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thewayneI've been reading a bit about diamonds today. I knew they were controlled by a cartel/monopoly, I knew a little bit about blood diamonds, but I really didn't know a lot about them. Today, ![[livejournal.com profile]](https://www.dreamwidth.org/img/external/lj-userinfo.gif)
apostate_96 posted a link to a blog post about public donations being used by Pat Robertson and the 700 Club to invest in a diamond operation when it was supposed to be going for charity/refugee relief. Can't say I'm really all that surprised by that.
Anyway, prowling around various links and such, I came across this article on trying to sell a diamond. Basically, trying to sell a diamond is a wonderful way to exercise your futility. The following is an excerpt:
Selling individual diamonds at a profit, even those held over long periods of time, can be surprisingly difficult. For example, in 1970, the London-based consumer magazine Money Which? decided to test diamonds as a decade long investment. It bought two gem-quality diamonds, weighing approximately one-half carat apiece, from one of London's most reputable diamond dealers, for £400 (then worth about a thousand dollars). For nearly nine years, it kept these two diamonds sealed in an envelope in its vault. During this same period, Great Britain experienced inflation that ran as high as 25 percent a year. For the diamonds to have kept pace with inflation, they would have had to increase in value at least 300 percent, making them worth some £400 pounds by 1978. But when the magazine's editor, Dave Watts,tried to sell the diamonds in 1978, he found that neither jewelry stores nor wholesale dealers in London's Hatton Garden district would pay anywhere near that price for the diamonds. Most of the stores refused to pay any cash for them; the highest bid Watts received was £500, which amounted to a profit of only £100 in over eight years, or less than 3 percent at a compound rate of interest. If the bid were calculated in 1970 pounds, it would amount to only £167. Dave Watts summed up the magazine's experiment by saying, "As an 8-year investment the diamonds that we bought have proved to be very poor." The problem was that the buyer, not the seller, determined the price.
The magazine conducted another experiment to determine the extent to which larger diamonds appreciate in value over a one-year period. In 1970, it bought a 1.42 carat diamond for £745. In 1971, the highest offer it received for the same gem was £568. Rather than sell it at such an enormous loss, Watts decided to extend the experiment until 1974, when he again made the round of the jewelers in Hatton Garden to have it appraised. During this tour of the diamond district, Watts found that the diamond had mysteriously shrunk in weight to 1.04 carats. One of the jewelers had apparently switched diamonds during the appraisal. In that same year, Watts, undaunted, bought another diamond, this one 1.4 carats, from a reputable London dealer. He paid £2,595. A week later, he decided to sell it. The maximum offer he received was £1,000.
In 1976, the Dutch Consumer Association also tried to test the price appreciation of diamonds by buying a perfect diamond of over one carat in Amsterdam, holding it for eight months, and then offering it for sale to the twenty leading dealers in Amsterdam. Nineteen refused to buy it, and the twentieth dealer offered only a fraction of the purchase price.
Selling diamonds can also be an extraordinarily frustrating experience for private individuals. In 1978, for example, a wealthy woman in New York City decided to sell back a diamond ring she had bought from Tiffany two years earlier for $100,000 and use the proceeds toward a necklace of matched pearls that she fancied. She had read about the "diamond boom" in news magazines and hoped that she might make a profit on the diamond. Instead, the sales executive explained, with what she said seemed to be a touch of embarrassment, that Tiffany had "a strict policy against repurchasing diamonds." He assured her, however, that the diamond was extremely valuable, and suggested another Fifth Avenue jewelry store. The woman went from one leading jeweler to another, attempting to sell her diamond. One store offered to swap it for another jewel, and two other jewelers offered to accept the diamond "on consignment" and pay her a percentage of what they sold it for, but none of the half-dozen jewelers she visited offered her cash for her $100,000 diamond. She finally gave up and kept the diamond.
I knew about the theft that sometimes occurs when you had diamonds appraised, 60 Minutes did a special on it that I found rather amusing. I had no idea that diamonds have effectively zero resale value.
Makes me very glad that Russet doesn't like diamonds. Now I just have to do some educating on my parents and sister.
apostate_96 posted a link to a blog post about public donations being used by Pat Robertson and the 700 Club to invest in a diamond operation when it was supposed to be going for charity/refugee relief. Can't say I'm really all that surprised by that.Anyway, prowling around various links and such, I came across this article on trying to sell a diamond. Basically, trying to sell a diamond is a wonderful way to exercise your futility. The following is an excerpt:
Selling individual diamonds at a profit, even those held over long periods of time, can be surprisingly difficult. For example, in 1970, the London-based consumer magazine Money Which? decided to test diamonds as a decade long investment. It bought two gem-quality diamonds, weighing approximately one-half carat apiece, from one of London's most reputable diamond dealers, for £400 (then worth about a thousand dollars). For nearly nine years, it kept these two diamonds sealed in an envelope in its vault. During this same period, Great Britain experienced inflation that ran as high as 25 percent a year. For the diamonds to have kept pace with inflation, they would have had to increase in value at least 300 percent, making them worth some £400 pounds by 1978. But when the magazine's editor, Dave Watts,tried to sell the diamonds in 1978, he found that neither jewelry stores nor wholesale dealers in London's Hatton Garden district would pay anywhere near that price for the diamonds. Most of the stores refused to pay any cash for them; the highest bid Watts received was £500, which amounted to a profit of only £100 in over eight years, or less than 3 percent at a compound rate of interest. If the bid were calculated in 1970 pounds, it would amount to only £167. Dave Watts summed up the magazine's experiment by saying, "As an 8-year investment the diamonds that we bought have proved to be very poor." The problem was that the buyer, not the seller, determined the price.
