Monthly newsletter for February 2021
We’re well and truly into 2021, with very little having changed due to Covid, but with markets continuing their relentless and at times irrational rise. The recent GameStop and Bitcoin rollercoasters have stoked fears of broad speculation in the markets, and an increased urgency for experienced investors to focus on fundamentals.
Next week we will see the final results of a highly coveted Macallan 1926 Valerio Adami 60 Years Old be auctioned, which is expected to be the first bottle to achieve a price of more than £1m (US$1.4m). This perfectly illustrates the point that we wanted to make in our most recent article regarding the risk vs returns of investing in casks or bottles. The market for bottles is incredibly liquid, with high profile auctions and collections driving prices up significantly, ultimately making the exit easier for investors. We are actually concerned for our fellow investors who are going long on casks, as the exit is perilous and complicated. Please do share this with friends, family and colleagues who have been thinking about cask investment recently. We also recently published our FAQ section on our website, which goes deeper into the questions most investors ask us before joining the Collective. This has been one of the biggest asks from many of you, so we’re glad we finally have this available for easier sharing.
On the market front, it has been a relatively quiet month across whisky auctions, some market corrections and a few lots where the reserves were not tested. In the coming months we will stay closer to the auctions taking place in Europe as the full effects of Brexit start to filter through. We have also been in talks with collectors looking to sell off a selection of very sought after bottles, hopefully we can get those deals done for March.
Getting back to the broad-based speculation we have seen in the markets recently. Our conviction in the supply-demand of the whisky category has kept our investors in good stead over the last 2 years. With the benefit of hindsight and the data we have now collected over this period, it is great to see that our investment thesis continues to hold. The Covid market crash last year was an opportunity for us to review how our portfolio would hold up, and we’re pleased to see that whisky as an asset class has proven it’s resilience. Yes, markets have recovered since then with the injection of liquidity across the globe, but with that has come the irrational exuberance of inexperienced investors, asset bubbles across sectors, and multiple debates regarding inflation (or deflation, depending on which camp you’re in).
So what does this mean for your whisky investments? The good news is that if you follow microeconomic fundamentals, it will be a solid asset in your broader portfolio no matter which direction the markets and reserve banks take. Below are the hypothetical returns of $10K since SVC’s inception, and it’s great to see that our numbers stack up nicely against other global assets and indices, but with significantly less volatility.
Please position yourself correctly as we go into 2021. It feels like this year is going to be an interesting one again.
Marek, Marc, Neil, Gary