8 ms·

Burgundy wine investors have beaten the stock market

76 points by known 7y ago

dandelany 7y ago
Collector's items are like companies... Many of them beat the market for many years, until, one day, they don't!
- mitchtbaum 7y ago
  Therefore?
  - Scoundreller 7y ago
    Sell before the music stops!
Scoundreller 7y ago
Yabbut, I can buy $1m in stocks for $9.95, and that includes storage costs and insurance against fire/quakes/storms. And sell it tomorrow for $9.95.
- acchow 7y ago
  What brokerage are you using? That sounds incredibly expensive for stock trading.
  - lozaning 7y ago
    I suppose if I was buying a million dollars worth of stock I might actually care about getting front runned (front ranned?) on RobinHood and would consider paying a higher fee if it would mitigate that.
    - usmannk 7y ago
      Are you implying robinhood is front-running trades? That's an extraordinary claim indeed. And even if they were, it would not impact you in this particular case.
      - spullara 7y ago
        Not sure if this is frontrunning exactly but I think the point is that they make money by marketing your trades. https://seekingalpha.com/article/4205379-robinhood-making-millions-selling-millennial-customers-high-frequency-traders https://seekingalpha.com/article/4205379-robinhood-making-mi...
        benj111 7y ago
        That's not front running at all. In fact it's the perceived lack of front running risk by the buyers and sellers that make Robin Hood more valuable to Market Makers. A big institutional shareholder may very well know more than the Market Maker at the other end of the trade, that's a risk for them if the market moves against them. Robin Hood investors are far less likely to have that kind of information so there isn't the same risk that market makers will get shafted.
        semi-extrinsic 7y ago
        > In fact it's the perceived lack of front running risk by the buyers and sellers that make Robin Hood more valuable to Market Makers. Basically, you get a discount trading on Robin Hood, because the people taking the other side of the bet know that you're probably not making a smart move.
        benj111 7y ago
        Last time i explained the concept I was even less polite and got downvoted :) but yes
        sweeneyrod 7y ago
  - ljcn 7y ago
    The cheapest platforms in the UK are £5-10 per trade - $10 doesn't sound expensive.
  - Scoundreller 7y ago
    Not US :( But a good incentive to do less than 10 trades per year across 6 accounts. I just sit in a small number of big ETFs. The brokerage would make a lot more money off me if they charged $1/trade.
outside1234 7y ago
So did beanie babys... ... until they crashed.
- Scoundreller 7y ago
  Nobody drinks their beanie babies.
psadri 7y ago
Note to self - buy luxury goods stocks after the next stock market crash.
- ThrustVectoring 7y ago
  Manufacturers of luxury goods won't be mispriced in a way you can exploit, even after a stock market crash. Instead, what you want to buy is hobbyist and other niche goods, assuming you have cash through a recession. As people cut back their budget, there tends to be a glut of highly discretionary stuff in the resale market. Like, my brother-in-law got absolutely fantastic prices on model airplane kits in the aftermath of 2008.
  - acchow 7y ago
    There have been significant reforms in banking since the 2007 financial crisis. The next recession will probably be more similar to the early-2000's recession (post dot-com boom) than the financial crisis - shallow and short. Don't expect such fantastic deals to be had again.
    - psadri 7y ago
      This is an interesting observation. I think you are saying that real estate prices crashed big time because the people who held the assets couldn’t afford to keep them because of their very high leverage. High leverage was possible because of subprime mortgages. But that channel is now closed because of post 2008 lending reforms.
  - Swizec 7y ago
    Folks I know got absolutely fantastic prices on houses on the Monterey coast in the aftermath of 2008. Could only afford one but damn, talk about a solid investment in a niche product. That house airbnbs for $900/night nowadays :D
  - benj111 7y ago
    "Manufacturers of luxury goods won't be mispriced in a way you can exploit, even after a stock market crash" Why not? I would expect luxury goods manufacturers to suffer during a recession, and I would expect the stock price to follow suit. I don't think it's a mispricing as it's reflecting to reality on the ground, nevertheless I would expect them to bounce back after the recession. So it does seem to be an opportunity you can exploit. Your second paragraph seems to have shifted to a completely different asset class. No doubt there was fantastic prices on model aircraft kits, but you need to know the market, and it isn't apparent to me whether the model aircraft kit market will behave the same the next time. Plus it's more risky. If I buy a stock, I don't have to worry about it being fake, getting damaged, I can sell trivially at the touch of a button.
forgingahead 7y ago
So has Bitcoin -- so what? This is a useless article, written for content filler rather than any sort of useful, long term educational information.
- chosenbreed37 7y ago
