Where is the best place to buy Bordeaux Futures?

Where is the best place to buy Bordeaux Futures?

What happens if I buy the futures and then the company I bought them from goes out of business?

How much would I save on average by buying them now, if 2009 is a great year?

In the past there have been many instances of people saving lots of money by buying at first tranche. However, it is my (unprofessional, unstudied) opinion that as the Bordelais have been increasing prices (especially in "great" vintages) that they're no longer leaving money on the table. When you combine the potential bubble with the precarious state of the world economy, I'd personally not bet that most wines aren't available at similar prices after release.

Plus, as previously noted, it is taking a chance, period- if the retailer goes under, you are an unsecured creditor.

If you really are interested in buying futures, I'd say:
1) diversify. I'd rather have 5 retailers owing me 2 cases each than 1 owing 10.
2) I'd go with retailers with long history of coming through with futures in a timely manner. Top of the list would probably be Zachys, Sherry-Lehmann, PJs, Winex, WHWC, MacArthurs/Bassins, Calvert Woodley, maybe Wine Library, K&L. WineHouse, Post. JJ Buckley is newer, but I think size helps. I think Wine Connection and Grapes are sitting out this one. I'd be wary of retailers that have long delivery times, even if a history of coming through after time. But there are no guarantees, Sams had a very good rep.
3) Pay with credit card, and use card with best rep for coming through, and a good relationship.

In the past there have been many instances of people saving lots of money by buying at first tranche. However, it is my (unprofessional, unstudied) opinion that as the Bordelais have been increasing prices (especially in "great" vintages) that they're no longer leaving money on the table. When you combine the potential bubble with the precarious state of the world economy, I'd personally not bet that most wines aren't available at similar prices after release.

Plus, as previously noted, it is taking a chance, period- if the retailer goes under, you are an unsecured creditor.

If you really are interested in buying futures, I'd say:
1) diversify. I'd rather have 5 retailers owing me 2 cases each than 1 owing 10.
2) I'd go with retailers with long history of coming through with futures in a timely manner. Top of the list would probably be Zachys, Sherry-Lehmann, PJs, Winex, WHWC, MacArthurs/Bassins, Calvert Woodley, maybe Wine Library, K&L. WineHouse, Post. JJ Buckley is newer, but I think size helps. I think Wine Connection and Grapes are sitting out this one. I'd be wary of retailers that have long delivery times, even if a history of coming through after time. But there are no guarantees, Sams had a very good rep.
3) Pay with credit card, and use card with best rep for coming through, and a good relationship.

Thanks for those tips, I think you are right, I can probably put that money in the stock market and in 3 years or so and I would have enough to buy wine at regular price compared to if I bought it now at future price.

Abe,

There are lots of things that can go wrong with Bordeaux futures. All of the following can happen, and have happened:

Market prices can drop between the time you take on the futures contract and the time the wine is delivered. One of my local retailers offers an extensive portfolio of Bordeaux futures. They send out weekly email with an updated list of futures offerings. The prices on Suideraut and Rieussec Sauternes have actually dropped by a couple of hundred US$ a case over the past week.

There's a long chain of middlemen between the chateau in Bordeaux and you. Any one of them could go out of business and fail to deliver the wine to the next entity in the chain, ultimately resulting in non-delivery of your wine. Fraud and bankruptcy of firms involved in the futures supply chain have both happened.

The wine can be lost or damaged during shipment, resulting in non-delivery. About a decade ago a container ship from France sank off the Azores in the North Atlantic, taking with it about 1/4 of the Bordeaux shipped to fulfill US futures contracts for that vintage. Importers who hadn't bought insurance against that sort of thing were out really big bucks.

If you do decide to buy futures, always remember that there are only two parties to the contract: you and the wine retailer making the futures offer. Read the terms carefully, and ask what happens if for any reason the wine can't be delivered. The best retailers unconditionally guarantee their futures contracts: if their intended arrangements to deliver on the contracts go sour, they will go onto the open market to secure the wine, even if that means taking a loss, and at worst will offer a full refund of the money you put down. I'd steer clear of any retailer who isn't willing to do that.

Economically, what you're looking at is the money you're potentially saving and the risk you're taking (see above), versus what that money could earn if you invested it for three years.

Robert Parker wrote an excellent piece about futures investing many years ago in The Wine Advocate. His conclusion is that there are really only two good reasons to buy wine on a futures basis:

(1) To secure your portion of wines from small producers, where if you wait until after the wine is released you run the risk of not being able to buy it at all.

(2) To acquire wine in large-format bottles, such as magnums, double magnums, etc. Wineries tend to bottle wine in large format bottles only in very limited quantities, many times only if ordered in advance of the wine's release.

I think that's sage advice. Otherwise, wine futures are a highly speculative investment, just as are pork bellies or other agricultural futures.

-Paul W.

I am a buyer because 2009 is a birth year for my nephew and I want to try to get him the exact same estates that I purchased for his sister who was born in 2005. If not for those reasons I would be waiting it out. I have purchased Bdx futures through Bassins/MacArthur's and Calvert Woodley in the past and have never had a problem. I plan to use Bassins for this years purchase unless they are not carrying everything I need and will then get the rest from Calvert Woodley.

In the past, I saved a lot of money buying futures. Even lower tier wines would often be released 20%-30% higher. Second and third growth could soemtimes double in price by release. As othes have said, I don't see that happening these days with the already high prices being placed on futures and the overall surplus of wine. Not saying that release prices will be less than futures prices but I don't see the same appreciation potential as in past vintages and no reason to tie up ones funds for 2+ years if there is no substantial savings to be had.

I swear never to let Calvert-Woodley off the hook that easily. They DO have a history of not delivering and refusing to go open market to make their customers whole. Caveat...

I swear never to let Calvert-Woodley off the hook that easily. They DO have a history of not delivering and refusing to go open market to make their customers whole. Caveat...

Honestly this is the first that I can recall of anyone having an issue with Calvert-Woodley. My experiences as well as my brothers have all been positive but I will also state that they are not great in number. I do most of my major purchases through Bassins and lots of everyday shopping more local so Calvert-Woodley becomes a backup/rarely used alternative.

Brian,

That falls into one of Robert Parker's reasons for buying on a futures basis--you want to assure that you will be able to secure the wine.

Regarding prices: another factor is the current dicey state of the euro. Even if prices hold steady in Europe, they may drop significantly over the current futures offerings in US$ if the dollar continues to strengthen against the euro. It will be interesting to see how things play out.

-Paul W.

What Paul and Dale said. Due diligence now will save you a lot of stress later.