Paul Slegers discusses the current diamond market

[WinkHPD]

Paul Slegers was here in Boise yesterday (Oct 26th) and spent some time with me discussing the diamond market. I recorded this interview with him and Andrey has graciously granted me permission to post it here.

I would be interested in knowing what you think about his discussion.

Wink

http://www.vidmails.com/playback.php?pl=ZDc0NThiMzg4Yjk5Mzk3NTcyNjdjM2FmODFkNTY4OTI5NzQzYT&crmid=1

 

[strmrdr]

Interesting
Thanks Paul and Wink!!!
I will come back with comments once I have time to digest the information presented as a lot of ground was covered.

 

[WinkHPD]

Date: 10/27/2008 7:50:53 PM
Author: strmrdr
Interesting

Thanks Paul and Wink!!!

I will come back with comments once I have time to digest the information presented as a lot of ground was covered.

Thanks Storm, I will look forward to your comments. Paul is a brilliant man and I really enjoyed his views on the market at this time and what he thinks will happen.

I especially appreciated his views on what the press will try to do.

Wink

 

[diagem]

Interesting and may I add pretty accurate as per my believes...

Here are my thoughts...

On the high quality goods (D-H VS+)

Big sizes 4 carats and up (even some segment in the three carat size) are prone to some sort of correction due to [some] speculations..., but the five cts. (especially the five ct plus) can get hit harder (in the short term) on the wholesale pricing level it reached...

2-3 carats size will probably stay stable in the well cut shapes.

1-1.5 carat size will stay stable as prices were not inflated except when taking into consideration the US$ vs. other currencies.....

One carat and below will stay stable or even continue their upward trends once the (economic turmoil) dust settles..., (some sizes in the smalls have not budged in price for years and can easily climb).

I believe the most vulnerable segment will be the lower quality J (and lower) SI1 (and lower)...., as these qualities become pricier trying to fill a gap as the prices of high quality goods were escaping towards the top..., some big size low quality Diamonds prices did not make sense in the last year or more!

In some segments as for example the large (7-8 carat+) "browns/capes" can find themselves prone to a sharp price correction due to price overshooting in the past 1-2 years... (for the same reason of filling in the gap vs. the high quality prices of their counterparts)

Fancy colored (or what I call TRUE fancy colors) will hold prices and will continue the upward trend due to their true rarity..., on the other hand..., fancy light and fancy hue''s based on tricky cuts will loose out!

As Paul mentioned..., there were no "new" significant mine discoveries in the past 10+ years..., and probably potential [???] new mine production wont enter the market in the next 5 years (even if new discoveries are made)..., I would expect emerging markets to fill the demand in the near future. That can cause the demand for high quality rough and polished to grow and cause future prices to escalate.

One thing is for sure..., there in no true and correct info. out there these days..., and any one claiming Diamond prices are dropping is purely speculating..., we will not know anything for sure until the market starts moving again which will only happen after the shock of the recent turmoil relaxes..., we dont know when this will happen but whatever news is being written these days has NO weight whatsoever on the potential future and is all considered PURE speculation!

Thanks Paul and Wink for this industry insight....

 

[strmrdr]

After thinking about it for a while I''m not sure I want to comment because no one really knows how things are going to go and Paul''s opinions some of which I agree with and some I don''t are just as good as anyone''s and better than most at this point.
Lets just say that for the next year or 2 my outlook is more gloomy than his is for the polished market.
A couple days ago I drove by some jewelers in my town and it was dead and there are no adds yet for Christmas help like there usually is by this time.

 

[JoeNewbie11]

One cannot dismiss the current global economic condition and outlook and its affect on all commodities, even diamonds. Recently, the US Stock Market along with all other major markets around the world have led to one of the biggest destructions of wealth in history. This along with the credit bubble bursting, will hamper all consumer''s ability to buy, both on the high end and low end. In the coming months and possibly years, these market effects will hit mainstreets around the world and a global recession is very likely according to many economists.

In my opinion, diamond prices are not insulated from these strong market forces. I am no expert, but my prediction is diamond prices will drop across the board, except for the rarer segments (fancies and large carat polished stones).

 

[Kaleigh]

This was very interesting, so thank you Wink and Paul. It will indeed be interesting to see what happens as we endure this finacial crisis. I agree that high quality stones will not see a drop in price, especially the larger ones. Wink your questions were spot on. Thanks, wish there would be more of these. Nice of you two to give up a Sunday for us PS''ers. Your dedication is appreciated!!!

