Rare Whisky Outperforms Blue Chip Investments… Or Does It?

Buy Whisky For Drinking, Not Investing

By Richard Thomas

The end of last week saw a torrent of business stories based on The Rare Whisky Apex 1000 Report, trumpeting that rare Scotch whiskies are now a better investment than blue chip commodities such as gold and petroleum. For those who pay attention to the world whiskey trade, this is nothing new. Indeed, it would be impossible to ignore with are so many people out there flogging their services as whisky investment advisers.

That last part should be the only warning you need to recognize a bubble scenario when you see one. Auction prices for rare Scotch whiskies have skyrocketed in recent years. Looking at Wine Searcher’s list of the most expensive Scotch whiskies, the top nine all have average prices in the five-digit range. No one is disputing that single malts that are both very rare and very old are fetching a pretty penny these days, but there are two salient facts to absorb about stories like those appearing last week before you run out and buy some as an investment.

First, the charts presented by Rare Whisky 101 and articles like this one from Bloomberg charts compared the Rare Whisky 101 whisky index against four investment options which are all in the tank right now. They aren’t saying “this is how we are doing against other commodities on the rise” but “this is how we are doing against these options that are on the decline.”

Oil, for example, is in a historic slump. The price of oil enjoyed a high, stable run of prices above $90 a barrel for about five years before beginning a slump down to its current record lows. If prices keep falling, oil might soon hit a 14-year low. Likewise, gold is coming down from a grossly inflated peak of the type last seen in the 1970s. Comparing whisky to gold works if you are pulling an April Fools prank, but it’s misleading as investment advice.

The second thing to remember is the classic investor’s axiom: “buy for a little, sell for a lot.” That means if you already have your hands on a stash of decades-old single malt, now is the time to part with it. If, on the other hand, you are trying to buy into the Scotch whisky collectors market with an eye on turning the profit, what you are really doing is paying off the guy who already has the collection.

When I saw those charts like what I saw on Rare Whisky 101, my first thought wasn’t “I should run out and by some 50 year old single malt!” Instead, it was “now looks like a good time to get into oil.”