Diamonds and the economy?

[HerDiamond]

I am curious to know if the market for diamonds normally follows other industries, such as housing, when there is an economic down turn like we have going on now?

For instance if banks are not lending or making the standards more difficult to qualify for home loans then housing prices go down. Is realize that the jewelry industry has substantial margins, and is extremely profitable, but I am sure even the most profitable need some form of credit to buy wholesale diamonds. Is the case the same when jewelers can not get loans to purchase diamonds on the wholesale market will the price go down? What about when the sales volume goes down does that reduce the price?

My initial thinking is that diamonds are almost a "protected" industry as most people consider a diamond purchase as a long term investment where if you needed to you could sell the stone for about what you paid for it rather than and investment in a non deprecating asset such as a car where you loose most of the value before the ink is dry on the contract.

Any other thoughts?

 

[neatfreak]

Date: 9/29/2008 8:21:09 PM
Author:HerDiamond
My initial thinking is that diamonds are almost a 'protected' industry as most people consider a diamond purchase as a long term investment where if you needed to you could sell the stone for about what you paid for it rather than and investment in a non deprecating asset such as a car where you loose most of the value before the ink is dry on the contract.

Unless your diamond has a name and a pedigree behind it, it's NOT a sound investment at all. You cannot sell a diamond for what you paid in almost any circumstance.

 

[:)]

It is very difficult for a consumer to get the full $ back paid for a diamond (unless a vendor gives you a full credit upgrade/change policy, but then you aren''t really getting the $ back in your pocket, just applied to another stone). Diamonds are generally not a good investment - I would actually consider them similar to a car - as soon as you drive it off the lot (i.e. buy it), the price you (as a consumer) can get back for it is not the full price you paid. Routine wear and tear also runs the risk of a decrease in the clarity grade, thus decrease in value. Now if you held onto a diamond for many many yrs and gave the second hand market a chance to catch up to what you paid, perhaps then you could get your $ back in resale, but I would not consider it a good money maker.

 

[MichelleCarmen]

All it takes is about 15 mintutes of browsing on craig''s list to see that diamonds are not a sound investment. Everyone on there is selling rings/earrings/pendants, etc., for a fraction of what they paid. You can find some great deals if you''re in the market to buy!

 

[Finally!]

What is an example of the kind of pedigree that would cause a diamond to retain its value?

 

[bgray]

name and pedigree is rather misused here. if a stone is in a Tiffany or Harry Winston monting then that would likely retain more value than a non "name" piece. Now if the stone were a documented Golconda or some other rare stone that is a special item that is in almost all circumstances to be highly desired and collectible. the rarer a stone is by virtue of size, cut or provenance the more it retains value. that all being said it is best to buy the very best quality stone at the lowest possible price as you lose less value if you need to re-sell. a 1/2 carat tiffany even in a tiffany mounting isnt worth too much second hand

 

[neatfreak]

Date: 9/29/2008 10:02:27 PM
Author: bgray
name and pedigree is rather misused here. if a stone is in a Tiffany or Harry Winston monting then that would likely retain more value than a non ''name'' piece. Now if the stone were a documented Golconda or some other rare stone that is a special item that is in almost all circumstances to be highly desired and collectible. the rarer a stone is by virtue of size, cut or provenance the more it retains value. that all being said it is best to buy the very best quality stone at the lowest possible price as you lose less value if you need to re-sell. a 1/2 carat tiffany even in a tiffany mounting isnt worth too much second hand

I don''t think it''s misused here at all. The Hope Diamond, the Golden Jubilee, The Millenium Star, etc. These are the types of named diamonds I meant in my post, not that they came from Tiffany''s.

 

[bgray]

sorry--i misunderstood--i didnt think it was referring to really NAMED stones! sorry...

 

[neatfreak]

Date: 9/29/2008 10:29:46 PM
Author: bgray
sorry--i misunderstood--i didnt think it was referring to really NAMED stones! sorry...

No worries! Just saying that of course if you are talking investing in a stone like one of those it''s an investment. Otherwise not. Totally can see how you thought I meant from a name brand store.

 

[WinkHPD]

Date: 9/29/2008 8:21:09 PM
Author:HerDiamond
I am curious to know if the market for diamonds normally follows other industries, such as housing, when there is an economic down turn like we have going on now?


For instance if banks are not lending or making the standards more difficult to qualify for home loans then housing prices go down. Is realize that the jewelry industry has substantial margins, and is extremely profitable, but I am sure even the most profitable need some form of credit to buy wholesale diamonds. Is the case the same when jewelers can not get loans to purchase diamonds on the wholesale market will the price go down? What about when the sales volume goes down does that reduce the price?


My initial thinking is that diamonds are almost a ''protected'' industry as most people consider a diamond purchase as a long term investment where if you needed to you could sell the stone for about what you paid for it rather than and investment in a non deprecating asset such as a car where you loose most of the value before the ink is dry on the contract.


Any other thoughts?

Wow, I wish it was extremely profitable. Diamond margins today are so small as to be almost laughable with the exception of stores like Tiffany''s. Those of us still selling diamonds are passionate about it and love what we do, we could make more money in many other trades.

As far as our banking arrangements, my banker is coming in tomorrow with the new paperwork on my line of credit for another year. I just talked with a friend in the business whose line is up another million this year as they keep borrowing more and paying it back on or before promised dates. Most of us in the trade have found that if you pay your bills and mind your credit that the money is there for us when we need it. Those that don''t wont be here much longer.

Wink

 

[HeartingDiamonds]

[/quote]
Wow, I wish it was extremely profitable. Diamond margins today are so small as to be almost laughable with the exception of stores like Tiffany's. Those of us still selling diamonds are passionate about it and love what we do, we could make more money in many other trades.
[/quote]

Hear, hear, Wink!