  > This is a useless article, written for content filler rather than any sort of useful, long term educational information. I guess it was either this or blank page. The latter is less likely to grab your attention. Maybe "fillers" have some use after all :-)
Arbalest 7y ago
Anything with low volumes isn't fair to compare, you can pretty much always pick something that "beats" the "market"
- Doubl 7y ago
  I think you are suggesting that they looked across the field and picked out an existing high performing investment rather than suggesting that's it's easy to find something low volume that will do well in the future.
- pinky1417 7y ago
  And even with high volumes, you can always pick something retrospectively that beats the market. It's not useful to look back and say, for example, if you put money into X stock at Y time you'd beat the market. You can't go back in time so it's not useful. What is useful is to figure out what, today, may predict outperformance tomorrow. In choosing fund managers, it's not enough to choose managers who've outperformed in the past - that's not in itself predictive of the future (same is true for home prices as we learned in 2008, individual stocks, etc.). But other characteristics might be predictive, like choosing fund managers who follow a true "value" approach to stock-picking: finding companies with a competitive advantage and buying them below their intrinsic value being one approach to value. See Warren Buffett's 1984 article "The Superinvestors of Graham and Doddsville" for the best example I know of distinguishing chance price rises from predictable rises: https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup...
  - CogitoCogito 7y ago
    > It's not useful to look back and say, for example, if you put money into X stock at Y time you'd beat the market. You can't go back in time so it's not useful. It's not only not useful, it's totally obvious some things will always beat the market. "Beating the market" is really just "beating the average". If there's nothing that beats the average, then it means that all stocks do exactly the same thing... But yes like you said finding things that beat the market in hindsight certainly isn't very useful unless you can learn some specific strategy (e.g. insider information) that was used and employ it yourself (if you choose).
mruts 7y ago
On a risk adjusted basis? I seriously doubt it.
- tuesdayrain 7y ago
  Seems like a lot of people here are using the term "beat the market" to mean "had higher nominal returns than the market" which is not a very useful metric without taking risk into account.
  - bumby 7y ago
    I wonder if wine experiences the same price volatility as stocks. I can speculate reasons why they wouldn't and would thus still provide better risk-adjusted returns but I really don't know.
    - mruts 7y ago
      Maybe they wouldn’t be expressed as annualized volatility and only expressed as long tail risk: blight, climate change, etc.
dejv 7y ago
Big problem with wine collections is transfering stock into money. Selling big stashes is not going to be easy and cheap.
- audiometry 7y ago
  And also paying for storage while holding it. And also, what is total notional value of all burgundy in the world? 1bn? That’s nothing in scale with other markets. Dumb article.
  - dejv 7y ago
    Oh yeah storage is huge part of what determine final price: for investment grade wines you need to proof that you store it in proper place with reputable vendor. those places are not cheap and will eat into your margin.
neonate 7y ago
http://archive.is/bAqJU http://archive.is/bAqJU
ukoki 7y ago
> Collectors who have drunk most of their Pinot already may need another glass after seeing the result Don't get high on your own supply
levosmetalo 7y ago
Stock market means average. Every "investment" that is slightly over average stock market returns for some time beats the stock market in that timeframe. Now, doing that consistently over and over again is something to strive to, but not many other investment in the same risk category do it.
- simonh 7y ago
  Half of children score below average in tests! >! Cue pedantry about what 'average' means.
- mrfredward 7y ago
  Office pools buying lottery tickets can beat the stock market...once in a while. If you aren't doing anything economically useful...don't expect returns greater than inflation in the really long run.
  - soVeryTired 7y ago
    > If you aren't doing anything economically useful...don't expect returns greater than inflation in the really long run. I think the British aristocracy would like a word with you.
- toomuchtodo 7y ago
  > but not many other investment in the same risk category do it. Only real estate. https://economics.harvard.edu/files/economics/files/ms28533.pdf https://economics.harvard.edu/files/economics/files/ms28533.... HN Discussion: https://news.ycombinator.com/item?id=19817584 https://news.ycombinator.com/item?id=19817584
bumby 7y ago
Speak of economics and wine, one of the clearest examples of non-rational economics behavior was detailed by Richard Thaler regarding an economist wine collector. https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193 https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193

76 points by known 7y ago

dandelany 7y ago

Collector's items are like companies... Many of them beat the market for many years, until, one day, they don't!

mitchtbaum 7y ago
Therefore?
- Scoundreller 7y ago
  Sell before the music stops!

