Diamonds: Not A Girl's Best Friend

Tyler Durden's picture




 

On the day when the 76.02-carat 'Archduke Joseph Diamond' sells for a record $21.5 million, we thought it intriguing how even these incredible high-end status symbols are seeing prices collapsing at the low-end...of the high-end. It seems the 'wealthy' just can't afford 1-carat diamonds anymore as the price has plunged by over 25% in the last 15 months. Perhaps it is only the 1% of the 1% that can now afford their baubles as like everywhere, there is a growing divide between the 'haves' and the 'have-mores' (in this case). Coincidentally, heading into the stock market slide of 2008, we saw Diamond prices plunge and Gold prices rise - but we are sure it's different this time...

 

 

and meanwhile, all those tungsten gold bars have gained significant value against their sparklier cousins over the last few years...

 

  • 3-carat diamonds (D, IF) are trading just above their average price from the 2009 lows (around $76,500)...
  • 1-carat diamonds (D-H, IF-VS2) are trading 3% below their average price from the 2009 lows (around $8,300)

and per Miller Tabak:

"[jeweler] Zales will offer a financing option to customers with sub-prime credit profiles in an effort to drive sales"

 

Charts: Bloomberg

(h/t Last Crusader)

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Wed, 11/14/2012 - 15:58 | 2981159 fightthepower
fightthepower's picture

Fuck you Bernanke!

Wed, 11/14/2012 - 16:04 | 2981172 idea_hamster
idea_hamster's picture

There is no diamond shortage in the world -- only a rather effective diamond cartel.

When significant finds were located outside ZA in Russia and Canada, it was all over for diamonds as a store of value.

Granted, they still do a good job getting through airport security, and they don't have to be declared (unlike your pre-paid Best Buy gift card).

Wed, 11/14/2012 - 16:05 | 2981196 whatsinaname
whatsinaname's picture

Jill Kelley had no shortage of diamonds ? 

Wed, 11/14/2012 - 16:16 | 2981254 idea_hamster
idea_hamster's picture

I think she likely has quite enough diamonds.  Brains and common sense may be another matter....

Wed, 11/14/2012 - 16:18 | 2981266 DoChenRollingBearing
DoChenRollingBearing's picture

The other BIG problem with diamonds is that you cannot get a decent price for them if you want to sell.  Once we got a diamond as a gift that we did not want!  So, we took it down to the "Diamond District" of our city to sell.  Although there were a number of jewelers and similar there, the best we could get was about 35% of retail price.  So, we took it.

With gold Eagles, you pay (say) 6% over spot, but you will get spot plus 1% or so from your coin shop if you sell.

Diamonds are pretty much a closed business.  You cannot get what they are worth unless you "are in the club."  You would have to hold diamonds a LONG time to make a decent return.

Wed, 11/14/2012 - 16:24 | 2981295 seek
seek's picture

I'll throw in another datapoint. I had a failed engagement, the ring was $28K ($25K diamond, $3K setting) I picked up from Blue Nile.

The ex shopped the ring to multiple stores (brought the certificates, etc, which helped) -- $19K was the best deal. SO 67% percent recovery, and it likely was only that high because I was pretty careful in picking out the rock and bought from a discount place.

So I'd agree, diamonds suck as an investment, store of value, or anything else for that matter.

 

Wed, 11/14/2012 - 16:31 | 2981331 Beam Me Up Scotty
Beam Me Up Scotty's picture

Also, there are too many variables with diamds.  The whole 5 c's thing makes knowing if you got a good deal real hard.  If I buy an ounce of silver, its pretty easy to tell if its an ounce and its silver.  But a shady retailer can tell you how great your diamond is, and how are you to know, unless you are a diamond grader yourself?  Way to easy to overpay for something that isn't nearly as nice as advertised.

Wed, 11/14/2012 - 16:50 | 2981432 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

My friend's Russian grandmother left the old country with a whole mess of them crammed up her ass...wipe 'em off, good as new!

Wed, 11/14/2012 - 20:19 | 2982159 dvfco
dvfco's picture

What did she cram up there - gold bars, silver or diamonds?  