 

[bgray]

Date: 10/28/2008 12:53:54 AM
Author: JoeNewbie11
One cannot dismiss the current global economic condition and outlook and its affect on all commodities, even diamonds. Recently, the US Stock Market along with all other major markets around the world have led to one of the biggest destructions of wealth in history. This along with the credit bubble bursting, will hamper all consumer''s ability to buy, both on the high end and low end. In the coming months and possibly years, these market effects will hit mainstreets around the world and a global recession is very likely according to many economists.

In my opinion, diamond prices are not insulated from these strong market forces. I am no expert, but my prediction is diamond prices will drop across the board, except for the rarer segments (fancies and large carat polished stones).

absolutely: the depth and severity of the recession or depression have yet to play out. every good stock was and is dragged down with the bad in the recent market slide. when theings are truly bad everything should get cheaper. much of the impact after the actual market correction is psychological. people stop buying even if they can--that causes a severe cascade of events.

 

[Fly Girl]

Thank you for posting this, Wink. I had a chance to meet Paul, and John Pollard, during Paul''s Minneapolis leg of his North American tour, and he is truly brilliant and charming. I was delighted to meet both gentlemen.

I have been thinking for some time that the great buys are in lower colored stones, and you can find excellent cuts in the Crafted by Infinity line. Also, while some premium brands have been charging a higher premium for some time, it has been noted on PS many times that there are certain premium brands that don''t. As diamond cut quality becomes more widely accepted and recognized, I agree that the price spread between lesser cut quality and top cut quality will widen.

PSers may well look back on these early days with fond memories when the cost of top cut quality diamonds goes up as they become more well known.

Who knows how deep this recession will be? That is why Paul was so careful to preface his comments with the date.

 

[WinkHPD]

Date: 10/28/2008 12:00:51 AM
Author: DiaGem
Interesting and may I add pretty accurate as per my believes...

Here are my thoughts...

On the high quality goods (D-H VS+)

Big sizes 4 carats and up (even some segment in the three carat size) are prone to some sort of correction due to [some] speculations..., but the five cts. (especially the five ct plus) can get hit harder (in the short term) on the wholesale pricing level it reached...

2-3 carats size will probably stay stable in the well cut shapes.

1-1.5 carat size will stay stable as prices were not inflated except when taking into consideration the US$ vs. other currencies.....

One carat and below will stay stable or even continue their upward trends once the (economic turmoil) dust settles..., (some sizes in the smalls have not budged in price for years and can easily climb).

I believe the most vulnerable segment will be the lower quality J (and lower) SI1 (and lower)...., as these qualities become pricier trying to fill a gap as the prices of high quality goods were escaping towards the top..., some big size low quality Diamonds prices did not make sense in the last year or more!

In some segments as for example the large (7-8 carat+) ''browns/capes'' can find themselves prone to a sharp price correction due to price overshooting in the past 1-2 years... (for the same reason of filling in the gap vs. the high quality prices of their counterparts)

Fancy colored (or what I call TRUE fancy colors) will hold prices and will continue the upward trend due to their true rarity..., on the other hand..., fancy light and fancy hue''s based on tricky cuts will loose out!

As Paul mentioned..., there were no ''new'' significant mine discoveries in the past 10+ years..., and probably potential [???] new mine production wont enter the market in the next 5 years (even if new discoveries are made)..., I would expect emerging markets to fill the demand in the near future. That can cause the demand for high quality rough and polished to grow and cause future prices to escalate.

One thing is for sure..., there in no true and correct info. out there these days..., and any one claiming Diamond prices are dropping is purely speculating..., we will not know anything for sure until the market starts moving again which will only happen after the shock of the recent turmoil relaxes..., we dont know when this will happen but whatever news is being written these days has NO weight whatsoever on the potential future and is all considered PURE speculation!

Thanks Paul and Wink for this industry insight....

And thank you for your additional insights. These are interesting times and it will be even more interesting to see what the press will claim versus reality. I think it will take a LOT of singing on the part of professionals to overcome the clarion call to chaos that the press will be singing.

Wink

P.S. I think this will be true in MANY professions!

