WHISKY – LIQUID GOLD?

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WHISKY – LIQUID GOLD?

I had the great pleasure of a short break in the Scottish Highlands in May this year. We stayed near Inverness, at a delightful B&B very close to the small village of Drumnadrochit. We had a fantastic view of Loch Ness, though given that I am something of a sceptic, didn’t venture into any of the monster museums.

Anyone that has been to the Highlands knows that the scenery is utterly fabulous. Huge wide open spaces, big skies, much like America. A part of our trip included visiting a friend who has set up a Whisky Bar in the distillery capital of Scotland – Dufftown. The Seven Stills has a wonderful little restaurant and vast supply of whiskys, do call in and say I sent you.

Anyway, I saw a piece on the news about a fire at a Jim Beam warehouse in the US. This reminded me of a tour around one of the distilleries we visited (well, it would be rude not to do so). The tour was interesting and by the end of the tour our guide was highlighting the merits of investing in whisky. There are huge prices being paid for whisky. Serious money snaps up “new” products (for which read, distilled and laid down about 50 years ago) and now decanted into bottles.

SOLOMONS IFA LIQUID GOLD ANGLE SHARE

Water to Whisky

I’m sure that for some there is money to be made in whisky, but not for most. Investing always comes with costs, these are explained and shown on your statements. The format has improved, but they are nothing short of useless in terms of explaining value. Stating the price of something is one way of showing a value, but.. whisky is designed to be consumed. Basic economics of supply and demand will inevitably mean that price rises with scarcity.

Angel’s Share

There are storage, security, insurance and maintenance costs incurred by a distillery for many years. The distillery I visited was holding a few barrels (casks) certainly as far back as 1967. A typical cask holds about 200 litres. The casks themselves are second-hand and from around the world, (typically Spain, Portugal and America) depending on the desired result would be changed to provide a different flavour to the whisky. Most casks last for up to 60 years. They leak and have to be fixed by a trained Cooper (there is a 5-year training process). The whisky evaporates and tends to lose 2% a year of its alcohol by volume every year! The distillers call this “The Angel’s Share”. I might call it an annual cost of 2%.

When a bottle finally goes on sale for a price of say £40 in most cases it has been in production for 12 years. The longer the production, the more expensive. To sell your cask (if you had bought one) from 1969 you are essentially selling something that has taken 50 years to produce, 5 decades of patience and “leaving well alone”. There have been 50 years of costs and inflation. This fact alone leads to the conclusion that there would be a very limited supply. Hence the £5,000 price tag for a bottle of 1969 Glenfarclas Family Cask S16, 2451. Yes, this is subjective to collector opinion. A 1999 “similar” bottle would be £265 for a 20-year-old bottle (new by comparison).

Inflation and intoxication

If we could have bought the bottle of 1969 Glenfarclas for £40 in 1969 today it would now cost £641.92 purely due to inflation over 50 years. So whilst this goes some way to explaining a £5,000 price tag, it is obviously only part of the story… the rest is in the perceived value, restraint and costs over 5 decades. In many senses there is also the survivor and success premium – of lasting the distance. You are only able to purchase what has survived. In the same way that you can buy shares in Shell but not Barings.

Leave it alone – stay off the good stuff?

If you are going to buy “alternatives” or “collectables” you basically have to leave them alone and wait for the impact of inflation, scarcity and perceived value. This might sound easy, but the temptation not to drink or consume your investment is fairly great in this instance. It is hard enough to persuade investors in mainstream investments to leave their portfolio alone each year, but for 5 decades? Even the Angels take something each year…

As for the fire at Jim Beam, it would seem that they lost 45,000 casks in the fire. This may have some impact on the price of casks sold to whisky producers around the world (in America the cask cannot be reused). It will also greatly increase the price of any surviving casks, but otherwise, I do hope they were insured against fire.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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WHISKY – LIQUID GOLD?2019-07-04T14:19:36+01:00

The Trouble With…

The Trouble With…

It seems impossible not to feel a sense of despair sometimes when you see, read or hear the news. When there are atrocities on our own streets or we see yet further mindless violence in countries with whom we have deep and long connections, the sense of despair is palpable. However bad or inept the reporting, I remain thankful that I live here in the UK.