It's too bad she didn't bring over some real local caviar up there.  I love that stuff.  Ah, I guess I wouldn't want her to have to clean it.  I'm even nervous eating muscles unless I know the chef.  Keister Kaviar - no, that doesn't sound so good.

 

Wed, 11/14/2012 - 18:10 | 2981802 Yellowhoard
Yellowhoard's picture

Blue Nile is not a discount site. Go to Pricescope for competitive diamond pricing, you'll discover that there are many better sources than Blue Nile.

http://www.pricescope.com/diamond-prices/diamond-prices-chart

Also, if you are buying for an investment, buy at an auction.

Wed, 11/14/2012 - 18:56 | 2981922 yoshinator
yoshinator's picture

You actually did allright only loosing 67%. 3 grand for the setting sounds like you got ripped off unless it was something crazy detailed with a shit load of specialized work.

Wed, 11/14/2012 - 19:07 | 2981941 kekekekekekeke
kekekekekekeke's picture

marry me

Wed, 11/14/2012 - 23:17 | 2982810 seek
seek's picture

Not a practical option for me anymore, but after snooping around, you're both super cute and you have your shit together, so you're a catch and shouldn't have any problem scoring a such a ring from someone.

Fri, 11/16/2012 - 20:21 | 2990193 kekekekekekeke
kekekekekekeke's picture

thank you :3

Wed, 11/14/2012 - 19:20 | 2981972 Hard1
Hard1's picture

Don't marry him, engage me!!! 28K on a piece of carbon!!! wow! you must be either a .01 percenter, an idiot or both! 

Wed, 11/14/2012 - 19:36 | 2982021 overbet
overbet's picture

At least you avoided the trap. Well worth the haircut.

Wed, 11/14/2012 - 23:09 | 2982781 seek
seek's picture

More truth to this than you can imagine.

Wed, 11/14/2012 - 18:40 | 2981891 yoshinator
yoshinator's picture

Well wholesalers usually buy at whats called a back number. It could be 20 30 40 or 50. That means between 20 and 50% off the retail price. If you want to buy diamonds you want to buy wholesale unless you work on or around the industry its very hard to get in. That is the retail market in diamonds is for suckers. As far as getting spot +1% for your gold eagles tell me where this guy is the best I can get is 3% bellow spot for any .999 gold bars and 22k coins. Silver much worse for eagles if I want immediate cash and don't want to wait for a buyer to come to me the best I can get at todays price 32.70 is about 27 bucks. But then again I get cash and none of that cashiers check bologne. If you want physical silver and gold to pay back in a big way you better be expecting some big price movements up from the price you buy. Silver would have to rise about 11% and gold about 5%. 

 

I only buy scrap gold now and I buy it at refining cost or less. I know exactly what its worth and sometimes I get it even cheaper from people off the street 14k at $25 bucks a gram I profit immediately.

Wed, 11/14/2012 - 19:14 | 2981950 fiddler_on_the_roof
fiddler_on_the_roof's picture

In Northern California at my local dealer, you can buy 24K Gold maples for $spot + $45 and sell it at $spot +$10. you cannot beat that other than Tulving.

 

 

Wed, 11/14/2012 - 20:12 | 2982135 dvfco
dvfco's picture

You are getting royally screwed.  I feel like I'm getting screwed when I get only 2.5% premium on Gold Eagles.  Buying and selling silver (aside from American coins) I pay a few percent on either side.  However, right now I could buy a 100 oz. silver  bar for no more than $3,400 - and that's without going into NYC.  If I took my stuff to 47th St., I could do a little better.

Where do you live, on the Continental Divide?  Don't feel bad though, living in NYC and its environs is expensive - and dark, cold and Sandy lately.

Wed, 11/14/2012 - 21:27 | 2982426 Tapeworm
Tapeworm's picture

I have a pawn broker friend that deals in higher end and the metals. He called me on a custom ring thet was done by a jeweller in Billings, Montana with a 2.73 main and two sides of about .8 Ct. each. The thing was realistically appraised at 47k. (not the phony appraisals of the chain stores).  I told him that I'd look at it as an investment because it was under 14k.

