WineLeaks #18 - Bordeaux 2020
And a bit of market drama
Good morning wine lovers,
Last week, the Union des Grand Cru de Bordeaux hosted their annual tasting in London, showcasing the recently bottled 2020 vintage, and I was eager to see how the wines have turned out. I feature some of those wines in today’s WineLeaks — which is a bit longer (and later) than usual!
If you are new, you can join here to receive straight to your inbox updates about this project, WineLeaks, a curated overview of the wine market, and other in-depth reports.
Subscribe for free to receive new posts and support my work.
The Market Take
📅 Week 45
Markets in a Minute
Inflation (CPI) 12-M to October:
US +7.7% ↓ / UK -- / Euro +10.7% ↑
Interest Rates (Bank Rates):
US +3.75% / UK +3.00% / Euro +1.5%
S&P 500 (5D):
Crude Oil WTI (5D):
CBOE Volatility Index VIX (5D):
US$ Index DXY (5D):
▪️What happened in the markets last week?
A lot. You win some, you lose some. I know you are here mainly for wine — but some of the events this week may or may not have a ripple effect on other assets, including fine wine.
FTX Files For Chapter 11
FTX, the third-largest crypto exchange, growing in size and recognition over the past two years, filed for bankruptcy.
What happened? On November 2nd, CoinDesk, a news website focusing on crypto, published Alameda’s balance sheet, revealing its incestuous relationship with FTX. Alameda is a trading firm also owned by the founder of FTX, Sam Bankman-Fried.
Alameda was facing a barrage of demands from lenders after crypto hedge fund Three Arrows Capital collapsed in June, creating losses for crypto brokers such as Voyager Digital.
It later emerged FTX had lent $10bn of the $16bn of crypto-assets customers had entrusted with it to Alameda, to help it meet its liabilities, which the trading firm is alleged to have used to make risky bets.
In addition, the Securities and Exchange Commission (SEC) is said to be examining whether the platform (FTX) is following securities laws related to the segregation of customer assets and trading against customers, Reuters reported. The probe began a number of months ago.
Binance CEO Changpeng Zhao said he’d be selling his remaining holdings of FTT tokens but a few days later Binance announced a non-binding letter of intent to buy FTX subject to due diligence. Binance officially walked away from the deal after a few hours of checking its books and loans.
On Friday, FTX Filed for Chapter 11.
Trust in crypto-currencies
Market cap of Robinhood
Ripple effect ??
The collapse of the third largest crypto exchange, FTX was quite a blow to the digital token market. "FTX going down is not good for anyone in the industry. Do not view it as a win for us. User confidence is severely shaken," wrote Changpeng Zhao, the chief executive of FTX's larger rival, Binance.
The fallout from these revelations included a nosedive in the value of ftt, a token issued by FTX. The collapse of FTX and the uncertainty it has brought to the crypto industry is a damaging blow — prices of bitcoin et al. remain under pressure and vulnerable to further sharp declines.
Will that impact the broader market and the economy? Some analysts think it’s an isolated case — such as the one appearing on the BBC, Dan Ives, an analyst at Wedbush Securities, said he did not think FTX's troubles would spark wider problems in the stock market.
"It's a black swan event. There's really no bleed over into the overall market, there's containment," he said. "That's extremely important and another positive signal in terms of the walls between systematic risk and not."
Others - such as, in his most recent piece, talk about the current economic environment in terms of the mechanics of a tsunami:
The financial system, conditioned by low-interest rates, is struggling to cope with a historic acceleration of interest rates. As rates rise and liquidity gets pulled out of the system, the tide is receding and exposing a variety of previously unsuspecting naked swimmers [read: FTX].
At the same time as the FTX was filing for bankruptcy, in the US, inflation data showed an increase by a less-than-expected annual rate of 7.7% in October.
Yield on treasuries
The stock market soared. The S&P 500 index finished 5.5 per cent higher on Friday, while the yield on the benchmark 10-year Treasury note fell 0.27 percentage points to 3.82 per cent, while the DXY (the dollar index against a basket of six peers) dropped 2.3%, its worst day in seven years.
Why? In a number of the inflationary historical bear market cases, equities turned up just as inflation turned down from highs. Across the historical cases, however, the turn in inflation was accompanied by a meaningful economic weakness that required the Fed to choose between inflation and economic pain. And as discussed, this weaker growth and high unemployment was itself an ongoing downward pressure on inflation.
However, today, moderating inflation is not accompanied by weaker growth and inflation seems unlikely to hit central bank targets any time soon.
The Wine Market Update
(MoM = month on month)
Livex 50 (MoM):
Livex 100 (MoM):
Livex 1000 (MoM):
▪️What happened in the fine wine markets last week?
Liv-ex published a report showing the most profitable Bordeaux vintage: 2014, known as the best-rated ‘off’ vintage of the modern era.
