The $ vs. the € & £ and their effect on Port buying strategy

[Derek T.]

Here it actually takes nearly 30 years to pay off the darn loans. I can't believe the banks don't go out more than 5 years over there. Wow!

We get loans of any duration but the fixed rate element is usually limited to no more than 5 years, after which it reverts to the prevailing rate. Typical mortgage terms are over 20 to 30 years, similar to yours.

[Moses Botbol]

I'm hoping that interest rates stay low long enough for it to trickle down to home mortgages... I'd love to re-finance my home loan and get a better rate on another 30-yr fixed!

If low 30 year fixed comes around, it will be a good time to buy a rental income property.

[Glenn E.]

30-yr fixed!

Are you joking? We get 2-5 year fixed rates here in the UK. 30 years seems like too much of a gamble on both sides of the deal!

Absolutely! In fact, the 30-yr fixed loan is really the "reference standard" loan in the US. Sure, the banks spend all of their time advertising their 2, 3, and 5-yr fixed/ARM rates, but the one most people use for comparison is the 30-yr fixed.

I re-financed my loan the last time that interest rates came down, but unfortunately I did it too soon. My rate is now 6.75% and if I had waited a couple more months I could have gotten it down to 5%.

If the current Federal rate holds for a while, though, I'll probably be able to bring mine down another notch or two.

What's fun is that you can re-finance, but then continue to pay the same amount and (typically) pay your loan off in half the time. An extra $100 per month payment can often take a 30-yr fixed down to about 15 years.

[Roy Hersh]

5% would be locking in a 30 year Fixed at the lowest rates I have heard of in my lifetime. I'd even consider converting over if that rate had zero points and no extra fees.

[Glenn E.]

Yeah, I'm kicking myself for not re-re-financing at the time. There are fees involved in every re-finance - sometimes they just hide them by rolling them into the principle - but as I recall that 5% rate was available to me with no more than one point (and I think it might have actually been half a point). I could have gotten either 5.25% or 5.5% without points.

[Moses Botbol]

I am going to wait until New Year before discussing with my Lender.

[Andy Velebil]

So here is some interesting info about Acutions in October...I think the numbers say it all

Aulden Cellars-Sotheby's, Oct. 28, 2008
Location: New York Number of lots: 190 Percent sold: 70

NYWinesChristie's, Oct. 25, 2008
Location: New York Number of lots: 643 Percent sold: 67

Acker Merrall & Condit, Oct. 18, 2008
Location: New York Number of lots: 1,178 Percent sold: 100

Zachys with Wally's, Oct. 3 & 4, 2008
Location: Los Angeles Number of lots: 1,847 Percent sold: 94.1

BIG drop in percent sold as the worlds economy went into the toilet.

[Al B.]

Back on topic after the diversion in to polictical and economic comparisons, I have to say that the relative strength of the dollar against the pound has meant that I have stopped buying port in the US for the moment. All my buying now is in the UK. Port prices are still holding up at the moment in the auction rooms, but the net result is that unsold percantage are starting to climb. Sellers are still holding out for unrealistic prices - a good example being recently a lot comprising 2 bottles, a 1970 Fonseca and a 1970 Croft. The highest bid was £40 but the reserve was £120. The result - lot unsold.

However, the auctions are starting to see buyers who need to sell, regardless of reserve. The proportion of lots without reserve is still very small, but seems to be increasing slightly. Perhaps next year will see some bargains around for any who are lucky enough to have a little disposable income.

Alex

[Roy Hersh]

However, the auctions are starting to see buyers who need to sell, regardless of reserve.

Alex,

I agree and this has a lot to do with wine speculators involvement over the past decade+. In your opinion, do your feel this "need to sell" has any more prevalence with Port compared to the more generalized wine auction marketplace?

[Al B.]

However, the auctions are starting to see buyers who need to sell, regardless of reserve.

Alex,

I agree and this has a lot to do with wine speculators involvement over the past decade+. In your opinion, do your feel this "need to sell" has any more prevalence with Port compared to the more generalized wine auction marketplace?

It's difficult for me to say as I just do not follow any of the wine markets other than the port market. I honestly have no idea whether the Bordeaux market has crashed by 50% since June or gone up by 10%.

However, what I have seen in the port market is that there are starting to be sellers who have built up stocks of port in the past - probably using the old rule "buy two cases, drink one and sell the other to pay for the one you drink!" - and they are now looking to raise some cash. I don't think these are speculators as the ports coming on to the market are often mature and not the names a speculator would invest in. However, there are also some large parcels of young and top reputation ports starting to float around the UK auction market and these could well be parcels that speculators are looking to sell out of.

The UK auction season kicks off again seriously in March, so maybe we'll get some more clues then.

Alex

[Roy Hersh]

Alex,

Thanks for your perspective!

Best regards,

Roy