Dear reader,
Right now, covid-19 got Europe and most of the world on red alert, with millions of people in quarantine and hospitals in distress.
Despite advances in technology and medicine, we have seen a few pandemics in the last 100 years, notably the Asian flu in 1957-1958 – killing an estimated 2 million people –, the Hong Kong flu in 1968 and the SARS, that in 2002 killed more than 800.000 people. The coronavirus, in almost a year, has killed more than 1.3 million people.
But what is most concerning are capital cities in Europe that have been taken over by police forces – in their efforts to control the virus to a point of almost imitating Hollywood apocalyptic films.
Europe is preparing for a severe, long lasting winter that is having a huge impact on the economy. The continent has had millions infected and millions under quarantine.
It is now the rule to face a second wave, and maybe a third one.
For all practical purposes, we are not fine, and the frightening scenario is beginning to play out as a déjà vu.
In short, this is the crisis.
The one that has made all doomsday scenarios become a reality.
The fall in GDP is comparable to the great depression of 1930. The economy is grinding to a halt. Ports are no longer shipping, international flights are mostly banned.
The key dynamic for recessions is loss of confidence – and all the ingredients are here for a long period of recession, if not depression.
Right now, in different places, going out is only allowed with each family member, always requiring wearing a mask – and more and more people being against masks.
Clashes on the streets in different European cities have become more frequent, with people more and more desperate with the state of their businesses and economic security.
Civilization and anarchy are only seven meals apart. Seven meals without food and nations can go from civil to savage.
Most people have no idea how close we are to anarchy, but all military forces know it – because they know how quickly a civilized society can spiral into chaos.
Luckily, there is no food shortage, because of quarantine, and no supply chain shortages, but this pandemic is an alert to our way of life.
What does wine have to do with this?
Covid-19 is also having an effect on the wine industry because of the massive hit on the leisure industry. And this is what demands your attention.
This pandemic is a world-changing event that can destroy savings and investments of wine companies. Hotels have been closed and will continue to be closed. Many Restaurants and bars are also closed, and more and more people are losing jobs.
This warning will not make me any friends. But expect the best and prepare for the worst.
Will fine wine be a priority in this context? Probably not.
So what exactly does this mean to you, as a wine investor?
It is still about supply and demand, but with far less risk than stocks – because of the limited production and the fact that it is made to be drunk.
Because it is a real asset among alternative investments, it also fares as a safe haven.
We are making our bet. Time to make yours too.
Until next time.
Paulo