SWAG: THE INDUSTRIES LATEST ACRONYM

By Joe Roseman

Following BRIC’s and CIVETs, Joe Roseman identifies the next acronym to hit the investment world as silver, wine, art and gold (SWAG) punch well above their weight.

A few years ago, Jim O’Neill of Goldman Sachs almost revolutionised the way many people thought about emerging markets.  He coined the term ‘BRICs’.  It is successful because it works on so many levels.

Investing in the BRICs has become an asset class of its own.

This got me thinking about asset classes generally and just what it is that differentiates one asset class from another.  And, once I got started thinking about that, I started to think about how specific asset classes had performed.  Some assets, in particular, stood out to me as ones that had performed especially well over the last decade or so, despite two very deep recessions.  Silver, Wine, Art and Gold. These assets have punched way above their weight.  The SWAGs.

A lawyer friend of mine called me up a few months ago to tell me about an article he had read.  Apparently, the best performing wine over the last 20 years when held for a five-year period was a 2004 Carruades de Lafite.  This wine had appreciated by 3000-4000% over the defined five-year holding period.  Starting at £4,500.  It does not even taste that nice.

Notwithstanding the peculiarities of Carruades de Lafite, fine wine has exhibited a very strong asset performance over the last decade.  The Liv-Ex fine wine index is up almost 300% over the decade.

The story for gold is well-known.  But whenever one can get in a dig against Gordon Brown, one should not pass up the opportunity.  From the low point of $250-300 a decade ago, where Gordon Brown decided to sell the UK’s holding of gold, gold has appreciated some 600%-700%.  Silver has put in a similar performance.

Art is a tougher asset to nail.  All-time records are being set at Christies and Sotheby’s for Picassos, Morres, Hepworths, Rodins and other such classic artists.  The more well-known and prestigious the piece of art, the greater the price appreciation appears to have been.  The Artprice Global Index takes an average, and shows that fine art as a whole has appreciated by 120% over the last decade.

Obviously, the nature of each asset has its own fabric and character, but they all share a similar characteristic.  Namely, notwithstanding two global recessions, a severe global banking crisis, a credit crunch and (generally speaking) highly volatile and mostly negative equity market performance, they have all appreciated quite sharply with a relatively limited volatility given the size of their appreciation.

The FTSE All-Share index, by comparison, stands almost at the same level as a decade ago.

If held within a portfolio, the SWAG assets have provided a tremendous boost to an otherwise lacklustre portfolio mix of equities and bonds.  And that is what got me thinking about a new type of asset calls.  OK, it not as intellectually rigorous as Jim O’Neill’s BRICs, but I believe there is some merit in thinking about allocating a portion of any portfolio to the SWAG grouping. Everyone needs some SWAG.

But what is it about the SWAGs that has allowed its investment performance to be so strong?  One way of looking at this question is to identify the common traits of each of these assets.  What do they all have in common?

1. They are all physical assets.
2. They all have longevity – Lafite will last for 50 to 100 years.
3. There is no incumbent debt associated with the asset.
4. They are transportable and relatively easy to store/hold.
5. There is scarcity – a finite supply.
6. There is no income stream – so no income tax liability.
7. Asset performance seems relatively uncorrelated to equity markets.
8. A sovereign default would not alter any of the above traits.

SWAGs, it seems, all carry a similar DNA.  I am a big believer in the idea that no asset class is too risky.  Risk is virtually all in the size of the allocation to an asset.

Given the scale of the price increases in SWAGs, it seems sensible to me to have them in a portfolio in one guise or another.  Gold and silver already have active ETFs.  There are several art funds that can be purchased and similarly one can invest in fine wine through specialist funds.  Each of these assets can be used in a financial or portfolio capacity and is open to the small investor.

I have read the views of many economists who tend to class SWAG-style assets as not ‘proper’ assets because they  have no income stream.  Such thinking is, actually, tremendously naïve.  To define an asset as needing an income stream fails to appreciate the very essence of an asset.

