How Bonhams Helps To Inflate The Bubble – A Case Study

by Oliver Klimek on October 31, 2012

This is a followup to my recent article about the failed Bowmore 1957 auction. After it had been published I was pointed to an interesting blog post that gives us a different angle on the whisky pricing issue.

Curiously, Bonhams is involved again. This is because of another outcome of their recent New York auction that would probably have gone unnoticed if it was not for the clever folks of the L.A. Whisk(e)y Society who reported that quite a few recent cheap bourbon bottles were misdescribed as “ca. 1950s” and hence sold for triple digit bids.

Of course this touches the subjects of sincerity and professionalism of a well-reputed auction house. I don’t want to accuse Bonhams of deliberately misleading bidders, but if they did not intend to do so, then their whisky experts must have had a very bad day when they were writing the lot descriptions. It is their bloody job to make sure a description is as accurate as possible, regardless of any exclusion clauses in the terms of service. Describing a 1996 vintage bottle as “ca. 1950s” is inexcusable.

But in a twisted way we can be thankful to Bonhams here. The high auction results for these El-Cheapo bourbons perfectly highlight the current situation of the whisky auction market. People buy those presumable ‘dusties’ blindly without even knowing what liquid they bid on: modern bourbon of unknown provenance exported in bulk and bottled elsewhere under fancy names that – (im)properly described – give the illusion of long-lost brands.

Buyers without any fundamental knowledge have entered the whisky market and pay ludicrous prices for bottom-shelf booze. This is a textbook symptom of the approaching end of a speculative bubble. And of course those fools don’t only bid on misdescribed bottles. They also buy the real goodies with the same amount of ignorance. For instance a bottle of Ardbeg Day was sold for €243 at whiskyauction.com this September. Rare, expensive, old, bingo, who cares about the price then, the only way is up. They can only be saved by even greater fools buying from them… if they ever come around.

Another little piece in this mosaic is the New York based elitist 1494 club of whisky investors, founded by David Clelland, which is so secretive that they don’t even want to disclose their street address. Apart from a luxury car and private jet service they offer, curiously, annual valuations from Bonhams, possibly done by the same people who do the lot descriptions.

Regarding all this in conjunction with the fact that empty bottles of collectable whisky often sell for frankly amazing prices (Lagavulin 25 for €125 to name just one example), I feel creepy shivers running up my spine. Careless auction houses selling fake whisky bottles to clueless ‘investors’ is the last thing the whisky market needs.

Just like in the stock market, in any stage of the cycle it is possible to pick good whisky bottles for prices that allow a profit. But for doing so you need knowledge, the more the better. If you can’t afford the time to learn about whisky and study the market, better keep away from it. It is high time the whisky market is swept clean again.

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{ 7 comments… read them below or add one }

Howard October 31, 2012 at 12:42 pm

I disagree that Bonhams is innocent. Some listings are so blatantly fake or wrong they are either incompetent or culpable. I notified Joe Hyman before the auction of the fake Elmer T Lee, I told him why, gave him proof not only that it was misdated but a fake. He told me it was removed before auction via email but it was not and it sold. I was at the NYC Whiskyfest showed the fake listing to their rep speaking there, Martin Green and he could care less told me to tell Hyman and almost pissed I was bothering him. At best they don’t care. I purposely did not bid on items I was interested in without seeing them first hand, no one should.

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Gareth November 3, 2012 at 10:23 pm

Interesting posts both. This is quite possibly the subject of another blog post, but how would you suggest the market is swept clean?

A colleague and I were looking at some of the whiskies on ebay the other day and some of the bottles on there seem nothing short of a confidence trick!

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Oliver Klimek November 4, 2012 at 7:10 am

Like on the stock market, people need tp burn their hands in trading with whisky to clean the market. In a bubble created by greed eventually there will be a point when buyers will refuse to buy because they have lost trust in the trend.

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Gareth November 4, 2012 at 10:39 am

OK, that makes sense, thanks for replying.

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Adrain November 4, 2012 at 8:18 pm

This wouldn’t be the first time an auction house has sold bottles of dubious provenance. The Billionaire’s Vinegar provides a fascinating summary of the sale in the 1980s and 1990s of old/rare wines and the general lack of any evidence backing up the sellers claims of age and origin of the wines being sold.

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Howard November 5, 2012 at 1:36 am

Once I provided proof and got assurance blatant fakes would be pulled and they weren’t was so bad. They were arrogant. Its very simple, if anyone ever plans on bidding for Bonhams items you better inspect them first as they will have no problem selling you a lump of coal and telling you it’s a diamond. I’m also going to report them the the BBB and NY AG and Consumer fraud unit for investigation. Who runs these frauds?

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Thomas Tannenberger November 6, 2012 at 10:26 am

not only Ardbeg Day, already the Galileo is seen at whisky auctions at 189€ (while, at least last time I have looked, it still was available regularly in the shop for 99€).
what I´m interested in is how big the shares of different countries is (let´s say, roughly, America, EU Europe, Eastern Europe incl Russia, Asia and such), as this maybe has an influence of the predictions (as you said ´when the bubble bursts´). is it balanced in nationalities, or are there markets where more buyers are active concerning such auctions? (I don´t even know if the houses ship overseas as I never bought at an auction, as long as there´s well sorted reasonably priced online shops for rare old bottlings.)

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