This analysis doesn’t have much standing as the vintages have different released dates and judging them over the same three-year period is irrelevant.
I suppose it’s an interesting trivia to know.
In other news, Matteo Ascheri, President of the Consorzio di Tutela Barolo Barbaresco Alba Langhe e Dogliani confirmed to The Drink Business that the Barolo en primeur was set to become an annual official appointment from 2024.
Having shared this news, some people don’t like the idea because ‘it doesn’t benefit the final consumer’ and others believe en primeur altogether to be a marketing stunt.
On one side, you’d have a build-up to the release — more cohesive information regarding the vintage and a wider exchange of ideas on the wines. It is a marketing stunt, but one that increases the profile, transparency and awareness around some wines in the area. I think that’s a benefit to the consumers.
Will the prices go up? Probably. But at the same time I do believe that the current prices are too low, when accounting for the quantity produced, the quality of Barolo DOCG and especially when compared to Bordeaux and Burgundy.
My only worry is the risk that — like en primeur — allocations will be controlled by few(er) operators in the market. I hope not.
Bordeaux 2020 wines
Another week, another GCC tasting. This time it was focused on the 2020 vintage. Here’s a summary of the main characteristics:
Quality: 2020 = 2018; not as consistent as 2019, 2016, 2010
Could find dry tannins that are sometimes underripe esp. in second wines
The Right Bank had an easier time: less rain in August, with clay-limestone soils that kept the freshness
Top scores by critics favour the Right Bank wines
I’ll pick one wine in each of the main AOCs to discuss but you can find the full list of wines in the vintage with individual scores that I downloaded from BordOverview, with the £ updated min prices & the link to wine-searcher.
Link to the 2020 Bordeaux (on ‘2020_Bordeaux’ tab)
We need to talk about Pontet-Canet.
I am completely intrigued that this wine comes highly recommended by all wine critics: Anson (97) and Perrotti-Brown (96-98+). Robinson gives it a less-enthused 17.
I didn’t enjoy any of the most recent vintages: 2017, 2018, 2019, 2020. While tasting it (on three separate occasions), I received similar feedback from people around me, MWs, wine merchants and sommeliers. I tasted it a few times and then went back to it some more. I just don’t think it’s good.
But who am I to judge? It’s better you listen to those more competent wine experts.
Jane Anson hailed Château Pontet-Canet as a serious over-performer “a brilliant wine in this vintage”. Lisa Perrotti-Brown MW writes in the Wine Advocate: “This is a singular, fascinating expression of the vintage and highly recommended!”. Jancis Robinson says: “This should mature into something really exciting. Real energy here.“
This discrepancy that I cannot riconciliate is driving me mad — what do you think of Pontet-Canet? Let me know.
In terms of value itself, I would pick the muscular Grand-Puy-Lacoste or the distinctly-Pauillac Batailley ahead of Pontet-Canet. If I were to follow my taste buds, I would choose Pichon-Longueville Comtesse de Lalande — a stunning wine and easily among my favourites in Bordeaux.
Densely-coloured, classic, spicy and rich are the 2020 wines of St-Estèphe. Cos D’Estournel, Montrose and Calon-Ségur all presented with elegance and definition.
Calon-Ségur is classified as 3rd growth, but Jane Anson in Inside Bordeaux re-classifies them as 2nd growth. She particularly believes that its soils have a killer combination of gravel and clay typical of St-Estèphe which “transmit a powerful shot of ageing potential and concentration to the wine”.
For the 2020 in particular, Calon-Ségur presented a “concentrated, chiselled and juicy, this has clear personality and equals the great, classically balanced vintages of Calon like 2016.” It finishes with impressive length and depth. Fantastic wine!
It received 98 from Anson, (95 - 97)+ from the Wine Advocate, 18 from Jancis Robinson. A few months ago, Liv-ex produced a historical analysis of the château — showing a very low aggregate critics score for the 2020 vintage. That tells me that Liv-ex benchmark score must be heavily dependent on Neal Martin’s, the only among the top wine critics who awarded Calon-Ségur a score lower than 95 points (or eq.).
While the Liv-ex report is recommending 2019 as it’s trading at a 11.7% discount from the 2020. A word of caution: 2017-2019 vintages showed atypical Calon-Ségur in their concentration and character. William Kelley was particularly critical about the high alcohol levels in the 2019.
It seems as though St-Julien didn’t shine bright as most years in 2020. Léoville-Las-Cases and Ducru-Beaucaillou performed well still, but it wasn’t one for the annals. So let’s talk about the smallest of the appellation’s classified properties — Château Saint-Pierre.
And the cheapest.
