Whisky talk

kevinmrn wrote:

Are we in a whiskybubble, and if so, is it going to burst soon?

A new inaugural release every week selling at 5x on auction.  Shops selling out of their Springbanks in seconds through the use of bots.  (Sounds like the 2017 ICO crypto bubble...)

  I used to be able to buy springbank 12 CS months after they were released.  Now I don't even see them anymore.

Most of these bottles are not being drunk.  And the quality of most of these would be very average. And there must be millions of bottles just sitting in people's collections.

How do you guys think this will play out?  When will there be too many bottles in everyone's collection?  When will the market be too flooded?  When will someone open the latest inaugural release that they bought for 2k on secondary and realize they might have overpaid?  Or do you think prices will keep on rising for a while longer?

https://www.whiskyandwisdom.com/is-the-tide-turning-on-the-scotch-whisky-industry/

This is worth a read and make of it what you will. 

An interesting read Karloff, nice one.

Whisky does not exist in isolation. Prices have been rising along with stocks, crypto and real estate, while central banks have been flooding the system with money in an attempt to stimulate the economy in response to COVID-19. Quantitative easing, low interest rates and the perceived 'wealth effect' have further expanded the 'everything bubble', and whisky got its share in it. Prices have been rising steadily, flippers have been confident to pay ridiculous prices for subpar whiskies, knowing they could sell them at a profit. If Springbank Local Barley is a proxy for this mania, then the air is already coming out of the bubble.

Rising inflation has become a reality, and what was deemed 'transitory' in 2021 has now become an uncomfortable fact: fiat money is on the decline. You might not notice it comparing different currencies, but they are all falling. The Yen is leading the pack, as their central bank desperately attempts to keep yields pinned at 0.25%. The FED is talking tough, pumping the Dollar, but ultimately the amount of debt will tie their hands (unless they want the US government to default). They might reach 2.5% before something significant in the system breaks. The ECB is probably the worst specimen of all, first ignoring inflation, and now contemplating on a measly 0.25% rate hike. Try to extinguish a raging fire with a water pistol. They know Southern Europe can't even handle a slight increase in interest rates, their debt burden will wipe them out. The Euro is falling apart, watch it. People notice this decline in purchasing power and 'buy stuff', thus further pressuring prices.

That said, we are already seeing a deflationary shock. The stock market is in decline, cryptos are crashing hard, even bonds have been a desaster this year. The worst for real estate is yet to come, people have been confident to pay insane prices for years, assuming it would never stop to go higher. Trillions of dollar/euros have gone to money heaven.

Prices go up until they don't.

The wealth effect is evaporating, people are down on their stock portfolios, bonds and cryptos, while prices for food, gas and electricity are going nuts. Add a recession and people losing their jobs, and you have the perfect mix. Few will be in the position to bid up prices for whiskies in the near future, and more and more people might consider to sell some bottles before its too late. The Springbank 16 YO Local Barley touched $2000 in auction early this year, but now prices have almost come down by 50%. Looks very similar to the Bitcoin chart if you ask me, but flippers have obviously not fully realized this. Once the recession hits, prices will crash to their intrinsic value, and if you are sitting on a pile of NAS Macallans that nobody wants - good luck to you!

-Slainte

Very good analysis.  I'm hoping the housing market might stand a chance in some places where there still a shortage, and if governments would be a bit more ethical and keep investment banks out of buying private properties ????.  What's also scary is that we've created whole pension schemes on this never ending growing money tree.  Enhancing the bubble until it pops...

  That being said, the wealthily funded whisky industry rn also means there's an abundance of choice, and still some good value (drinking) whisky out there.  But maybe I'll get to buy some proper aged whisky without breaking the bank in a couple of years.

I've read about how whisky is in a bubble for over 7 years now going back to articles from 2011. 

No we are not in a bubble. Never have been. Number go up.

Prices will continue to climb higher at least until the end of this decade. For many reasons. 

Whisky was behind many other collectibles in 2020. Whisky flatlined in pricing from 2019 to early 2021. Whisky is just now catching up to other collectable, and has a long way to go.

You can expect whisky to go up another 20-200% (depending on the quality and scarcity) over the next 2 years due to logistic issues from; oil, gas, fertilizer, crop (barley) shortages, and many other issues. 

Number going up.

VaryingViewpoint wrote:

No we are not in a bubble. Never have been. Number go up.

I think it is a bit more complicated than that. I hear exactly the same by everyone who recently bought a house or apartment, defending the timing of their purchase by saying that prices will always go up. Sure, if you have been in that bubble for 20 years, you become blind to the bubble. Quantitative easing and rising prices is all we know, so throwing money after things becomes the only way to go.

