Roseman: How to capture wine 'value'

ALTERNATIVES

One of the drawbacks from investing in assets like silver, wine, art or gold (SWAG) is that mainstream analysts typically default to rejecting the asset class because it lacks an income stream.

Finance 101 has taught such analysts that an asset needs an income stream in order for it to have an implied value. Yet, as Dylan Grice of Soc Gen so eloquently put it: “Suppose we think of a typical SWAG asset. It has finite supply and stable to rising demand, but it offers no cashflow. When we discount its future cashflows, they sum to zero. So using a discounted cashflow model, such an asset has zero value. Therefore, a Picasso has a zero value. But a Picasso clearly does have a value. So the model is clearly limited.” It is seemingly easy to dismiss many tangible assets like wine pre...