Scoundreller 7y ago

Yabbut, I can buy $1m in stocks for $9.95, and that includes storage costs and insurance against fire/quakes/storms. And sell it tomorrow for $9.95.

acchow 7y ago
What brokerage are you using? That sounds incredibly expensive for stock trading.
- lozaning 7y ago
  I suppose if I was buying a million dollars worth of stock I might actually care about getting front runned (front ranned?) on RobinHood and would consider paying a higher fee if it would mitigate that.
  - usmannk 7y ago
    Are you implying robinhood is front-running trades? That's an extraordinary claim indeed. And even if they were, it would not impact you in this particular case.
    - spullara 7y ago
      Not sure if this is frontrunning exactly but I think the point is that they make money by marketing your trades. https://seekingalpha.com/article/4205379-robinhood-making-millions-selling-millennial-customers-high-frequency-traders https://seekingalpha.com/article/4205379-robinhood-making-mi...
      - benj111 7y ago
        That's not front running at all. In fact it's the perceived lack of front running risk by the buyers and sellers that make Robin Hood more valuable to Market Makers. A big institutional shareholder may very well know more than the Market Maker at the other end of the trade, that's a risk for them if the market moves against them. Robin Hood investors are far less likely to have that kind of information so there isn't the same risk that market makers will get shafted.
        semi-extrinsic 7y ago
        > In fact it's the perceived lack of front running risk by the buyers and sellers that make Robin Hood more valuable to Market Makers. Basically, you get a discount trading on Robin Hood, because the people taking the other side of the bet know that you're probably not making a smart move.
        benj111 7y ago
        Last time i explained the concept I was even less polite and got downvoted :) but yes
      - sweeneyrod 7y ago
- ljcn 7y ago
  The cheapest platforms in the UK are £5-10 per trade - $10 doesn't sound expensive.
- Scoundreller 7y ago
  Not US :( But a good incentive to do less than 10 trades per year across 6 accounts. I just sit in a small number of big ETFs. The brokerage would make a lot more money off me if they charged $1/trade.

outside1234 7y ago

So did beanie babys... ... until they crashed.

Scoundreller 7y ago
Nobody drinks their beanie babies.

psadri 7y ago

Note to self - buy luxury goods stocks after the next stock market crash.

ThrustVectoring 7y ago
Manufacturers of luxury goods won't be mispriced in a way you can exploit, even after a stock market crash. Instead, what you want to buy is hobbyist and other niche goods, assuming you have cash through a recession. As people cut back their budget, there tends to be a glut of highly discretionary stuff in the resale market. Like, my brother-in-law got absolutely fantastic prices on model airplane kits in the aftermath of 2008.
- acchow 7y ago
  There have been significant reforms in banking since the 2007 financial crisis. The next recession will probably be more similar to the early-2000's recession (post dot-com boom) than the financial crisis - shallow and short. Don't expect such fantastic deals to be had again.
  - psadri 7y ago
    This is an interesting observation. I think you are saying that real estate prices crashed big time because the people who held the assets couldn’t afford to keep them because of their very high leverage. High leverage was possible because of subprime mortgages. But that channel is now closed because of post 2008 lending reforms.
- Swizec 7y ago
  Folks I know got absolutely fantastic prices on houses on the Monterey coast in the aftermath of 2008. Could only afford one but damn, talk about a solid investment in a niche product. That house airbnbs for $900/night nowadays :D
- benj111 7y ago
  "Manufacturers of luxury goods won't be mispriced in a way you can exploit, even after a stock market crash" Why not? I would expect luxury goods manufacturers to suffer during a recession, and I would expect the stock price to follow suit. I don't think it's a mispricing as it's reflecting to reality on the ground, nevertheless I would expect them to bounce back after the recession. So it does seem to be an opportunity you can exploit. Your second paragraph seems to have shifted to a completely different asset class. No doubt there was fantastic prices on model aircraft kits, but you need to know the market, and it isn't apparent to me whether the model aircraft kit market will behave the same the next time. Plus it's more risky. If I buy a stock, I don't have to worry about it being fake, getting damaged, I can sell trivially at the touch of a button.

