Is the coronavirus financial storm a whole new world in the making?

by Mar 24, 2020Thinking outside the bottle0 comments

stock-market-coronga.jpg

(Paulo Pinto

Founding member, Alti Wine Exchange)

I have been holed up the last week. Not only because of my quarantine, but because of the financial storm, which gives me plenty of time for thinking about markets. How in the world did we get here?

Finimize says “Investors in search of safety helped push the value of the US dollar higher last week to highest level in three years – and the value of the British pound fell to its lowest level against the dollar since 1985”.

I will be brutally honest: this is not good. I understand this does not sound well when you are at home sitting in a recliner, but as I said, I have more time to think and to connect the dots.

We are having the biggest rescue package ever. Money is being printed like there is no tomorrow and the US dollar is now 10% more expensive, which is terrible for emerging markets and only good for anyone holding treasuries. For how long?

Maybe it’s time to remember that on January 17, 1917, over 103 years ago, as the Great War raged in Europe, the government of the United States signed a deal to purchase the Virgin Islands from Denmark. The US government paid “a sum of twenty-five million dollars in gold coin of the United States”.

US purchase of the Virgin Islands.jpg

 

Obviously, US$ 25 million was a lot more money back then. But given the change in the gold price over the years, US$ 25 million worth of gold in 1917 is valued at US$ 1.7 billion today.

Today, we do not have a gold standard. We have a dollar standard, and the FED frenzy of money printing is sending the purchasing power of the dollar over a cliff.

So even if it seems a valuable asset in the short term, do not forget that in 2008 the US government debt was about US$ 9 trillion. It has nearly tripled since then. And the longer we have this virus crisis, the larger the debt will be, reaching numbers not conceivable today. After all, the Virgin Islands cost just US$ 25 million, which is the price of some of the properties there nowadays.

***

That is the reason investing in fine and rare wine at Alti Wine Exchange for the long term is a good decision: because having real assets is real.

And maybe, it’s not going to be that much of a long term if we consider what we read yesterday in the South China Morning Post: ‘’Hong Kong to ban overseas tourists and alcohol sales at thousands of bars and restaurants’’.

This, because of a spike in infections – most of them imported. Which means the rest of the world can expect the same after this first tsunami. That means a longer shut down of the world economy, and more stimulus.

The ban on alcohol is a novelty, but it’s just a reminder that whatever decision governments take in the next few weeks could have an impact for the next few years in many industries and many companies, especially if they have debt.

Suspending all international travel for months is now a real possibility and will cause tremendous economic problems, and maybe a new world order when all of this is finished – but for sure a new way of life.

____

To read more of our analyses and posts, click here.

Explore More from Our Blog

Ever heard of a wine cocktail?

DEAR READER, I hope some of you learned from the reader letter last week [hyperlink to Week Ten post] and checked your attics! You never know how much wine sits above you, waiting to be uncorked and decanted—on someone else’s dime! Dear Sommelier Ferdinand, I have a...

What on earth is a ‘Wine Decanter’?

DEAR READER, It’s come to my attention that many of you are ill-informed, misinformed, and frankly, uninformed about how wine is to be consumed. Were I only a wine enthusiast, it would be wholly dispiriting. But—wine is my profession, and I’m obligated to recognize...

“What’s My Next Question?” – Benjamin Kaplan

What’s My Next Question? On a random day like today 11 years ago, a legendary Harvard Law professor and lawyer, Benjamin Kaplan, died at 99 years of age. A rich, marked life that left an impact long after his last breathe. Apart from influencing the likes of Ruth...

Wine that Makes You Look Up

Wines that Make You Look Up Can you imagine having a device that magnifies your view and never thinking to look up, never pointing it toward the sky? Until August 25, 1609, nobody had. Enter Galileo Galilee, the man who changed the way we see and interpret all that is...

Should you be swirling your wine before consumption?

DEAR READER, Through all the melodrama of the past few weeks, I’ve neglected to educate the newcomers about the art of winetasting. So, I dug deep into my inbox for this query: Sommelier Ferdinand, I went to a ball last night and wasn’t aware of the proper pre-drink...

Sommelier Ferdinand answers “What’s the point of drinking wine from a hundred years ago?”.

DEAR READER, I’ve heard what you’ve all had to say, and I’ve decided to reach out to Jerry, once again, to bury the hatchet. Who’s to say if he would be open to making amends… but I made the effort, on behalf of all you insightful readers! I’ll keep you all updated on...

BOXED WINE AND AN ANGRY RECIPIENT – A FOLLOW UP

DEAR READER, Something unprecedented has happened. My assistant has received an additional letter from Jerry. Remember him—from last week [READ HERE] Well, our beloved wine purist wrote back after reading yesterweek’s column: Sommelier Ferdinand, I don’t care about...

Transcending Time through Wine

On August 11, 1888, The Scientific American published its 658th issue, replete with exciting findings. From “A Study on Whirlwinds,” to “The Distillation of Peppermint" and thoughts on the human conscious, this popular science magazine had already been around since...

Boxed Wine and an angry recipient.

What an experience, to receive all your criticisms. That would shake any normal individual. But I’ve spent years having my judgments under a microscope, so I’ve learned to shut my doors to it. You are all welcome to try—but I won’t be changing any time soon! Speaking...

Sommelier Ferdinand answers “What it takes to become a Sommelier”.

DEAR READER, As the grapes grow richer, so do the bottler and buyer! Wine is an investment, my dear readers. Never forget the long game! Now, for some advice you folks have solicited: Sommelier Ferdinand, I want to be a sommelier, like yourself. I have the respect for...

Harry Potter and the Magical Creation of Seña 2007

On July 21, 2007, J.K. Rowling released her seventh and final book of a most memorable series. In just 24 hours, Harry Potter and the Deathly Hallows sold more than 11 million copies! On that same day, in a land more fascinating than Hogwarts, Seña 2007 was getting...

This week Sommelier Ferdinand answers the difficult question “Which do you prefer: Red or White?

DEAR READER, Some wrote in after last week, wishing me happiness…? Sending me love…? What do you all think, I’m still in love with Matilde? Save your pity for someone who needs it, I beg you! Anyway: Sommelier Ferdinand, Which do you prefer: Red, or white? -Clarise...