This morning my wife started telling me about a news feature on art collectors. Having gone through my academic life never venturing beyond the heights of a ‘D’ for art, I didn’t contribute much to the conversation beyond an obligatory grunt.
However one snippet that caught my attention was how one of the collector’s daughter cried when the painting (or was it sculpture) was sold; notwithstanding the fact that it reaped in a healthy profit for her father.
That reminds me of a Puer story. Being late to the Puer party, I have not been hoarding a stash since time immemorial, at least since a time when Puer prices were insanely cheap by today’s standard.
Often during our roadshows and events, I have the privilege of meeting with tea drinkers more experienced than me. One such chap told me about his Yiwu stash that he bought for less than $10 per cake.
“Name your price” I said. (To my wife’s chagrin, she who knew we were not in a position to be giving out blank cheques)
“Then what will I drink?” he shot back.
“Then what will I drink?”
Investing in Puer?
Hold that question in your mind as we ponder the ‘investment potential’ of Puer.
In the good old days- at least as recounted by the good old guys- Puer was inexpensive, to put it mildly.
$10 per cake would have probably been on the higher end of the scale for Puer back in the 80s. It works out to less than $2 per 50g which is, well dirt cheap.
Today some rare, sought-after cakes can fetch six digits or more.
While that is the higher end, the middle range can cost quite a pretty penny, giving sellers many times return on their initial purchase. That in turn sparked interest in the ‘investment potential’ of Puer.
“Then what will I drink?”
At that time Puer collectors weren’t as many as there are now. Furthermore, 2 of the 3 countries with possibly the biggest collection of Puer outside of China- Singapore and Hong Kong- are notorious for their high rentals. Cost of long storage might well outstrip the cost of Puer.
In China, the tumultuous years of Sino-Japanese wars, Civil Wars, the Cultural Revolution, the Great Leap Forward among others took its toll on the nation. Assets were stripped, households were torn apart. No one bothered to document what happened to Puer stashes all over the nation.
Today we know the value of Puer and hence we take care to store it. Porcelain jars, ‘pumidors’, dedicated storage and so forth. Back then, it wasn’t the case.
Against this backdrop, how much stock of well-aged Puer do you anticipate to be available on the market?
When Puer prices started rising, many merchants started releasing their stocks. What eventually were left were those that they valued higher as well as those held by private collectors.
Hence, by the 2000s, I reckon in order to get someone to part with their stock- especially stuff that they had grown accustomed to drinking- you had to blow them with an enticing offer.
That may not be indicative of the ‘true value’ of the Puer though, but includes the ‘sentimental value’ or equivalent that it meant to the collector.
“Too much money chasing too few goods”
Too much money chasing too few goods. That is the most oft citied cause of demand induced inflation.
From 1990 to 2005, China’s GDP growth averaged 9.9% per annum. Wikipedia tells us the average GDP per capita increased by 8.6 times during this period.
That means a lot of nouveau riche flushed with money are looking for somewhere to spend.
Puer became fashionable over this period and it became a common gift, especially among businessmen and government officials.
Without bothering to crunch numbers and perform statistical analysis, I think it is not preposterous to suggest such growth rates are unsustainable. Last year China’s GDP growth rate was closer to 7% while most developed nations however below 5%.
In short, that type of economic growth is not likely to return. Investment sentiments should be tempered across the board.
Back to the Future
This is not to say that the ‘investment value’ of Puer is no longer there.
Quality will always shine. Aged Dayi cakes by Menghai Factory for will always be in demand.
But I can see that some lesser offerings will prove to have less than impressive ROI. Especially the newer type that age terribly.
Rather than be swept along by the waves of speculation, why not spend your money on cakes that are worth drinking on their own merit?
Those that you have to be made an offer you can’t refuse (not of the Corleone variety) before you would part with because you would ask “Then what will I drink?”
Because you will be just as happy not selling it, heads you win, tails you don’t lose.
