NPR logo The Bordeaux Bubble


The Bordeaux Bubble

Bordeaux wine
Jean-Pierre Muller/AFP/Getty Images

There's a thriving futures market for Bordeaux. That's led, perhaps inevitably, to suggestions that the market is being manipulated.

Each spring, buyers from around the world travel to France to taste the previous year's vintage, which then ages for another two years before going on sale. So this spring, buyers placed orders for wine that won't be available until 2013.

Prices have gone way up in the past few years — you can now pay thousands of dollars for a single bottle of wine that won't be delivered for another two years.

The rise is partly driven (of course) by demand from China and Hong Kong.

But Robert Parker, the wine ubermaven, argued this spring that it's unclear exactly how much demand is coming from China — and suggested that the most prestigious wineries might be monkeying with the market to inflate prices.

Parker wrote:

... it is impossible to determine the amount of 2009 Bordeaux futures (and in a few months, 2010 Bordeaux futures) that have actually been sold to consumers. Throughout Bordeaux there is talk of the massive market in Asia, and the increasing significance of the English wine investment firms, but there are those (and I wouldn't dismiss their opinions) who tend to think that such assertions are grossly inflated. Moreover, they argue that there is a real bubble that is in danger of bursting if the right external influences unfold. One theory is that ... [wineries] are actually hoarding huge inventories of their wines to inflate prices.

I raise this issue only because it is a possibility. The fact that no one can (or wants to) provide the actual sales figures of how much 2009 (or over the next six months, how much 2010) is actually being sold through to consumers is astonishing.

As Felix Salmon points out, there's no way to short Bordeaux futures; you can bet that prices will rise, but not that prices will fall. That makes it much easier for a bubble to grow, and much harder for it to pop.

Hat tip: Cheap Talk