Is bigger better?

One of my first investments in wine was Chateau Mouton-Rothschild in magnum (1.5L) and double magnum (3L) format. In sommelier training, I was taught that larger bottles, especially those of First Growth Bordeaux, evolved better over time. The basic idea is that aging happens slower when there is less exposure to air. Because the mouth and neck of the magnum are the same sizes as those of the standard bottle, the wine/air ratio is much higher, yielding slower oxidation.

Large formats are also rare. They may constitute just 5-10% of the producer's entire vintage. In fine dining, it is considered prestigious to unleash one of these upon your guests.

This is why for years, large formats have traded at a premium. In my first trade, I quickly snapped up the magnums when I was offered a choice between cases of magnums or bottles for the same price. (6 x 1.5L or 12 x 75cl). The reason for par pricing was that Asian demand came primarily for standard bottles. Once the emerging markets learn more about wine, every broker on the street told me, magnums would trade over bottles again.

In the following months, I began to notice slight discounts for cases of magnums - about 2%-3% relative to bottles. My initial impulse was to buy more. After all, if everything went to hell, I would certainly be able to drink a magnum by myself in a single night. But then, as now,  I understand that the only way I can afford to stay drunk is by trading sober. If a glass of wine can take me back in time to catch a glimpse of women and countries I will never see again, a cup of coffee awakens the mercenary tools I've tried many times to leave behind - statistics, game theory, economics. The symbols and equations, I had forgotten long ago in that massacre of brain cells that transpired between final exams and graduation.  All that remains is anecdote. A treasury bond trade from the downfall of Long Term Capital Management a decade ago came to mind, and I decided that the magnum/bottle spread would continue to diverge.

In the current market, magnums trade at a 10%-15% discount to standard bottles. No one in the industry has a solid explanation. "Asians drink less" can't even be the reason, with half-bottles also trading at a similar discount.  The largest merchants and traders in the world continue to be baffled, and my own Excel spreadsheet shows global magnum stocks accumulating and not turning over.

"But mom, it was supposed to work!"
"Of course not, silly. Serving big bottles makes you look cheap when you're entertaining."
 "I'm sorry?" [Picturing a Jeroboam of '61 Latour rolling out at Tour d'Argent.]
"Big bottles are fine for home use. But only for things that keep fresh. Guess what we bought at Sam's Club today?"
"Oh."