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I thought I'd write up something on WhiskyInvestDirect, the platform where people can invest in barrels of Scotch whiskey, because I had mentioned it in another thread as something I had been using to invest money in a somewhat more esoteric asset. Also, I figured it might be worthwhile to create this thread so that I can write any additional commentary or observations on this investment as new developments arise. Finally, to the person who named me as a referrer when he opened his own account with WhikeyInvestDirect: Thank you very much! 
For 2022, my investments in Scotch whiskey actually turned a healthy profit, at least on paper. A rough estimate is that the whiskey I held (purchased in previous years) and added to (purchased in 2022) increased in price by 24% and that is after storage and maintenance fees. The return would have been slightly higher (maybe 1%) had I not purchased any additional whiskey. The return far exceeded what I expected and it's certainly better than the beatings given to those invested in the S&P 500 and NASDAQ indexes; and to a lesser extend the Dow Jones Industrial Average.
This rather nice return brings up a problem which I saw and perhaps the other iTuliper also saw. It's entirely possible that the gains seen are somewhat fictitious and were heavily driven by too much money in the system thanks to the central banks' ridiculous loose monetary policy over the past decade. It's not just that we saw 20+% gains in a year when a reasonable expectation should be in the 8% - 12% range. It's also that, starting around October 2022, it became impossible to buy a somewhat larger amount of whiskey in the pre-orders of new stock. Whereas in the past I was easily able to buy 500 or more LPA of whiskey per batch, I was suddenly in a situation where I had difficulty getting even 100 LPA. Most of my orders didn't get filled because I set a minimum quantity (typically 100 LPA for me) for the order to execute. To date, as far as I can tell, there is far more money chasing limited stock of new whiskey than there is new whiskey. On the most recent pre-order, I got allocated nothing.
A nasty bubble in whiskey is just one possibility, though. Another possibility is that inflation is truly roaring (we all know it is for food) and the price increases are not insane. One thing I've noticed this year is that there have been some bulk bids (distilleries buying whiskey from the investors) offering fairly high premiums for whiskey that isn't that old. For example, in February 2022, I ended up selling some Bunnahabhain whiskey that I had originally purchased in Q4 2020. On a nominal price basis, excluding storage and maintenance fees, I nearly doubled my money. There were some other bulk bids in which I did not participate because the returns were not nearly as exceptional (about 1.7x the price I paid two years earlier) and I am in a situation where I could not reinvest the money into new whiskey because of the problem stated above.
It's possible that the distilleries are also seeing high inflation, don't see any near-term end to high inflation, and are looking to buy up stocks so that they can get some sort of hedge against a secular, inflationary environment. One of the bulk bids I did not sell my whiskey into was for Tormore malt whiskey from Q3 2020. The buyer was seeking to buy 100% of all whiskey on the platform: a bit over 50,000 LPA.
In the coming year, I will attempt to continue buying whiskey in the pre-sales but am uncertain if I will be allocated anything. Also, I'll be keeping a close eye on how much liquidity the Federal Reserve actually removes from the system. If there is a liquidity crunch, we could see prices for whiskey fall by 30% or more as we saw in 2020. I also get the impression that many, if not most, of the users of WhiskyInvestDirect are British investors. It may be worthwhile to keep an eye on whether there is a liquidity crunch in the U.K. when making decisions on buying whiskey.
As it is, it's relatively painful to keep cash on the platform when a 1-year Treasury bill yields about 4.69% and a 6-month Treasury bill yields about 4.75%.
I'll close with the observation that investments in malt whiskey have been much more profitable for me than investments in grain whiskey. Net of fees, this should not be the case according to WhiskyInvestDirect but that is how it has played out for me so far. Being that the storage fees are based on the volume (liters) of whiskey one owns and not the price of the whiskey, grain whiskey is (so far) looking particularly bad because an investor has to pay more in fees for a given dollar amount of investment. For what it's worth, just eyeballing the price of the grain whiskey I own, I am probably averaging about an 8% - 9% rate of return net of fees. That's kind of what I expected with all whiskeys but the malt whiskeys have greatly outperformed. About 10% by volume of the whiskey I own is grain whiskey; the rest is all malt whiskey.