Similarly, many economists argue that assets such as SWAGs cannot be valued objectively because they have no income stream.  Well, again, I see that as naïve.  Analysts have no problem in valuing an equity that pays no dividend based on its P/E ratio.  Why can the SWAGs not be valued on a similar basis?  What is the P and what is the E, I hear the sceptical economist saying.  Well, the P is the price of the asset, and the E? Well, that is the global money supply.

As the global money supply rises and with real interest rates across the industrialised world negative, then the SWAGs get driven up in price.  The more money printing there is, then the more investors will look to protect and insulate their investments by allocating to assets that have SWAG qualities.

Learn more about how our sister company, Cellar Advisors, can assist with your portfolio by reading more here or contacting us at 314.667.5328

• April, 11 2012   |   Click here to Comment

Is your wine collection properly insured?  Marc Lazar discusses the importance of wine insurance, the best vendors and why he partnered with insurance broker Bliss & Glennon to create InsureYourWine.com.  Read the entire story at Barrons.com.

• April, 3 2012   |   Click here to Comment

A law effective in May will allow boutique wineries to ship directly into the Domaine New York facility.  This is great news for the wine collectors throughout the tri-state area!

Read more at winespectator.com

• March, 26 2012   |   Click here to Comment

We would love to have every wine collector store with us, but that isn’t always geographically or physically possible.  That said we’d like to bring awareness to topics that could be relevant to you: overcharging by your wine storage facility or your collection being held ‘hostage’!

Our goal is to help our clients with their wines whenever possible, and sometimes that means finding wine storage in locations where there are not Domaine Wine Storage facilities.  The bills we receive often shock us.  Luckily there are quality storage options in many markets, but also ones that will charge for every inbound or outgoing box, and every touch in between.

The latest example was from a prominent east coast facility that charged us:

• $8 per case per month for storage
• $4 per case for inbound delivery
• $4 again for removal

When deciding upon the correct wine storage facility for your collection, make sure to check the handling costs for wine entering or leaving.

Possibly more important are the terms on speed of delivery.  In this same transaction our wine was “held hostage” and we were told it could take up to 30 days to “close the account” and retrieve our wine.  Make sure that your storage provider can guarantee a pull within a reasonable time period.  Under normal circumstances this should be no more than 3-5 business days at the worst.

Contact us here or call 314.667.5328 for more questions about wine storage

• March, 7 2012   |   Click here to Comment

2012 DOMAINE WINE STORAGE NCAA MARCH MADNESS TOURNAMENT - WINNER TAKES ALL!!

Back by popular demand, you are invited to participate in the Domaine Wine Storage March Madness pool.  This year the contest will be split into two groups – Midwest or East Coast

ENTRY
1 – 750ml bottle of wine per entry, minimum $50 value(Per Wine Searcher low value; final determinations will be made by management if there are any questionable entries).

RULES
The conduct and format of the brackets will be run through the Bracket manger on CBS Sportsline.  NOTE: you have to create your own login first to join the group. 

Once the field has been announced on Sunday, March 11th, use CBS Sportsline to make your bracket selections. When the tournament starts, you will be able to track your results LIVE!

SCORING 
One point will be awarded for every correct pick throughout the tournament. In the event of a tie breaker, winner will be determined by the final score of the championship game.

DEADLINE FOR SUBMITTING YOUR BRACKET
Noon EST on Tuesday, March 13th prior to the start of Round 1 games

DEADLINE FOR SUBMITTING YOUR BOTTLE
Same as above. We are happy to pull a specific bottle from any of your lockers, but all must be chosen prior to the start of the 1st game. No Exceptions!

Christopher is kicking this off with a bottle of 2008 Sine Qua Non Syrah B20.