There are two camps when it comes to the economy, inflation and deflation. Yes, inflation is on everyone's mind and rightly so. We see that prices are rising. The response of central banks is to modestly raise rates, their goal is demand destruction. People are spending more on food, gas and rents (or loans for that matter), while salaries lose in purchasing power. Can they still afford to spend stupid amounts of money on a bottle of liquor in a year or two? We will find out soon. I'm not saying that there are no people who have more money than sense, but if fewer bidders show up and more people are willing to sell (because they have to), prices will drop. Again, not every bottle will be affected the same. Quality bottles that are sought after for drinking will remain expensive. Flipper bottles of mediocre quality (Bivrost's the nine worlds of Norse mythology, or many of the recent NAS Macallans come to mind) will have a hard time moving forward once the froth is gone.

Being overly confident that there is no bubble and that prices can only go up usually signifies the end of the bubble. When I saw crypto advertisement in public transport in autumn 2021, I knew where things were heading. Have fun staying poor, they said to me. Well, no reason to find joy in their misfortune, as everyone is going to lose in a deflationary shock.

-Slainte

Slàinte Mhath wrote:

VaryingViewpoint wrote:

No we are not in a bubble. Never have been. Number go up.

I think it is a bit more complicated than that. I hear exactly the same by everyone who recently bought a house or apartment, defending the timing of their purchase by saying that prices will always go up. Sure, if you have been in that bubble for 20 years, you become blind to the bubble. Quantitative easing and rising prices is all we know, so throwing money after things becomes the only way to go.

Being overly confident that there is no bubble and that prices can only go up usually signifies the end of the bubble. When I saw crypto advertisement in public transport in autumn 2021, I knew where things were heading. Have fun staying poor, they said to me. Well, no reason to find joy in their misfortune, as everyone is going to lose in a deflationary shock.

-Slainte

There is nothing complicated about a bubble, if it indeed a bubble exists. The fact that many have been stating for more than a decade that whisky is in a bubble over simplified why whisky prices continued to rise, and that many never understood what drove prices higher and why? Regardless of economic factors.

High quality whisky is a finite quantity. Whether it's fact or in some people's minds fiction. You can expect quality of new release to go down even further going forward due to cost restraints coming. And older classic releases from just 5 years ago will move up dramatically going forward. Not to mention most everything before 2015. 

Yes, more bottles will find their way to the auction markets as some will need to sell. However, regardless of the thinking that most don't drink expensive bottles that are purchased, the fact is many have been opened and drunk and shared across the globe these last 10+ years. And there are fewer and fewer of these prized bottles available every year to purchase. 

More millionaires are created every year, regardless of economic down turns. right now there are over 56.1 million millionaires in the world (it was at 45 million millionaires just a couple of years ago). Not even a third of all millionaires are able to own 1 bitcoin, a scarce asset that there is only about 15-16 million of and will always decrease in availability do to lost keys ever year. 

Number go up.

karloff wrote:

Personally my whisky bubble has well and truly burst. I've took a financial setback at work and what with the cost of living in this country going through the roof, whisky is the last thing on the shopping list. 

Very sorry to hear that karloff, but that's unfortunately what could happen to many of us, whisky is a luxury that is nice to have, but not essential to survive.

Slàinte Mhath wrote:

no reason to find joy in their misfortune

I can think of one reason 

VaryingViewpoint wrote:

Slàinte Mhath wrote:

VaryingViewpoint wrote:

No we are not in a bubble. Never have been. Number go up.

I think it is a bit more complicated than that. I hear exactly the same by everyone who recently bought a house or apartment, defending the timing of their purchase by saying that prices will always go up. Sure, if you have been in that bubble for 20 years, you become blind to the bubble. Quantitative easing and rising prices is all we know, so throwing money after things becomes the only way to go.

Being overly confident that there is no bubble and that prices can only go up usually signifies the end of the bubble. When I saw crypto advertisement in public transport in autumn 2021, I knew where things were heading. Have fun staying poor, they said to me. Well, no reason to find joy in their misfortune, as everyone is going to lose in a deflationary shock.

-Slainte

There is nothing complicated about a bubble, if it indeed a bubble exists. The fact that many have been stating for more than a decade that whisky is in a bubble over simplified why whisky prices continued to rise, and that many never understood what drove prices higher and why? Regardless of economic factors.

High quality whisky is a finite quantity. Whether it's fact or in some people's minds fiction. You can expect quality of new release to go down even further going forward due to cost restraints coming. And older classic releases from just 5 years ago will move up dramatically going forward. Not to mention most everything before 2015. 

