Diamond values in times like these...

It should come as no surprise that I’m often asked about the future of diamonds, particularly as an “investment”. Of course, I’ll always believe that diamonds have superlative physical and extensive emotional value.

In economic terms, the markets that are waxing and waning as we speak are staffed by fully-licensed brokers and speculators, who have training and accreditation to buy and sell all sorts of financial vehicles (read: paper assets) depending on a myriad of signals and indicators.

Diamond sellers are typically not qualified or well-versed enough in these matters. Unfortunately, some jewelers still promote diamonds as an investment. In my humble opinion, this is a no-no.

I am the Diamond Wizard, but alas I’m not clairvoyant. Who is? Unlike many know-it-all and I-told-you-so pundits these days, I do not even pretend to portend the future. But, I can tell you what my Mamma told me with great certainty… “There’ll be days like this”.

And, there have been before. In fact, the classic “boom and bust” business cycle is endemic to commodities in general and minerals specifically. Ore is found, a mine is built, full-scale production ensues, the community thrives, the market gets saturated, demand softens, prices fall, the mine loses “efficiency” and then it closes.

Prices firm up over time, a new mine is found… ad infinitum, or at least until the natural resource is completely exhausted. Sound familiar?

It's precisely why DeBeers was formed. Cecil Rhodes was among the first to recognize that the best way to curtail calamity and disaster in supply and demand was to “cartelize”, “monopolize”, or otherwise control the diamond trade through a “single-channel”.

To make a long story short, it has generally been a boon for consumers with diamond prices and value steadily climbing over the years. The most notable exception was the bust of the speculative bubble in “investment diamonds” in the late 1970’s. In this case, I must note that these were bought and sold as commodities on the strength of their paper (read: certificates) alone.

But, all that is solid does not melt into air!

Indeed, diamonds are the most tangible of assets. Their supply is limited by Mother Nature. They offer immediate allure and continual appeal. They do not deteriorate. They don’t need to be fed, clothed or housed. And, their benefits can easily be passed along for future generations to behold.

Common wisdom tells us that the best tends to hold or increase in value the most, much more so than second best or normal or average or less. And, consumer’s demand for branded diamonds has certainly clarified, reinforced, and solidified the perception of what is best in today’s marketplace.

Bearer of Odd News...

Just got back from summer vacation and reviewed my e-mails to find a wee bit of very Odd News.

It seems a 3.02 carat diamond ring worth $40,000 was found in a parking lot somewhere in Washington, DC and then returned to a local jewelry store whose name appeared stamped inside. The store owner commented, "People are careless". That's quite the understatement!

He also inferred that even if his people inspect the stone in an attempt to identify it, which incidently begs the question of how anyone knows its worth $40K without already having made the proper ID, it would still be like "finding a needle in a haystack" to track down the rightful owner(s). Whatever.

Careless or not, the owner of this ring wasn't properly protected in the first place. These days any diamond can easily be inscribed on its edge with a serial number or other identifier. And, you'd think that a truly customer service oriented retailer would keep detailed records of any item sold for that kind of money.

The best diamond companies and the best jewelers do everything they can to protect the consumer.

For example, serialized Hearts On Fire diamonds each have a unique laser inscription that includes the brand name, the company logo and the number assigned to that individual diamond. This number is recorded on the HOF Diamond Identification Document and the AGS Diamond Quality Document that are both delivered at the time of purchase.

In addition, a Transfer of Ownership is signed which registers the diamond to its rightful owner with both the retail jeweler and the Hearts On Fire Company.

All of this information is extremely useful to insurance companies in the event of a loss. It is also great help to law enforcement authorities. In fact, a ring of thieves was arrested by the FBI after a serial number of a particular Hearts On Fire diamond that had been reported stolen appeared on an online auction.

Don't you think that when you spend your hard earned money on a piece of the rock, you'd expect more than a little peace of mind to come with it?

Real Values...

Rule #3 - If you want to buy a diamond you should apply the following two rules.

Rule #1 - To appreciate the value of diamonds, you have to actually look at them.
Rule #2 - To understand the full value of a diamond, you have to know what to look for.

I've devoted my professional life to adding-value to that precious and uniquely mysterious gemstone called diamond - first as a cutter and teacher, then as a brander of superlative craftsmanship and performance.

It literally breaks my heart whenever I think that short-term greed might seriously undermine the value of the collective efforts of an entire trade.

On-line sellers are clearly not adding-value to diamonds! The prevailing “internet model" of selling diamonds is far from being new; it's probably one of the oldest and simplest forms of business behavior we know. Its called taking a free ride.

After the creators, innovators, entrepreneurs and other honest hard-working folks have made a product and brought it to market; they are very often blind-sided by disingenuous free-loaders who proudly proclaim an ability to do the "same thing cheaper".

How hard is that? Especially after a large supporting cast has already done the real job of creating desire: supplying, educating, romancing, selling and satisfying the customer. I finally have to call it like I see it… BS!

The Internet rewards unfair competition. Caveat emptor, "similar to" is not the "same as"!! Most on-line diamond sellers do not research, produce, or build new standards, products, or markets.

Diggers literally sweat diamonds out of the ground. Cutters and manufacturers develop the newest technologies and practices. Jewelers maintain necessary inventories, showrooms and professional staff to properly show and sell diamonds to an otherwise under-served public. The major gemological labs, supported by independent retailers and their customers, verify the highest standards of quality.

On-line sellers that do not maintain "bricks and mortar" businesses are merely padding their pockets by riding the coat tails of all the "middlemen" listed above and then cutting them out of the equation.

If you ask me, the cyber-bandits are syphoning off an unearned portion of the market’s wealth. They don’t own the diamonds they list for sale, nor do they share other typical costs of business such as bearing an equal burden of taxation.

The bottom-line is that every diamond they discount directly devalues all existing and future diamonds.

No one benefits but them.

We are all in the diamond business together... diggers, cutters, jewelers and consumers alike. That's right. It's precisely why every time the value of diamonds is threatened it's a disservice to all of us. We are collectively robbed of the fruits of our labors and investments. Quite simply, when the price of diamonds goes down, everyone who already owns one suffers and those who may wish to find more diamonds or create prettier diamonds are further discouraged.

I firmly believe that diamonds are still too cheap! Think about it, those controversial "blood diamonds" might never have emerged if revenues from legitimate trade in diamonds were large enough to support adequate and sustainable jobs, governance and services in the world's diamond-producing countries.

Understanding value. The pricing of diamonds has long been commoditized, based on the 4C's - color, clarity, carat weight and cost. These are all the factors that tell you the features of what a diamond is. And that’s the information that goes on most certificates.

But, now we know it’s all about what a diamond does. The latest buzzword is "performance". That's the benefit of exceptional cutting. Think about it this way – no horse trader would ever buy a thoroughbred sight unseen and then only by the pound! No way. He’d want a horse that he can see winning the race!

The only reason to cut a diamond at all is to make it look more beautiful!!! If that weren't so, we'd all just buy our diamonds in the rough because that would be the biggest bang for our buck. Wouldn't it?

Its now perfectly well understood that the best cut diamonds make the color look better, the clarity look better, and the size even look bigger because they shine from edge-to-edge with the most brightness and fire.

How can anyone properly judge a diamond's value without seeing it first as well as comparing it - up close and personal - to others?