Jonny McCormick

We need to talk about this unswervable issue. A press release reporting The Dalmore’s partnership with Whisky Highland to launch The Dalmore Investment Journal has raised hackles amongst many in the whisky blogerati. Accusations range from questioning the impartiality of whisky investment advice delivered via a whisky brand, rumours of the emergence of multi-million dollar whisky investment funds to misgivings that mischievous puppeteers are inciting a speculation bubble in the secondary market. Serious stuff, huh? So other than objections to a hubristic press release, why all the fuss? The crux of the matter is the mooted concept of ‘Investment Grade Scotch’. The indignation surrounding IGS stems from the holistic nature of whisky which evocatively appeals to all five senses – purely buying for investment seems to make a hard-hearted link with greed. Ex-banker Andy Simpson at Whisky Highland has built a business tracking live auctions, online auctions and even eBay and commercialised the endeavour by offering valuations as a service to individuals and businesses. Of course, whisky valuations can be freely provided by auction houses or by looking online at recent auction prices but many serious collectors seek multiple valuations, so Andy Simpson is offering a unique and accessible service and he knows what he’s doing. However, comparing the very best performing 10 bottles with gold and stocks or predict-ing the future size of the market have been easy targets for those feeling this talk is flagrantly stoking the market. The gold market does not operate in isolation and is buffeted by world economic affairs. Past perform-ance is not a great guide to future value whether its whisky or stocks but then, you’re smart enough to know that already.

Do we have any tangible evidence of a speculation bubble? Not really. Comparatively, whisky investing remains a small specialised market. It’s not going to have global repercussions so forget comparisons with the dot.com or subprime market: stamp collecting or comic books are closer parallels. DC Comics’ The Death of Superman was attributed as a factor which preceded the collapse of the comic book market after the industry had become increasingly dependent on using fancy limited edition covers over familiar storylines. True enough, external non-specialist press and the financial media are taking a growing interest in expensive whiskies but their appraisals have lacked insightful criticism due to naivety on the topic. Globally, the ranks of buyers and sellers at auction have expanded, especially in emerging markets (the Fine Wine trade has notoriously witnessed this particular hoopla). Are whisky companies investing more time and money courting new customers with large disposable incomes? As businesses, they would be fools not to, but the gulf between accessible whiskies and luxury whiskies has never been greater. Consequently, stratification risks further fissuring the whisky community, polarising them into the haves and will never have. Unquestionably, certain bottlings in the secondary market have seen a sharp spike in value, but the majority are accumulating slowly, some are static and some falling. Investment funds may be attracted to the healthy gains suggested by the press release but the imposition of a wealthy hegemony with the power to potentially influence parts of the auction market remains repugnant to many a connoisseur but an inevitable progression for others. Risk stalks the landscape but the antecedents of the debacle predate this press release. The contrivance of IGS may be pilloried at present, but with perspective, rare collectable whiskies will retain their intrinsic value and appreciate over the long term based on taste, avail-ability and distillery of origin.

Demand is unlikely to dissipate despite the hullabaloo.

Ian Buxton

History teaches us to beware whenever whisky and investment occur in the same sentence. Be it the distillery investment boom of the 1880s and 90s; the Pattison scandal or, more recently, the Glennstewart International cask sales fiasco the end is the same – the unlucky small investor limps away nursing a substantial loss.

But the ‘investment’ bandwagon rolls on, enthusiastically promoted by a shadowy caucus of distillers, retailers and auctioneers. A highly sophisticated PR campaign generates fulsome national press articles by journalists who really should know better. Quoting theoretical paper returns that ignore transaction costs, as too many have done, is careless at best. Their readers deserve better, so do not be seduced by their blandishments. Look for the vested interest: ask who is behind this advice and what’s in it for them?

Be sure that some people are making money, but then some people made money in Holland selling tulip bulbs; some cashed in with the South Sea Company and doubtless someone profited from the first dot com crash. With this particular bubble it’s unlikely to be you.

Buxton’s First Law of Investment states that by the time an alternative investment idea appears in the weekend lifestyle supplements the smart money has been made by insiders – and they’re about to move on. Guess who delivers their profits?

There’s a more fundamental point. If you care about whisky, really sincerely care, then you will readily appreciate that ‘investment grade’ whisky is not simply a specious concept but a damaging one. Whisky that is never going to be drunk; whisky whose future is to be traded like an ingot of bullion; whisky forever condemned to be the slave of the spreadsheet is whisky that will never fully live; whisky devoid of meaning; whisky without a soul. Reduced to a mere barren commodity there may as well be cold tea in the bottle, no matter the lavish packaging. Remember the fable of the Emperor’s New Clothes and you may look on the most elegant of bottles and see a rotting corpse beneath the silk.

Whisky attains its highest state when it is consumed; its apotheosis poignantly coinciding with the moment of its destruction. Only then is its destiny fulfilled. Whisky is disputation, conviviality, a metaphor for a nation’s identity and sense of self-belief; whisky is romantic, metaphysical and phantasmagorical; as Burns relates, whisky is: “the poor man’s wine”.

Where’s the harm, you enquire, resolving never to buy for investment. But, like a malevolent virus, an insidious inflation distorts all whisky pricing. Seeing distiller B achieve a stellar price for their whisky distiller A follows suit.

Much brand positioning is defined by a brand’s position relative to a number of other marker brands. Marketing people spend much time and energy tracking their rivals.

As one moves up, so does the pack. Thus super-luxury, investment pricing perniciously drags the whole category behind it. Consumers lose as prices climb inexorably higher.

By all means collect whisky and enjoy it as you will but do not succumb to the siren calls of self-serving false prophets.

If you want an investment, buy Diageo shares (up around 40 per cent in the past 12 months; easily traded and paying a dividend) –remember, as Shakespeare tells us “All that glisters is not gold.”