October 18, 2018
The Million Dollar Bottle
I reflexively thought of the movie Crazy Rich Asians when I read last week that someone -- reportedly Asian -- paid $1.1 million for a bottle of scotch.
The movie relocates the rich-brat genre to Singapore, to remind us, I suppose, that the crazy rich are everywhere. It's entertaining enough, but I take issue with those who say its cultural contribution is to showcase Asian actors. The glories of Japanese film-making already have been doing that for over a century. Instead, I applaud Crazy Rich Asians for its plain-speaking English title. There was a time when only the crazy poor were "crazy." The crazy rich were "eccentric."
As I write I sip an Islay single malt scotch called Finlaggan I bought for $28 at my local shop. Scotchophiles vigorously debate Finlaggan's merits, and Islay scotch -- redolent of smoke and peat -- is an acquired taste anyway. But I think Finlaggan is almost as good as a $60 Laphroaig. I certainly think so of the second glass, and since I'm the one drinking only my opinion counts. When Ed Koch was mayor of New York City, he never paid more than $7.50 for a bottle of wine. "You don't need to be a genius," I remember him saying, "to find a good $15 bottle of wine." In the same vein, any lunatic can pay $60 for a good bottle of scotch.
As expensive whiskey goes, $60 for a good scotch is actually pretty cheap. A client once sent me a bottle of Johnnie Walker Blue in an engraved bottle. It was a nice gesture, even if it did amount to using a few hundred dollars' worth of whiskey to pay for several thousand dollars in legal services. Further up the scale of extravagance, another local liquor store has a bottle of Pappy Van Winkle bourbon on the shelf at $1,200. I gather it's a bargain even at that price. But who am I to judge? I've certainly seen clients -- and even myself -- blow a grand or so without even the aftertaste of a happy memory. Hell, I've seen clients and adversaries burn hundreds of thousands of dollars battling over legal positions that, seen in the fullness of time, were not worth pursuing or defending. Spending a fraction of that on a good scotch or bourbon seems downright civilized by comparison.
But how crazy -- forget rich -- must one be to pay over a million bucks for a quart of booze? The bottle in question sold at auction in Edinburgh.
https://www.nytimes.com/2018/10/03/world/europe/scotch-whisky-auction-record.html?. It was distilled by the Macallan distillery in 1926, bottled in 1986, and bore a label designed by the Italian artist Valerio Adami, one of only 12 such bottles. Another bottle sold in May at auction in Hong Kong for a similar price, so it seems to hold its value.
But wait. The point of scotch is to drink it. At that record-breaking price, you would think the taste would be equal to it. Yet, Macallan's master distiller, who had tasted the 60-year-old Macallan when it was bottled, wasn't so impressed. "I had to try a lot of whiskies over the years and in my humble opinion, there were a number that were better than this one."
In any event, will the buyer even drink it, quite literally pissing away a million bucks? Maybe he will put it on display like some bottled Picasso. But Valerio Adami is no Picasso. Adami is a fine pop artist of the mid-20th century. https://en.wikipedia.org/wiki/Valerio_Adami. But many of his prints could be had today for a few hundred dollars to a few thousand. The most expensive Adami I've found sold at Christies for less than $200,000. So, it is really a stretch to believe that Adami's masterpiece -- more valuable than his gallery works -- would be a bottle label. The 1926 Macallan Valerio Adami is, then, a mystery -- the world's most expensive scotch that is neither the best scotch nor adorned by the priciest artwork. It reminds me of the status of Kent cigarettes in Romania at the end of the Cold War. I don't smoke, but I gather there was nothing special about Kents. Except that packs of Kent's, and only Kents, achieved currency status. Unopened cartons came to be treated like gold bullion. No one dared smoke them. As reported in The Wall Street Journal in 1986, Romania forsook a gold standard for "the Kent standard." http://www.sjsu.edu/people/tom.means/courses/econsymposium/s1/In-Romania-Smoking-A-Kent-Cigarette-is-like-burning-money.pdf.
But the analogy doesn't hold, because Kents in Romania were exchangeable, marketable commodities, very much like gold and silver. How does a single bottle of scotch become marketable? Will the owner issue fractional interests -- like old gold or silver bearer certificates that would entitle the holder to a shot of the stuff upon demand? Or maybe that bottle could be a liquid sort of rai stone, those large rocks used on the Micronesian island of Yap as an immovable store of wealth, of which oral tribal history records how large a piece each resident "owns."
https://en.wikipedia.org/wiki/Rai_stones. The rai stone is actually one of the best ways to explain cryptocurrencies. Think of bitcoin as a big immovable "thing," with the blockchain ledger taking the place of oral history as the perfect way to keep track of exactly who owns how big a piece of the rock. So maybe the owner of the 1926 Macallan will issue cryptocoins against the bottle. Boozecoins, if you will.
But I doubt any of that will happen. More likely, the winning bidder is just so rich that spending a million on a middling bottle of scotch is to him what spending $28 is to me. Maybe he will drink it. I wonder who he is. And I wonder how he managed to get his hands on so much scratch.
Honore de Balzac wrote that behind every great fortune lies a great crime. I don't know if that's always true, but it is often enough.
And so my thoughts wander from Crazy Rich Asians to those hundreds of millions of real Asians, including an estimated over 150 million children, who work 70-plus-hour weeks producing stuff for us to buy, often in degrading conditions for slave wages, so their families might not starve. https://www.scmp.com/comment/insight-opinion/article/2119890/modern-slavery-and-child-labour-asias-unacceptable-record,
https://www.hurights.or.jp/archives/focus/section2/2001/09/child-labor-in-asia-a-review.html. The exploitation of the millions and the million-dollar bottle are related. Whether directly or indirectly, the one begets the other. They remind us, if we still need reminding, that the rich are different, and not just because they have more money. While politicians lie to keep them cozy, sober Asians die to make things cheap. It's rich, really. And crazy.
ABOUT THE AUTHOR
Aegis J. Frumento
Stern Tannenbaum & Bell
Co-Head, Financial Markets Practice
380 Lexington Avenue
New York, NY 10168
Aegis Frumento is a partner of Stern Tannenbaum & Bell, and co-heads the firm's Financial Markets Practice. Mr. Frumento represents persons and businesses in all aspects of commercial, corporate and securities matters and dispute resolution (including trials and arbitrations); SEC and FINRA regulated firms and persons on regulatory compliance issues and in SEC and FINRA enforcement investigations and proceedings; and senior executives of public corporations personal securities law and corporate governance matters. Mr. Frumento has also represented clients in forming and registering broker-dealers and registered investment advisers, in developing compliance policies, procedures and controls, and in adopting proper disclosure documents.
Prior to joining the firm, Mr. Frumento was a managing director of Citigroup and Morgan Stanley, a partner and the head of the financial markets group of Duane Morris LLP, and the managing partner of Singer Frumento LLP.
He graduated from Harvard College in 1976 and New York University School of Law in 1979. Mr. Frumento is a frequent author and speaker on securities law issues, and is often quoted in the media on current securities law developments.
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