 When I got the thing I was shocked at how good it looked as I have little interest in diamonds. My mistake was showing it to my wife who glommed it instantly. It gives her great pleasure even after several years. That is important to me, and besides, I can get more for it now than what I paid, maybe not by much, but  one does not have to take a hit if bought right.

Wed, 11/14/2012 - 16:19 | 2981270 NotApplicable
NotApplicable's picture

Diamonds: Beanie Babies for the rich.

Wed, 11/14/2012 - 16:20 | 2981280 JPM Hater001
JPM Hater001's picture

So I spent upwards of 15K for my wifes diamond.  Are you telling me it's down?

Wed, 11/14/2012 - 16:25 | 2981300 BKbroiler
BKbroiler's picture

sucker

Wed, 11/14/2012 - 16:51 | 2981443 THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

I bought a zirconia knowing I would get a really CHEAP diamond soon. They will soon be the same price..LOL..I'll flip it even steven..

Wed, 11/14/2012 - 18:35 | 2981880 GubbermintWorker
GubbermintWorker's picture

Your wife or the diamond?

Wed, 11/14/2012 - 18:36 | 2981885 ilovefreedom
ilovefreedom's picture

Not to mention DeBeers has resorted to buying up companies that specialize in artificial diamond production as these are now becoming so similar in quality to actual diamonds the majority of consumers wouldn't be able to tell them apart.

A monopolized product by any other name would still be overpriced.

Wed, 11/14/2012 - 16:03 | 2981186 redpill
redpill's picture

Every kiss begins with Kay skullfucking retarded men with usury consumer loans so they can buy their shallow fuck partners tasteless and cliche diamond-studded heart pendents in order to get an extra blowjob on Christmas Eve.

Wed, 11/14/2012 - 16:09 | 2981214 SemperFord
SemperFord's picture

Some guys are actually this lame, I demand blowjobs, I am not pleased and I tell her to kick rocks.

Wed, 11/14/2012 - 16:09 | 2981215 Tinky
Tinky's picture

Your analysis is intriguing, yet also a touch confusing. Would that mean that the retarded men were already going to receive Christmas Eve blowjobs, and the diamond-related ones would be a sort of bonus? Or were they completely out of luck on Christmas Eve until they sprung the glittery surprises?

Wed, 11/14/2012 - 16:15 | 2981246 redpill
redpill's picture

One would only be able to know definitively if they got the first BJ prior to producing the sparklies; therefore it's key to sit on your overpriced, ugly, shitty jewelry as long as possible to extract maximum ROI.

Wed, 11/14/2012 - 16:24 | 2981297 Beam Me Up Scotty
Beam Me Up Scotty's picture

Isn't it more fun to give a pearl necklace than diamonds?

Wed, 11/14/2012 - 16:31 | 2981325 Tinky
Tinky's picture

You know, it's sub-threads such as these that ZH readers are particularly lucky to have for reference.

Wed, 11/14/2012 - 16:47 | 2981419 tsx500
tsx500's picture

....and much , much cheaper ! go to 2:56 of video

http://youtu.be/PIUBLyUYDG4

Wed, 11/14/2012 - 16:55 | 2981461 i_fly_me
i_fly_me's picture

Agreed ... unfortunately it does complicate sharing some of these posts with certain relatives.  "Hey, Mom, read this article, but uhm, what ever you do, don't read the comments ... trust me."

Wed, 11/14/2012 - 16:16 | 2981241 TruthInSunshine
TruthInSunshine's picture

 

 

#6: Convince The World That A Common Substance is Real

 

So, why do you think diamonds are valuable?

 

Most people will probably tell you the same reasons: they're very strong and visually striking, but most importantly, they're rare.

 

There's only one problem with that: that last one isn't true. To explain why you think diamonds are scarce, let's rewind about a hundred years.

 

For much of human history, diamonds were valuable because they could only be found in a select few places in the world. In the 19th century, however, that actually changed as people started to find massive deposits, most notably in Africa. Those deposits were large enough that the rarity of diamonds was quickly becoming a thing of the past.

