silver coins professing to offer “great deals” at “rock bottom prices.” Honestly, there is no such thing. Whatever the price of gold or silver, that is what honest dealers charge with a very small markup for profit. Moreover, honest dealers will have no problem if a buyer asks for their purchase to be authenticated by a third party.
Of course, if an old bottle of wine or spirits is a must for an investment, the most sensational would be the one found in 1867 when the grave of a Roman Nobleman buried in 325AD was uncovered. In the grave was a clear glass bottle containing wine from almost 1,700 years ago. Though wine is supposed to improve with age, the contents of this bottle turned more to resin. Still, for the true wine collector purists, that oldest bottle is worth a fortune. Oh, and it’s also guaranteed authentic.
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