Yes, more bottles will find their way to the auction markets as some will need to sell. However, regardless of the thinking that most don't drink expensive bottles that are purchased, the fact is many have been opened and drunk and shared across the globe these last 10+ years. And there are fewer and fewer of these prized bottles available every year to purchase. 

More millionaires are created every year, regardless of economic down turns. right now there are over 56.1 million millionaires in the world (it was at 45 million millionaires just a couple of years ago). Not even a third of all millionaires are able to own 1 bitcoin, a scarce asset that there is only about 15-16 million of and will always decrease in availability do to lost keys ever year. 

Number go up.

Number go up.  What's this number?  Debt?  Sure. You should study economic cycles, its quite interesting, and we for sure are at the end of an economic cycle.  Massive debt, high inflation, massive money printing to pay off the debt.  All of this has happened before to previous reserve currencies, as the pound in the 19th century, the Gulden the 18th, ...

More millionaires just means a bigger wealth gap, another sign of an end of economic cycle, doesn't mean more whiskies are being sold.

Here's a link to number go up video: https://www.youtube.com/watch?v=xguam0TKMw8&t=773s

As to the whisky bubble question, I think it's almost a fool's errand to even try to predict it.  I've been thinking "surely it'll pop now or at least slow down" consistently for more than a decade now.  IE I was almost certain the acceleration of supply (from increased production and new distilleries) would finally do it, but it remains full-steam-ahead.  I personally don't think we're in a bubble.  A "bubble" implies it will pop.  I'm not sure it will ever really pop.  It will eventually cool when it finally reaches unsustainability, but I doubt it will implode completely**. 

That said... not to get all conspiracy theoryey, but maybe it depends whether the Davos crowd manages to succeed in eliminating the working middle class.      if that happens the bubble would indeed burst as demand plummets.

Before you laugh though, if you're middle class consider your situation now.  I'm reasonably well off, not rich but doing okay.  I consider myself middle class but in the last two years I've just about become working poor.  Like Karloff I can't afford things I used to, what were once normal expenditures are now luxuries only.  There are A LOT of people falling into this category. 

(Edit. **if the entire economy were to collapse, 1930s style, of course whisky would follow suit)

kevinmrn wrote:

VaryingViewpoint wrote:

Slàinte Mhath wrote:

VaryingViewpoint wrote:

No we are not in a bubble. Never have been. Number go up.

I think it is a bit more complicated than that. I hear exactly the same by everyone who recently bought a house or apartment, defending the timing of their purchase by saying that prices will always go up. Sure, if you have been in that bubble for 20 years, you become blind to the bubble. Quantitative easing and rising prices is all we know, so throwing money after things becomes the only way to go.

Being overly confident that there is no bubble and that prices can only go up usually signifies the end of the bubble. When I saw crypto advertisement in public transport in autumn 2021, I knew where things were heading. Have fun staying poor, they said to me. Well, no reason to find joy in their misfortune, as everyone is going to lose in a deflationary shock.

-Slainte

There is nothing complicated about a bubble, if it indeed a bubble exists. The fact that many have been stating for more than a decade that whisky is in a bubble over simplified why whisky prices continued to rise, and that many never understood what drove prices higher and why? Regardless of economic factors.

High quality whisky is a finite quantity. Whether it's fact or in some people's minds fiction. You can expect quality of new release to go down even further going forward due to cost restraints coming. And older classic releases from just 5 years ago will move up dramatically going forward. Not to mention most everything before 2015. 

Yes, more bottles will find their way to the auction markets as some will need to sell. However, regardless of the thinking that most don't drink expensive bottles that are purchased, the fact is many have been opened and drunk and shared across the globe these last 10+ years. And there are fewer and fewer of these prized bottles available every year to purchase. 

More millionaires are created every year, regardless of economic down turns. right now there are over 56.1 million millionaires in the world (it was at 45 million millionaires just a couple of years ago). Not even a third of all millionaires are able to own 1 bitcoin, a scarce asset that there is only about 15-16 million of and will always decrease in availability do to lost keys ever year. 

Number go up.

Number go up.  What's this number?

You should study economic cycles, its quite interesting, and we for sure are at the end of an economic cycle.

More millionaires just means a bigger wealth gap, another sign of an end of economic cycle, doesn't mean more whiskies are being sold.

Price.

We are at the start of a full decade of very high inflation like the 1920's. It's only 2022. 

It means more being purchased. And not just by millionaires. You don't need to be a millionaire to afford expensive bottles of whisky. And there are more of those type of people now than at any time in history.