 

Faced with stockpiles that were on the verge of being significantly devalued, the owners of those deposits had three options:

 

A) Compete against each other and watch the value of their diamonds plummet as the law of supply and demand drove prices down;

 

B) Forget the diamond market and just use their land to invest in Six Flags Over Zimbabwe;

 

C) Band together to form an evil multinational monopoly that would inflate prices and earn them billions upon billions of dollars.

 

Go figure, they chose the third option, forming the cartel we know as De Beers. To maintain the perception that diamonds were rare, De Beers not only significantly limited how many diamonds they mined each year, but also literally started buying up all the other diamonds and just stockpiling them (along with their own excess supply). Combined with a decades-long advertising campaign, they created a perception out of thin air that diamonds were rare and valuable, and that you had to drop thousands of dollars on one to prove you loved your spouse.

 

So, if all that's true, how in the hell do they get away with it? Shouldn't it be illegal?

 

Actually, it totally is. The monopoly De Beers holds is so blatantly illegal by U.S. antitrust laws that they've been banned from selling in the U.S. (they're forced to sell to intermediaries on the international market). Until they pleaded guilty to price fixing charges in 2004, their executives wouldn't even set foot on American soil because they feared they'd be arrested on sight.

 

While there are indications that the cartel might finally be slowly losing its grip on the market, it's been a pretty damn impressive run.

 

 

 

Wed, 11/14/2012 - 16:18 | 2981263 blunderdog
blunderdog's picture

Fortunately the Feds haven't started interfering too much in that market yet...

Wed, 11/14/2012 - 16:48 | 2981422 TruthInSunshine
TruthInSunshine's picture

That headline was supposed to end in "Is Really Scarce" regarding diamonds.

But gold (non-tungsten filled kind) actually is rare! 2 Olympic sized swimming pools full in all the world, bitchez!

Golds pwns diamonds.

Wed, 11/14/2012 - 20:00 | 2982092 Bicycle Repairman
Bicycle Repairman's picture

Let the reality of the diamond market sink into your head.  It is a complete and utter fraud that has been well maintained for decades. 

Which markets are more like the diamond market than a free market?

Wed, 11/14/2012 - 22:20 | 2982609 squexx
squexx's picture

They don't call it JEWelery for nothing!

Wed, 11/14/2012 - 16:19 | 2981258 Iconoclast
Iconoclast's picture

 

 

Every kiss begins with Kay skullfucking retarded men with usury consumer loans so they can buy their shallow fuck partners tasteless and cliche diamond-studded heart pendents in order to get an extra blowjob on Christmas Eve.

 

 

Just one extra and only on Xmas Eve? 

Wed, 11/14/2012 - 16:15 | 2981249 Stoploss
Stoploss's picture

Anybody see my dow 11,000 hat lying anywhere?

Wed, 11/14/2012 - 15:59 | 2981162 Karlus
Karlus's picture

Gold bitchezzzz

Wed, 11/14/2012 - 16:19 | 2981271 THX 1178
THX 1178's picture

Trade that Au in for Ag. It will increase by a larger multiplicand.

Wed, 11/14/2012 - 16:01 | 2981171 ZDRuX
ZDRuX's picture

Diamond Backed Securities from subslime borrowers?

Can't burst this bubble for sure, it's made of diamond!

Wed, 11/14/2012 - 16:04 | 2981173 BKbroiler
BKbroiler's picture

maybe cuz Russia just announced it has a friggin whole mountain made of diamond.

http://www.sbwire.com/press-releases/trillions-of-carats-found-in-russia...

"trillions of carats"  might just affect the market.

Wed, 11/14/2012 - 16:12 | 2981232 fuu
fuu's picture

An Impact Diamond says, "I love you with the heat of an asteroid collision".

Wed, 11/14/2012 - 16:14 | 2981237 BKbroiler
BKbroiler's picture

"This diamond represents the devastating impact you had on my life"

Wed, 11/14/2012 - 16:18 | 2981265 robertocarlos
robertocarlos's picture

Sorry I crushed your pubic bone.

Wed, 11/14/2012 - 18:03 | 2981765 ParkAveFlasher
ParkAveFlasher's picture

Mysteriously enough, I tend to Tunguska - that is, explode before actual impact. 

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