Whisky as an \"Investment\"

Whisky as an \"Investment\"

Mark is a contributing editor for Whisky Magazine
Mark Gillespie

19 July 2013

Publication: Issue 113

The financial crisis is over, folks. Good times are back, and it's time to start investing again.

What's that? You say the value of your home is still less than your mortgage, your investment portfolio consists of lottery tickets, and you dread going into work each day for fear that you'll be called in for a "chat" with Human Resources and walk out with a redundancy package?

Nonsense, dear reader…now's the perfect time to take what cash you have and invest it.

Gold? Too expensive… Blue-Chip Stocks? Yeah, right… Collateralised mortgage obligations with hundreds of home loans bundled together? Wait, that's what got us into the last mess… Better invest in something you know, something you can hold in your hand and lovingly caress, an investment that gives you liquidity; better yet, why not invest in a liquid itself?

The very fact that you're reading this magazine is a clear indication that you know and love whisky, and that makes you an expert! Time to profit from all of those dusty bottles in your closet…what could possibly go wrong?

Reality check, folks!

Several months ago, I railed about the inherent problems with whisky auctions, but the potential issues with whisky as a legitimate "investment vehicle" make whisky auctions look like a Girl Scout cookie sale.

As a former business journalist, let me put the propeller-beanie on for a minute to explain. The mortgage mess of 2008 started with high-risk home mortgages that were packaged into bundles and sold to investors. The problem was that the investment banks packaging those mortgages were touting them as safe to their clients, without mentioning that the whole concept had the potential of becoming a house of cards in a wind tunnel. The lenders who made the original mortgage loans got their money, the bundlers who packaged the loans got their money, and the investors got stuck with the losses when those high-risk loans went bad.

Let's substitute whisky for mortgages. There are "investment vehicles" that are acquiring bottles of "rare" whisky today and selling shares in the overall bundle of bottles to interested investors.

In a recent news release, David Robertson of The Whisky Trading Company was quoted as saying "If you had invested in the top 100 performing whiskies in 2008, you would have seen returns of 306 per cent. With knowledge and insight there are huge returns to be made and it's time to take whisky investment seriously." Ok, let's take it seriously for a moment. The 2008-2013 time period may well be one of the best times for whisky to have appreciated in value.

However, there are no guarantees that this trend will continue. As an investment, whisky isn't considered "fungible", which means loosely that one bottle of rare whisky isn't necessarily equal in value to another.

Look at the results of recent whisky auctions in which different bottles of the same whisky brought widely different winning bids for an example.

You may have a bottle of 1951 Macallan that's identical to mine, but they're not interchangeable the way that two gold ingots or two bank notes would be.

On top of that, it's common knowledge that counterfeit bottles of "rare" whisky are widespread.

What's more, while whisky may be a liquid, it's not a liquid investment.

There's nothing like the stock markets where whisky can be traded on a daily basis. Even selling shares in a whisky investment fund means that someone has to be willing to buy them, absent a guarantee from the fund's backers to buy out investors on demand.

Of course, I could be wrong, investors might well benefit from making whisky part of their portfolios. Just keep your eyes wide open, fresh batteries in your rubbish detector, and don't risk any money you can't afford to lose.

Personally, I have a better investment vehicle for my whisky. I'd rather take those bottles and share them with family and good friends. The profit may not show up in a bank account, but the memories and joy those special moments bring are priceless.

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