SCHEDULE
March 11 Selection Sunday
March 13 & 14 First Round
March 15 & 16 Second Round
March 22 & 23 NCAA Sweet Sixteen
March 24 & 25 Elite Eight
March 31 Final Four
April 2 National Championship

If you are interested in participating (why wouldn’t you be!) follow this link to join the group.

Midwest participants – Contact christopher@domainewinestorage.com to enter your wine.
East Coast participants – Contact justin@domainewinestorage.com to enter your wine.  

Feel free to watch all of the Games at Domaine Chicago throughout the tournament, where we’ll be sure to have some special bottles open as well! As always, all Domaine customers are welcome in the Chicago Lounge.

We had over 50 participants in our inaugural pool and expect the interest to be higher this year.

Some of the wines the 2011 winner took home:  1985 Phelps Backus Cabernet, 1999 Gaja Ca Marcanda, 2003 Larkmead Cabernet, 2003 Almaviva, 2003 Louis M. Martini Cabernet Sauvignon Monte Rosso Vineyard, 1997 Argiano Brunello, 1997 Banfi Brunello, 2001 Pio Caesare Barolo,2006 Chateau Lafon La Tulierie, 2000 Philip Togni Cabernet Estate,  2007 Pride Mountain Cabernet, 2005 Dunn Howell Mountain Cabernet, 2005 Etude Cabernet, 2006 Benovia ‘Sonoma Coast’ Pinot Noir, 2004 Anderson’s Conn Valley Vineyards Estate Reserve Cabernet Sauvignon, 1992 Silver Oak Napa/ & Alexander, 1995 Alenza Condado de Haza, 2007 Sea Smoke Southing Pinot  Noir, 2007  Modus Operandi Cabernet, 1999 Arietta Red Wine, 2007 Kistler Vine Hill Chardonnay, 2004 Cos D’Estournel, 2002 Bouchard Pere & Fils Nuits St. Georges “Les Cailles”, 2006 Rivers Marie Cabernet, 2008 Lafarge Volnay, 2004 Elvio Cogno Barolo Ravera, 2000 Kistler McCrea Vineyard Chardonnay, 2004 Drinkward Peschon Cabernet, 2006 Montes Alpha M, 2005 Pax Kobler Syrah, 2007 Switchback Ridge Cabernet, 2002 Dominus

• February, 29 2012   |   Click here to Comment

Cellar Advisors and Domaine Wine Storage & Appreciation are proud to partner with the American Heart Association’s Heart’s Delight Wine Tasting & Auction.  The annual fundraiser is taking place May 2-5 in Washington D.C.

Widely recognized as a premier destination event, Hearts Delight gathers winemakers, culinary greats and distinguished guests to play and bid in our Nation’s Capital.

YOU CAN HELP IN TWO DIFFERENT WAYS

1. Donate bottles to the auction
2. Purchase a ticket to one or more of the events

WINE DONATIONS

The American Heart Association would like to fill the remaining auction lots with ’07 Cult California Cabernets, Burgundy or Bordeaux.

• Minimum auction donation: $100
• Deadline to donate: March 8
• Contact Sarah Blind at sarah@cellaradvisors.com or 314.667.5328 x 1003 to plan your donation
• We want to make this easy for you!  Our team will manage all logistics and paperwork associated with your donation and ensure that you receive a tax letter after the event.

EVENTS

Join us for one or more of the events below!  Contact Sarah Blind at sarah@cellaradvisors.com or 314.667.5328 x 1003 to purchase your tickets.

