Saturday, May 8, 2010

The Ultimate Liquid Investment

Another alternative investment which has gained popularity over the years, especially after the financial crisis and the ongoing sovereign debt crisis is fine wine investment.

There are 2 major rationales behind investing in fine wine are:
Firstly as an investment for future consumption, buying young wines at the initial release price, with the assumption that this when mature, would be much more expensive to buy and tastier to drink.
Secondly as a financial investment, buying wines with the sole intention of reselling later for a profit.

For investors who keep a cellar, both factors will influence investment. The overall demand for fine wine, which is produced in very small quantities, has increased enormously over the last several years. The demand is set to go up as more and more people join the millionaire club especially from emerging markets (the BRIC countries). The Liv-ex 100 Fine Wine Index has outperformed the FTSE 100, Dow Jones and other indexes over the last few years offering significant returns without the volatility of the stock market.

The essentials to wine investment are to focus on the top wines from the best vintages because only a small percentage of wines produced will increase in value over time. The second most important aspect is storage of wines under proper temperature control.

To be regarded as a good investment, a wine requires the following qualities:
A. It must be an instantly recognized brand with a long track record of quality and consistent high prices.
B. The wine must come from a great vintage.
C. The label must have strong consistent global demand.
D. The wine must have the ability to age and improve over a long period of time.

Bordeaux represents about 91% of the wine investment market and therefore should take the corresponding share (more than 90%) in any wine portfolio.

The disadvantage of wine investing is similar to that of gold investment and art investment i.e., there are no interest payment, dividend payments or rental incomes. Moreover, there are the costs of storage and selling which have to be factored in and these brings down the profitability.

Typically, a broker will work on a 10% margin while selling wine. Selling at auctions will also have consignor fees to be considered. These generally begin at a maximum of 10% depending on the quantity and quality of wine on offer.

Unlike in art, the amount of investment can be as little as £500 (approx INR 34,000) in a case of wine, although a minimum investment of £10,000 (approx INR 674,000) is considered optimal to create a more balanced portfolio so that the risk is spread at least across a few Chateaux and vintages.

There are quite a few wine investment companies and wine investment funds who accept a minimum of £10,000 (approx INR 674,000) for investment through them. One has to be careful about the charges when dealing with any such company as some of them charge as high as 25-30% upfront. Before choosing a investment company, the track record and charges are to be considered.

Wine should only be a small part of an investors total investment portfolio as a diversification ploy and is to be considered riskier than bonds, gold, equities.

Friday, May 7, 2010

Is The Future Upon Us

Until a few years ago, there were not many people who might have ever heard the December 21, 2012, prophecy based on the end of the Mayan Long calendar.

Who were the Mayans? Mayans are Meso-American civilization dating back to 2000 BC and they were known not only for the fully developed written language but also for their accurate astronomical and mathematical calculations.

The Mayan Long Count calendar lasts for 5125 years and ends on December 21, 2012. Although this may mean many things (including they just had to end the calendar at some date, so they ended on December 21, 2012), the most popular is the belief that the world will come to an end on December 21, 2012.

Although there is no explanation given how the end will come but since the long count calendar was made corresponding to some astronomical calculation it has lead to the belief that the end will be caused by some extraterrestrial phenomenon.

Some scholars and proponents of the December 21, 2012, theory believe the end will come via a large solar flare. This flare will come because the orbits of the planets in our solar system will be infiltrated by an outside orbiting planet that the Sumerians and the Babylonians referred to as Nibiru.

Another school of thought, however, believe that on December 21, 2012, a very rare planetary alignment will occur during the winter solstice. At this time our planetary system (including the sun) will align at a point that is known as the galactic equator. This alignment is so rare that it only happens every 25,000 years and this rare planetary alignment could signal a shift in the magnetic poles and thus cause total annihilation.

There are talks about some scientific experiments being tried where atom will split in a long tunnel and this may lead to a creation of black hole and everything might get over within a few seconds and this experiment, they say, may be completed on December 21, 2012.

Another prediction is of some giant meteor striking the earth on December 21, 2012, although there is no evidence of any meteor or asteroid that might come the Earth’s way within the next 2 years.

What does religious scriptures say

Prophecies of Armageddon: Matthew 24:29 says, "Immediately after the tribulation of those days shall the sun be darkened, and the moon shall not give her light, and the stars shall fall from heaven, and the powers of the heavens shall be shaken." These biblical verses might also refer to some extraterrestrial event, but then bible does not mention December 21, 2012, as the Armageddon Day.

In Hinduism, the world begins in Satya Yuga and ends at Kali Yuga and the cycle repeats (there are a total of 4 yugas). The accepted belief in Hinduism is that at the end of Kali Yuga, we will see total annihilation and creation will once again begin after destruction and a new Satya Yuga will start. Lord Krishna had said Kali Yuga will last for 5000 years and some “gurus” are predicting December 21, 2012, is the end of Kali Yuga.

For some of the people who ascribe to the December 21, 2012, theory, the volcano in Iceland emitting ash and the debt crisis involving sovereign countries and the riots arising out of them are early signs of things to come.

Although December 21, 2012, prophecy is a scary one, do we need to worry? Absolutely no. There were many other prophecies which went wrong and perhaps this one will pass too without an event. And, if indeed, this is true and the Earth does come to an end why should we worry about dying in any case we are mortals. Just lift up the glass and say cheers and ENJOY.