Sipp’n Corn Review – Beanie Babies or Bourbon?

In Bourbon Whiskey: Useful Alternative Investment or just the next Beanie Baby? (2020), authors Carson Hartig, Conor Lennon, and Keith Teltser studied nearly a decade of bourbon secondary market sales data and considered whether bourbon ought to be considered a “collectible,” like fine art, wine, or baseball cards, or a viable “alternative investment,” due to its persistent large price increases.

The researchers found that from 2011 to 2019, secondary market prices increased by about 7% per year.  However, perhaps identifying when secondary market prices really skyrocketed, between 2014 and 2018, secondary market prices increased 21% per year.

Noting that collectibles tend to yield lower financial returns than stocks and generally have more risk over time, the authors conclude that bourbon might be considered a collectible if those who buy do so for a non-pecuniary reason, perhaps for perceived status of owning and being able to display particular bottles.

While that might be true for truly vintage bourbon and for many collectors, the authors found that, at least with recent annual and limited edition bourbon releases, the secondary market operates more as an alternative investment.  In fact, the research shows that “secondary markets are fueled by demand for recently released products rather than unique or vintage collectible items” and the secondary market shows efficiency in the sense that the price increases are seen across distinct markets. Because of the efficiency of the market and the high returns, the authors conclude, while warning that they do not provide investment advice, that “bourbon could be a viable alternative investment,” at least with regard to limited edition bourbons from the past decade.  As they must, the authors recognize that “realizing those gains is legally troublesome,” but they also promise further research and future papers to examine more bottle-specific details and the systematic risk of bourbon as an asset.  I’ll be looking forward to the next article.

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