forgingahead 7y ago

So has Bitcoin -- so what? This is a useless article, written for content filler rather than any sort of useful, long term educational information.

chosenbreed37 7y ago
> This is a useless article, written for content filler rather than any sort of useful, long term educational information. I guess it was either this or blank page. The latter is less likely to grab your attention. Maybe "fillers" have some use after all :-)

Arbalest 7y ago

Anything with low volumes isn't fair to compare, you can pretty much always pick something that "beats" the "market"

Doubl 7y ago
I think you are suggesting that they looked across the field and picked out an existing high performing investment rather than suggesting that's it's easy to find something low volume that will do well in the future.
pinky1417 7y ago
And even with high volumes, you can always pick something retrospectively that beats the market. It's not useful to look back and say, for example, if you put money into X stock at Y time you'd beat the market. You can't go back in time so it's not useful. What is useful is to figure out what, today, may predict outperformance tomorrow. In choosing fund managers, it's not enough to choose managers who've outperformed in the past - that's not in itself predictive of the future (same is true for home prices as we learned in 2008, individual stocks, etc.). But other characteristics might be predictive, like choosing fund managers who follow a true "value" approach to stock-picking: finding companies with a competitive advantage and buying them below their intrinsic value being one approach to value. See Warren Buffett's 1984 article "The Superinvestors of Graham and Doddsville" for the best example I know of distinguishing chance price rises from predictable rises: https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors https://www8.gsb.columbia.edu/articles/columbia-business/sup...
- CogitoCogito 7y ago
  > It's not useful to look back and say, for example, if you put money into X stock at Y time you'd beat the market. You can't go back in time so it's not useful. It's not only not useful, it's totally obvious some things will always beat the market. "Beating the market" is really just "beating the average". If there's nothing that beats the average, then it means that all stocks do exactly the same thing... But yes like you said finding things that beat the market in hindsight certainly isn't very useful unless you can learn some specific strategy (e.g. insider information) that was used and employ it yourself (if you choose).

mruts 7y ago

On a risk adjusted basis? I seriously doubt it.

tuesdayrain 7y ago
Seems like a lot of people here are using the term "beat the market" to mean "had higher nominal returns than the market" which is not a very useful metric without taking risk into account.
- bumby 7y ago
  I wonder if wine experiences the same price volatility as stocks. I can speculate reasons why they wouldn't and would thus still provide better risk-adjusted returns but I really don't know.
  - mruts 7y ago
    Maybe they wouldn’t be expressed as annualized volatility and only expressed as long tail risk: blight, climate change, etc.

dejv 7y ago

Big problem with wine collections is transfering stock into money. Selling big stashes is not going to be easy and cheap.

audiometry 7y ago
And also paying for storage while holding it. And also, what is total notional value of all burgundy in the world? 1bn? That’s nothing in scale with other markets. Dumb article.
- dejv 7y ago
  Oh yeah storage is huge part of what determine final price: for investment grade wines you need to proof that you store it in proper place with reputable vendor. those places are not cheap and will eat into your margin.

neonate 7y ago

http://archive.is/bAqJU http://archive.is/bAqJU

ukoki 7y ago

> Collectors who have drunk most of their Pinot already may need another glass after seeing the result Don't get high on your own supply

levosmetalo 7y ago

Stock market means average. Every "investment" that is slightly over average stock market returns for some time beats the stock market in that timeframe. Now, doing that consistently over and over again is something to strive to, but not many other investment in the same risk category do it.

simonh 7y ago
Half of children score below average in tests! >! Cue pedantry about what 'average' means.
mrfredward 7y ago
Office pools buying lottery tickets can beat the stock market...once in a while. If you aren't doing anything economically useful...don't expect returns greater than inflation in the really long run.
- soVeryTired 7y ago
  > If you aren't doing anything economically useful...don't expect returns greater than inflation in the really long run. I think the British aristocracy would like a word with you.
toomuchtodo 7y ago
> but not many other investment in the same risk category do it. Only real estate. https://economics.harvard.edu/files/economics/files/ms28533.pdf https://economics.harvard.edu/files/economics/files/ms28533.... HN Discussion: https://news.ycombinator.com/item?id=19817584 https://news.ycombinator.com/item?id=19817584

bumby 7y ago

Speak of economics and wine, one of the clearest examples of non-rational economics behavior was detailed by Richard Thaler regarding an economist wine collector. https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193 https://www.aeaweb.org/articles?id=10.1257/jep.5.1.193