Well well, it’s been quite a week. We’ve seen a meltdown in the financial markets that has unsettled even the most experienced players. In fact, it took on such proportions that there was a very real, systemic risk of the whole financial system breaking down. Not surprisingly, this has triggered a global response from governments. After the US took the initiative in announcing measures, it now seems that the UK has initiated the right response in buying stakes in the troubled banks, forcing them to own up to a much larger figure of cash needed than they previously communicated. On top of that, there’s the buying up of troubled loans. All in all, European governments have announced packages worth a stunning 2 trillion sterling. It now seems the US package of "just" 700 billion US is rather puny.

Now that investors feel that the extreme risk has passed, stock markets have rallied by about 15% from their Friday lows. For us wine investors, the big question now is what the effect will be on the wine trade. The past week has been very slow in volume with only the best vintages selling at significantly reduced prices. The one exception seems to be Asia. There is still strong demand there – especially for wines in the Lafite stable – partly triggered by the bargains being presented at the moment. As a whole, most traders have been very cautious in taking on stock, waiting for the storm to blow over. My expectation is that this will take a few weeks. In order for that to happen, we need to see proof that the worst is indeed over and then have more of an idea how much the "real" economy will be effected.

One thing is very clear though: the wine market has now turned to a buyers market. Taking advantage of thin trade and still a lot of stock being offered, buyers are in the driving seat. Fundamentally, wine is still a very good investment: availability is low and gets lower every day as wine gets consumed while demand still greatly outstrips supply. As an indication of that, apparently Lafite could sell 50 times more cases if there would be more supply. This will not be changed by what’s happening these days.

As a last thought, one of the historically most reliable indicators of market sentiment is the ratio of company directors buying and selling shares in their own company. The average is 2.5:1 (in favor of buyers). It previously peaked at 12:1. Now, it’s at 25:1....

As we always say, whether you’re a buyer or a seller, Ditton Wine Traders do both, at very hard to beat prices.

Today was another day of mayhem on the stock exchanges. The CAC- 40, the French stock market index, lost 9% of it's value which is the largest one-day-drop ever. Both the FTSE and the DAX are down 7% and Asia closed this morning showing losses of between 4% and 6%. As I write this, the DOW trades 780 points or 7.6% lower. On such a day, or rather a series of days with extreme uncertainty ranging to panic, it won't come as a surprise that fine wine prices are coming down as well.

One very good benchmark for fine wine prices is provided by the Vintage Wine Fund, according to their website "The only place one can find live quotes of both buying and selling prices on top end fine wines. All prices and available quantities are constantly updated and users can trade online at any time". I track their prices and since the 9th of September, the basket of wine they trade has dropped in value by just over 10%. Remember these are bidding and asking prices – they do not reflect actual trades.

Another widely quoted benchmark is the Liv-ex 100. This index represents a slightly wider range of Fine Wine and is mostly based on actual trades, so prices are more representative of the market. According to Liv-ex's blog, the index came down by a mere 3.7% in September. Compare this to the developments on the stock exchanges and I know where I'd rather put my money. Having said that, it's only fair to say that the volume traded is rather thin. As demand is low and supply is still fueled by sellers taking profits, the only possible result is a weakening of prices.

Normally, the months of October and November see heavy volume being traded as merchants start to stock up for Christmas. This year, we see the same trend but much more modest. That is, in Fine Wines. Champagne on the other hand is much more in demand, after a rather sluggish summer period. We will keep you closely informed of future developments. In the meantime, we try and make use of the good deals being offered. Check out our wine list - there are some real bargains to be had at easily the cheapest prices around.

Many thanks for taking some time to read this. I intend to use this page to keep you updated on events and developments in the Fine Wine & Champagne market. This website being principally a trading site, the entries will be focussing on events that bear a direct relationship to wine and their prices. We will not spend time on tasting notes – there are many other websites and blogs that cover these extensively – other than when they have an impact on Fine Wine prices. As an example of the latter, you might recall one of the 2005 Bordeaux Cru Classé blind tastings where Pedesclaux, a relatively lesser known Cru, came in 3rd, ahead of Lafite and other illustrious names. This of course caused an immediate run on the wine, resulting in a hefty price increase (if you are interested in Pedesclaux 2005, have a look at our list - there are still some cases to be had).

As they effect demand and supply, we will be regularly commenting on the impact on fine wine prices of global economic and financial developments. In the current financial climate, this is particularly important for those of you who like to be closely informed. At the moment, we see prices of some vintages easing. Although the top wines from the best vintages hold their prices very well, some others are being offered at significantly lower prices, due to sellers that are happy to cash in on their return and don't hold a favourable view on the times ahead. This seems to be the case for the 2005 vintage in particular.

Historically, fine wine prices have been 0 or even slighlty negatively correlated to the financial markets. It's going to be very interesting to see whether this trend continues in the current financial turmoil. Indeed, there is a strong argument to be made that blue chips of the best vintages will increase even more. These wines are in finite and diminishing supply, there is strong global demand for them and investment funds are taking a closer look at wine as an alternative investment. If you take that view as well, this is a pretty good time to pick up some of these gems. If you don't, we are happy to advise on best strategies to streamline your cellar.

This is a one-way-blog. However, if you'd like to comment on anything you read or would like to suggest a topic, please feel free to drop us a line at info@dittonwinetraders.co.uk. We most certainly will give attention to any serious requests you might have.