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Is the Naples Winter Wine Festival's annual auction a good economic indicator?
Each January, the festival offers its exclusive attendees over-the-top lots including sports cars, exotic vacations and rare vintages, so you might think it's a good gauge of confidence among wealthy investors.
The $13.5 million organizers raised last month represented a 59% increase over the $8.5 million they raised in January 2013. In fact, January's fundraising total was the best since 2008, when organizers raised $14 million.
Still, if you compare the results of previous auctions with the Standard & Poor's 500-stock index, the auction's results are no guarantee better days lie ahead.
For example, 2009 was the worst year for the wine auction, but it turned out to be a great year to invest in the stock market's 500 largest companies. The S&P 500 finished that year up nearly 24%.
Perhaps the wine festival auction is a lagging indicator instead? After all, the S&P 500 index fell nearly 39% in 2008 so it makes sense that the auction in January 2009 raised 64% less than the previous year. The S&P 500 rose only 3% in 2005 and the wine-auction proceeds rose just 2.8% in January 2006.
But even this lagging indicator isn't always reliable. The S&P 500 rose 13.4% in 2012 but the auction proceeds fell 13% in January 2013.
Our conclusion: Don't base your investment decisions on people bidding at a wine festival auction. They're just having a good time.
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