UNITED STATES OF WINE

Wednesday, May 2, 2012

Wednesday evening is a new United States of Wine celebration showcasing the best of American wine. Highlighted wines will be presented by owners and  winemakers, and will include a live auction featuring large format bottles from the winery.  This will be followed by a Collectors Dinner.  Tickets: $200 & $500

PRIVATE DINNER SERIES

Thursday, May 3, 2012

Thursday Offers a series of intimate wine dinners with an international flair in homes, restaurants and Embassies with a host, chef and winemaker at each.  Tickets start: $400

FRIDAY NIGHT VINTNERS SERIES

Friday, May 4, 2012

Friday features an exclusive Vintners Dinner highlighting the wines of Château Mouton Rothschild.  The dinner is followed by a live auction led by Sotheby’s Jamie Ritchie.   There will be an award presented to the Congressional Honoree.  Tickets: $1,000

GRAND TASTING, RECEPTION & AUCTION

Saturday, May 5, 2012

Saturday begins with a virtual tour of Bordeaux including an unique wine tasting of the 2009 vintage and an older vintages selected by the visiting Château owners and wine directors.  The adventure continues with exciting seminars and food prepared by some of the nation’s top chefs.  During the Grand Tasting Reception guests will have the opportunity to bid on exclusive travel packages, dining experiences and rare and exceptional wine during the spirited silent and live auctions. Tickets start: $250

• February, 29 2012   |   Click here to Comment

Underwritten by Lloyd’s of London, we have access to over $100 Million of coverage that holds an A.M. Best Rating of A+ (XIV).  This rating means that the Lloyd’s syndicate has the highest score for management and $1.5 to 2 Billion of reserves in excess of outstanding policies.  In addition to this tremendous financial strength, our policy has domestic support from Edgewood Partners Insurance Center, one of the 50 largest brokers in the US.

Through our years of experience evaluating policies good and bad, we have built a program with extensive features and protections.  All Domaine clients receive:

• Worldwide transit/shipping coverage for wine directed to or from a Domaine Facility, regardless of carrier.
• Zero deductible for storage coverage and very low deductibles for transit/shipping.
• All peril coverage in all Domaine facilities under one policy, including extremes of temperature, mechanical breakdown, theft, breakage and loss.
• Coverage for earthquake and flood.
• Additional coverage for wines in client homes up to 20% of the value of wines at Domaine.
• Complimentary appraisal from Domaine for purpose of securing appropriate coverage.
•  Individual certificates of insurance issued in customer name – know you are specifically covered and not part of a group.

We are certain that you will not find a better-priced insurance program at any facility, and our features are second to none as well.  Pricing quotes are available from any of our facilities and we have access to substantial discounts for collections over $1 Million.

• February, 22 2012   |   Click here to Comment

Eric Asimoy’s recent article in the New York Times brought light to the question of why Americans don’t drink Syrah.  I am proud to say that this American does, and plenty of it, specifically Côte-Rôtie from the famed Northern Rhone.

This past fall I hosted 10 wine collectors at Domaine Chicago to sample a selection of these wines.  My intent was to showcase some of the top producers as well as compare traditional vs. modern styles.

As luck had it, and probably with a little intent of my own, many of the wines were focused on a family of winemakers whom I personally think have turned out the best examples of Syrah in history.  René Rostaing, one of the greatest icons of Côte-Rôtie married into a family deeply rooted in the region.  His father-in-law Albert Dervieux-Thaize, president of the Côte-Rôtie growers association for thirty-three years, produced a little wine himself, while his uncle Marius Gentaz Dervieux might be considered the greatest producer of Syrah ever.

Côte-Rôtie

11/1/11

The first flight focused on wines that had considerable age but also revealed elegant low alcohol levels.

1979 Côte-Rôtie, Côte Brune-Marius Gentaz Dervieux

From 100 year old vines.  Never a disappointment with good bottles, and this was no exception. Showing firm grip, fine tannins, blood, and iodine.  Packed with rich cherry fruits and Asian spice balanced with heavy earth tones.  Great balance, but, began to fade after about 45 minutes.

1983 Côte-Rôtie, Brune et Blonde- E. Guigal

I threw this in not having much expectation, but boy was I wrong.  Of the wines of the flight, this wine was amazingly young and fresh.  Not as powerful as 83 La Lá examples I have tasted, revealing more subtle oak nuances, a dark core and fruit to match.