I’m not alone in thinking that the man currently elected as President of the United States is simply not fit for the task. He is out of his depth and displays his evident lack on a daily basis. We have come, (well…I have) to expect very little from him.

Viva Espana?

Spain on the other hand, is a country that most of us know almost as well and the US. Our language barrier is possibly helpful as we tend not to make too many assumptions about each other. Yet I am struggling to understand what goes through the mind of a policeman in the Spanish Civil Guard who appears to enjoy stamping, beating and fighting anyone he deems to be “opposition”. The images that have crossed a multitude of screens are truly horrifying. Whilst the vote for independence may be “illegal” it is clear that a very significant proportion of those living in Catalonia do not wish to remain part of Spain.

Splitting Heirs

As an Englishman and a British citizen, I’m aware of the calls for devolution of power and potential independence of Scotland, Wales, Northern Ireland and perhaps Cornwall. This is unsettling to my sense of what is “normal” but of course the history of our own union is relatively recent and things were different before, much as they were in Spain, Italy, Germany, France, Prussia and so on… borders change. We do not keep the peace by pretending that all is well. We do so by listening to the perspective of the other. As in a marriage that reaches the point of irreconcilable differences, we need to acknowledge that sadly (perhaps) the best course of action is to separate and ultimately to agree to the new legal state of all parties concerned. This will have some genuine difficulties, just like a divorce, the division of resources and accounting for what belongs to who is painful. Those of you that have been through a divorce will understand this more pertinently than those that have not.

Head of State or State of Mind?

The suggestion that “the law” is to be upheld as though it is never altered based upon real experience is nonsense. The law is formed from experience and always evolves to reflect the changing nature of society. When a Monarch, President or Prime Minister fails to grasp the sense of unfairness felt by “their own people” preferring to support aggressive legitimised bullies, it seems to me only right to call them to account.

Ceteris Paribus

What has this to do with financial planning? We make assumptions about the future all the time. The biggest ones are those we don’t even verbalise – such as a relationship lasting. At my annual Institute’s Conference, last week, I expressed this view and to be honest, it didn’t seem to “land” with the small group that I was with. We talk of risk – typically investment risk, but also political and economic risk, occasionally the risk of health or redundancy, but rarely the risk of relationships ending. It is the elephant in the room with all couples, do we talk about the risk of irreconcilable differences?

I’m reminded of the saying “the pessimist complains about the wind, the optimist expects it to change, the realist adjusts the sails“.

Feedback welcome, but not for a debate on the issues of Scottish Independence or devolution, or even what’s going on “abroad”. We can only control a very small number of things, but our ability to face up to our assumptions is one of them. For the record, I “love” Britain, Spain, the US but I prefer human dignity over any flag.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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The Trouble With…2017-10-05T14:37:39+01:00

Could Financial Services Be Beautiful?

Could financial services be beautiful?

I wonder how many of us watched the final of the European Football Championship. The final was a footballing spectacle, with Spain beating a very good Italian side 4-0. The sports psychologists will have something to say about the score-line, but this was a world cup winning team perhaps at its best.

The pundit “experts” were left gob-smacked by the sublime passing and control that the Spanish side seemed to have in abundance. I had every sympathy with the Italians, who despite playing with 10 men for a large part of the second half, held on nobly. However one wonders if the result would have been much different if they had fielded 15 players – and Italy are good!

I have a confession, I’m not madly into football as some are. However, I do like to see good goals, team spirit and tenacity. I don’t like all the silly falling over and cries of “foul play”. I enjoy the drama of sport, but when sport becomes predominantly about winning it loses its purpose.

I know that these days it is simply a business, but something of sport is lost when winning is the only objective, which is why finals are usually so dull. One of the pundits was so in awe of the performance that he said that “football has just been reinvented”.

This made me wonder whether the collapse of faith in the Banking sector and generally within financial services is perhaps a good thing. There is certainly a need to reinvent a better way of managing risk and oversight of it.

There is also the enormous need for good financial planning which will help determine what level of risk needs to be taken on an individual level. The competition within the sector is in all the wrong things – performance and returns. A reliable, honourable and dare I say it, beautiful banking or financial services system is all about the why and how – not the what. It is time for a collective rethink.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Could Financial Services Be Beautiful?2017-01-06T14:40:00+00:00
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