The magazine conducted another experiment to determine the extent to which larger diamonds appreciate in value over a one-year period. In 1970, it bought a 1.42 carat diamond for £745. In 1971, the highest offer it received for the same gem was £568. Rather than sell it at such an enormous loss, Watts decided to extend the experiment until 1974, when he again made the round of the jewelers in Hatton Garden to have it appraised. During this tour of the diamond district, Watts found that the diamond had mysteriously shrunk in weight to 1.04 carats. One of the jewelers had apparently switched diamonds during the appraisal. In that same year, Watts, undaunted, bought another diamond, this one 1.4 carats, from a reputable London dealer. He paid £2,595. A week later, he decided to sell it. The maximum offer he received was £1,000.
In 1976, the Dutch Consumer Association also tried to test the price appreciation of diamonds by buying a perfect diamond of over one carat in Amsterdam, holding it for eight months, and then offering it for sale to the twenty leading dealers in Amsterdam. Nineteen refused to buy it, and the twentieth dealer offered only a fraction of the purchase price.
Selling diamonds can also be an extraordinarily frustrating experience for private individuals. In 1978, for example, a wealthy woman in New York City decided to sell back a diamond ring she had bought from Tiffany two years earlier for $100,000 and use the proceeds toward a necklace of matched pearls that she fancied. She had read about the "diamond boom" in news magazines and hoped that she might make a profit on the diamond. Instead, the sales executive explained, with what she said seemed to be a touch of embarrassment, that Tiffany had "a strict policy against repurchasing diamonds." He assured her, however, that the diamond was extremely valuable, and suggested another Fifth Avenue jewelry store. The woman went from one leading jeweler to another, attempting to sell her diamond. One store offered to swap it for another jewel, and two other jewelers offered to accept the diamond "on consignment" and pay her a percentage of what they sold it for, but none of the half-dozen jewelers she visited offered her cash for her $100,000 diamond. She finally gave up and kept the diamond.
I knew about the theft that sometimes occurs when you had diamonds appraised, 60 Minutes did a special on it that I found rather amusing. I had no idea that diamonds have effectively zero resale value.
Makes me very glad that Russet doesn't like diamonds. Now I just have to do some educating on my parents and sister.
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no subject
Date: 2006-01-26 08:25 pm (UTC)Diamonds have two inherent purposes: to flaunt your wealth, and to cash in on insurance losses. They are not an investment vehicle. If you don't comprehend that basic fact, get back in the gutter where you belong. Hail Caesar! I have lots of diamonds, and I know and love them for what they are. ;-)
no subject
Date: 2006-01-26 10:35 pm (UTC)I have two rings that I wear all the time. One is my engagement ring, the other is a ring I inherited. The saphire in the ring was chipped, so I replaced it with a London blue topaz. After 13 years of wear, the topaz is more scratched and worn than the diamond that I've been wearing for over 15 years. True, if I'd replaced the saphire with another saphire it wouldn't be as worn. Saphires that size are outrageously expensive.
Personally, I prefer other gemstones. When I'm buying loose stones to put in jewelry pieces I make, I tend to go for topaz and amethyst. If I want a white stone, I'll use a silver topaz. Most people will not realize that it isn't actually a diamond. You can make some beautiful pieces of jewelry with smokey quartz, and you can still get that relatively cheaply. Although, I have noticed the price of quartz going up.
no subject
Date: 2006-01-26 11:53 pm (UTC)That article was interesting. From the stuff I'd seen, it suggested how difficult/non-profitable it could be to get into diamonds, but that illustrated it almost chillingly. It pretty much indicates you'd better like looking at 'em 'cause you won't make any money trying to sell them. From what I've read recently about it, I'd say a diamond is about as good of an investment as a tattoo.
no subject
Date: 2006-01-27 01:00 am (UTC)Then again, there's always similar substitutes: the famous cubic zirconia, and also Moissanite (http://en.wikipedia.org/wiki/Moissanite), which is still pretty strong, and can made synthetically.
no subject
Date: 2006-01-27 01:03 am (UTC)They're just as hard, and have all of the same properties of a diamond, except that instead of spending years deep underground subjected to extreme temperatures, and most importantly, extreme pressures.
Edit that as follows:
...extreme pressures, they are created in a shorter period of time in a lab, under pressure/temp suitable for diamond stability. Also, because they're created above the surface of the earth, they are more likely to be exposed to air, which may cause contaminataion and thus coloration. Apparently colored diamonds are worth more anyway.
no subject
Date: 2006-01-27 03:59 am (UTC)http://en.wikipedia.org/wiki/Synthetic_diamond
no subject
Date: 2006-01-27 11:51 pm (UTC)