1985 Côte-Rôtie, Côte Brune- Marius Gentaz Dervieux

The bottle on this eve was not as spectacular as others I have had from the same case.  There was certainly a presence of volatile acidity that masked a lot of the fruits, but still came across as pure and elegant.

1985 Côte-Rôtie, La Chatillonne Côte Blonde- Vidal-Fleury

The wine epitomized the feminine qualities taht Côte-Rôtie exhibits.  Almost Burgundy like, showing a slightly stewed character as it opened in the glass, hints of plum, rich cherry fruits, cinnamon and pepper were evident in the darkest and richest wine of the flight.

The Famed La Landonnes  from René Rostaing were up next.  Typically garnered as his top cuvee, Rostaing’s holdings in La Landonne include vines inherited from Marius Gentaz-Dervieux.

1978 Côte-Rôtie, La Landonne- René Rostaing

From the private cellars of Rene, this wine has showed a lot of variation over the past few years.  I have tasted examples that have been powerful, albeit elegant and bottles that tend to lack such concentration.  The bottle tasted on this eve was as pure, smooth and elegant as they can be.  Revealing a great sense of minerality, matched with complex dark fruits and fine tannin.

1994 Côte-Rôtie, La Landonne- René Rostaing

The wine was dark and brooding, with blue fruits, smoke, and bacon.  Unfortunately the alcohol took over anything else that this wine might have revealed.

2000 Côte-Rôtie, La Landonne- René Rostaing

The 2000 from a heralded vintage was very hallow.  Lacking depth and balance, it was a bit astringent, perhaps from the oak, and also a bit chalky.

2003 Côte-Rôtie, La Landonne- René Rostaing

This wine was second to the 78′ in this flight, but definitely on the opposite spectrum of elegance.  This wine, albeit quite young, was delicious to drink.  It was deep, dark and ripe with amazing concentration.

Our last group of wines brought us to a smattering of style and vintages.

1995 Côte-Rôtie, La Vialliére- Dervieux- Thaize

If my information is correct this wine is made by surviving family members from Albert’s side.  These wines don’t hit the heights that the example from René and Marius do and the 1995 followed suit.  This wine was insipid, and lacked concentration, coming off as a bit thin.

1996 Côte-Rôtie, La Vialliére- Dervieux- Thaize

Corked.

2001 Côte-Rôtie, La Serene Noire-Mathilde et Yves Gangloff

This was a real treat as examples of the Serene are becoming harder to find out in the market place as of recent.  This wine was opaque and hard tremendous depth, concentration and complexity.  Exotic spices balanced well with rich dark fruits.  Hold on to this one.

2001 Côte-Rôtie, La Mouline- E. Guigal

The 2001 Guigal La Mouline is still an infant and needs a lot of time to rest.  It was huge, amazing on the modern style spectrum, black fruits, savory herbal elements, and dense.  This wine was the anti elegance.  I found this wine to be very one dimensional, big and over the top and was unfortunately (or not) left in the dust by some of its contemporaries.

“Like” Domaine Wine Storage on Facebook to view more photos from all of our events.

• February, 15 2012   |   Click here to Comment

Construction on the second floor is underway.  So we will have new options of 17,27 and 34 case lockers.  This new layout will allow the cases to be divided up into smaller lockers, affording clients with large cellars easier access.  Having to pull a case at the very back of a 300 case locker will no longer be a time-consuming problem.  Spread the word to collectors in the Chicagoland area!  Contact Christopher Klingenstain at: Christopher@domainewinestorage.com or 1-773-252-3300 to reserve your space.

“Like” us on Facebook to stay up to date with the progress.

• February, 9 2012   |   Click here to Comment

Have you ever enjoyed a bottle of Italian Swiss Colony wine from California?  We haven’t, but are pretty intrigued after watching this commercial.  Thur far, there has been a 100% success rate of ones’ day being improved with only 1.05 minutes spent watching.

• January, 23 2012   |   Click here to Comment