Planted to 75% Cabernet Sauvignon, 15% Merlot, 10% Cabernet Franc, it’s one of the underdogs of the appellation, which is gaining more exposure and recognition. Once again Jane Anson upgrades this domaine from a 4th growth to a 3rd growth, as it’s situated in the heart of St Julien, directly opposite Ducru-Beaucaillou, a stone’s throw from Beychevelle and Branaire Ducru.
Investment-wise, when buying gems at undervalued prices, it’s better value-for-money to buy an ‘on-vintage’ (the opposite is true for 1GCC: buying ‘off-vintages’ at discounted prices is the better strategy). 2016 is the most effortlessly incredible vintage in St Julien, and St Pierre is right up there with the best examples you can find. It is one of the most Pauillac-like wines, the tannins are pretty fierce, and it needs time but it will reward ageing.
A very well-crafted, understated, elegant wine that will age for 20 to 30 years.
Jane Anson awarded Left Bank wine of the vintage crown to Château Margaux. Needless to say, there were a few wines here worthy of attention in 2020. Along with Margaux, Rauzan-Ségla & Palmer set the bar for high quality in this AOC.
While Rauzan-Ségla is certainly a must-buy in 2020 — the 2016 is still priced at modest 6% premium, which makes it a great bargain!
Among the top wines of the appellation, Château D’Issan is an undervalued estate worth watching out for.
D’Issan is a 3rd growth which, in terms of quality, has been scored as 2nd growth by Anson in Inside Bordeaux. Issan had suffered from decades of under-investment but has since the mid-90s begun upgrades both in the vineyard and the cellar worth €10m. It offers some good value Margaux.
In terms of the price difference, it’s once again better to invest in 2016 rather than a lesser vintage, especially in cases such as this one whereby the price difference is zero.
Do you remember when I made the case for Vieux Château Certan 2012 in WineLeaks #12? It seems that, differently from Margaux above, in Pomerol, the wine’s prices levels are driven by the brand (of course!) but then purely by vintage and critics’ score.
Vieux Château Certan 2020
There were quite a few estates that received high appraised in 2020 and among those Vieux Château Certan stole the heart of a lot of wine critics. That’s why the price is also higher:
There are going to be two ways to approach this: 1) Just let the remarkably sensual, inexplicable beauty of it wash over you or 2) Try to unravel all those intricate layers and have it blow you mind. Either way, this is simply an incredible achievement—bravo Alexandre and Guillaume Thienpont!
In 2021, Europe was facing one of the largest shortages of raw materials with a consequent increase in prices. Therefore, a lot of estates came out with higher release prices en primeur to make up for that. Vieux Château Certan increased their release prices by 33% on their 2019. In their case, they were helped by raging reviews.
Currently, the 2020 vintage is selling for £250, the 2019 for £236. It’s not a big difference at all — but why go for the lesser vintage? In Vieux Château Certan’s case, the difference is so minimal that once it’s released in bottle, being available more widely might actually boast its price.
The same price dynamic, albeit more marked, can be observed with one of my absolute favourite wines — Trotanoy. Their widely acclaimed 2020 vintage is selling for £311, while 2019 for £253. Which one to go for? In this case, I’ll probably pick the 2019.
In addition to the price increase, I believe there’s also a supply-demand ratio here. 2020 was a vintage that somewhat disappointed everywhere else but some, generally Right Bank, names stood out. Critics awarded the best scores and buyers jumped on them, inflating 2020 prices higher.
For St-Emilion, Larcis Ducasse is still, in my view, a great investment. Check out the investment thesis on WineLeaks #12.
The greatest success of the vintage, however, was Canon. Nicolas Audebert and his team also work at Château Rauzan-Ségla, to craft another wine that was among the top of the vintage. Jane Anson awarded Right Bank wine of the vintage crown to Château Canon, with a 99-point score. And she was not alone — it was hailed as an “exhilarating triumph!“ by most of the critics. And for that reason, the 2020 Canon has been released for €96 per bottle ex-négociant, up 37.9% on the 2019 release.
Is 2020 Canon overpriced?
Yes, I think so. Saturnalia also agrees. However, you can see that I’ve bought 2019, 2016 and 2014 Canon for the Saturnalia Model Portfolio in the October update.
I could not close this 2020 without mentioning Château La Mission Haut-Brion. Certainly not the cheapest, but what a brilliant wine, and underpriced too!
La Mission Haut-Brion, 2020
Tightly in control, superbly elegant, this 2020 is a stunning expression of the vintage!
I hope you enjoyed this edition. If you did, why not share it?
Directory of All Investment Cases
New? Sign Up Here
Got Feedback? Just Hit Reply
IG: In the mood for wine / Twitter: In the mood for wine
My investment thesis, risk appetite, and time frames are strictly my own and significantly different from my readership's. As such, the investments covered in this publication and in this article are not to be considered investment advice nor do they represent an offer to buy or sell securities or services, and should be regarded as information only.