Turning to Liquid Assets

“Wine is the thinking person's health drink.”

—Dr. Phillip Norrie

Do investors just want to have fun? A few articles in the past indicated that financial news can not only be interesting, but titillating. For example, the cross-dressing trader and the Rationalizer device (somewhat like Jane Fonda used when she played Barbarella).

Now, there is a new twist. With the world economy turning sour, at least one research firm thinks the wealthy French will embrace liquid assets. Timetric, a respected provider of financial online data analysis and consultative services, indicates that in 2015 affluent French investors will be shifting away from real estate toward luxury items such as wine, classic cars and art. They say the same investor’s percentage of fixed income investments will increase as well.

While most of the rest of the developed world, including the U.S. and Britain, saw declining property values from 2007 to 2011, France actually saw a slight increase of 0.7%. Part of the reason is that foreigners were buying prime residential property. Coincidently, high-net-worth French investors increased their holdings of this asset from 19% to 24% of their portfolios during this time period.

The definition of high-net-worth individuals (HNWIs) used in the Timetric study included those with readily convertible assets of $1 million. It is worth noting that in the U.S. the test is more stringent, usually referring to those with assets of $25 million or above.

Real estate, the highest percentage of French HNWIS assets in 2011, is illiquid and with the world continuing to be uncertain, Timetric, is predicting that French HNWIS will shift out of it not only into fixed income, but also into something that can not only accrue in value but also potentially be used as well. That means wine (they are French, we must remember) as well as classic cars and art.

This triad is called collectibles. Though these assets can be difficult to sell, just like real estate, at least they can be consumed (wine), used (cars) or hung on the wall (art).

Wine has been a good investment of late since the Chinese entered this market. The same can be said for art. Evidently, classic cars also made gains.

What is the worst possible case for the wealthy French? They may end up drinking their liquid collectible assets. Somehow, this seems just right.