For 2022, my investments in Scotch whiskey actually turned a healthy profit, at least on paper. A rough estimate is that the whiskey I held (purchased in previous years) and added to (purchased in 2022) increased in price by 24% and that is after storage and maintenance fees. The return would have been slightly higher (maybe 1%) had I not purchased any additional whiskey. The return far exceeded what I expected and it's certainly better than the beatings given to those invested in the S&P 500 and NASDAQ indexes; and to a lesser extend the Dow Jones Industrial Average.
This rather nice return brings up a problem which I saw and perhaps the other iTuliper also saw. It's entirely possible that the gains seen are somewhat fictitious and were heavily driven by too much money in the system thanks to the central banks' ridiculous loose monetary policy over the past decade. It's not just that we saw 20+% gains in a year when a reasonable expectation should be in the 8% - 12% range. It's also that, starting around October 2022, it became impossible to buy a somewhat larger amount of whiskey in the pre-orders of new stock. Whereas in the past I was easily able to buy 500 or more LPA of whiskey per batch, I was suddenly in a situation where I had difficulty getting even 100 LPA. Most of my orders didn't get filled because I set a minimum quantity (typically 100 LPA for me) for the order to execute. To date, as far as I can tell, there is far more money chasing limited stock of new whiskey than there is new whiskey. On the most recent pre-order, I got allocated nothing.
A nasty bubble in whiskey is just one possibility, though. Another possibility is that inflation is truly roaring (we all know it is for food) and the price increases are not insane. One thing I've noticed this year is that there have been some bulk bids (distilleries buying whiskey from the investors) offering fairly high premiums for whiskey that isn't that old. For example, in February 2022, I ended up selling some Bunnahabhain whiskey that I had originally purchased in Q4 2020. On a nominal price basis, excluding storage and maintenance fees, I nearly doubled my money. There were some other bulk bids in which I did not participate because the returns were not nearly as exceptional (about 1.7x the price I paid two years earlier) and I am in a situation where I could not reinvest the money into new whiskey because of the problem stated above.
It's possible that the distilleries are also seeing high inflation, don't see any near-term end to high inflation, and are looking to buy up stocks so that they can get some sort of hedge against a secular, inflationary environment. One of the bulk bids I did not sell my whiskey into was for Tormore malt whiskey from Q3 2020. The buyer was seeking to buy 100% of all whiskey on the platform: a bit over 50,000 LPA.
In the coming year, I will attempt to continue buying whiskey in the pre-sales but am uncertain if I will be allocated anything. Also, I'll be keeping a close eye on how much liquidity the Federal Reserve actually removes from the system. If there is a liquidity crunch, we could see prices for whiskey fall by 30% or more as we saw in 2020. I also get the impression that many, if not most, of the users of WhiskyInvestDirect are British investors. It may be worthwhile to keep an eye on whether there is a liquidity crunch in the U.K. when making decisions on buying whiskey.
As it is, it's relatively painful to keep cash on the platform when a 1-year Treasury bill yields about 4.69% and a 6-month Treasury bill yields about 4.75%.
I'll close with the observation that investments in malt whiskey have been much more profitable for me than investments in grain whiskey. Net of fees, this should not be the case according to WhiskyInvestDirect but that is how it has played out for me so far. Being that the storage fees are based on the volume (liters) of whiskey one owns and not the price of the whiskey, grain whiskey is (so far) looking particularly bad because an investor has to pay more in fees for a given dollar amount of investment. For what it's worth, just eyeballing the price of the grain whiskey I own, I am probably averaging about an 8% - 9% rate of return net of fees. That's kind of what I expected with all whiskeys but the malt whiskeys have greatly outperformed. About 10% by volume of the whiskey I own is grain whiskey; the rest is all malt whiskey.
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