 

[WinkHPD]

Date: 10/28/2008 12:24:31 AM
Author: strmrdr
After thinking about it for a while I''m not sure I want to comment because no one really knows how things are going to go and Paul''s opinions some of which I agree with and some I don''t are just as good as anyone''s and better than most at this point.
Lets just say that for the next year or 2 my outlook is more gloomy than his is for the polished market.
A couple days ago I drove by some jewelers in my town and it was dead and there are no adds yet for Christmas help like there usually is by this time.

Which is just as Paul said, the average goods and sellers are going into distress. Those of us who sell to the higher quality niches are actually having increases this year. I have been somewhat pleasantly surprised, but after talking with Paul I realize this is as it should be. I think you are actually more in agreement with us than you think.

Wink

 

[WinkHPD]

Date: 10/28/2008 1:25:38 AM
Author: Kaleigh
This was very interesting, so thank you Wink and Paul. It will indeed be interesting to see what happens as we endure this finacial crisis. I agree that high quality stones will not see a drop in price, especially the larger ones. Wink your questions were spot on. Thanks, wish there would be more of these. Nice of you two to give up a Sunday for us PS''ers. Your dedication is appreciated!!!

I appreciate your kind words. I think Paul will disagree with you about the larger stones, he feels that those have bubbled up in price and need a correction. He will be back in his office today perhaps, but I suspect it might be at least tomorrow before he gets a chance to visit us, he arrived only sometime this morning (in his time) after being all day on planes from Seattle where he went after he left Boise.

Wink

 

[WinkHPD]

Date: 10/28/2008 12:53:54 AM
Author: JoeNewbie11
One cannot dismiss the current global economic condition and outlook and its affect on all commodities, even diamonds. Recently, the US Stock Market along with all other major markets around the world have led to one of the biggest destructions of wealth in history. This along with the credit bubble bursting, will hamper all consumer''s ability to buy, both on the high end and low end. In the coming months and possibly years, these market effects will hit mainstreets around the world and a global recession is very likely according to many economists.

In my opinion, diamond prices are not insulated from these strong market forces. I am no expert, but my prediction is diamond prices will drop across the board, except for the rarer segments (fancies and large carat polished stones).

While it may seem so if you are listening to the press, my personal experience is contrary to the expected.

My business for the year was up at the beginning of this month by more than 15%. Last Tuesday and Thursday I held Round Table events with Richard Homer, having sit down dinners with several of my clients at which gems were shared. Before the Round Tables my October business was already more than double last year''s October and now it is double that again.

While several of my guests bought less than they would have liked nearly all of them bought something. Those with money are being more selective about what they buy, but they are still buying. Those jewelers who offer value and excellent service will continue to prosper, although I will admit that I am working more than twice as hard as I used to. The days of sitting in the office waiting for clients to appear are over. Aggressive marketing and massive value will be required to prosper, but prospering is possible. Remember that many of the current great family fortunes were made during the great recession and I expect that the same will happen during these economic conditions.

Given the declining availability I think that there will be little decline, if any, in the finer goods, and that there will be, as Paul predicts, a drop in the pricing of the average goods, which will make it seem as if there has been an increase in the price of the finer goods.

I also believe with Paul, that the smaller goods of average quality in cutting that are more available will drop, but not by the 30 to 40% the press is already calling for. Those kind of drops I believe are reserved for the larger goods in three carats and up.

We will look back at these posts in a year or two and have our answers, so it is almost a perverse kind of fun to stick our necks out and put them on the public line for all to see...

Wink

 

[WinkHPD]

Date: 10/28/2008 8:43:20 AM
Author: Fly Girl
Thank you for posting this, Wink. I had a chance to meet Paul, and John Pollard, during Paul''s Minneapolis leg of his North American tour, and he is truly brilliant and charming. I was delighted to meet both gentlemen.

I have been thinking for some time that the great buys are in lower colored stones, and you can find excellent cuts in the Crafted by Infinity line. Also, while some premium brands have been charging a higher premium for some time, it has been noted on PS many times that there are certain premium brands that don''t. As diamond cut quality becomes more widely accepted and recognized, I agree that the price spread between lesser cut quality and top cut quality will widen.

PSers may well look back on these early days with fond memories when the cost of top cut quality diamonds goes up as they become more well known.

Who knows how deep this recession will be? That is why Paul was so careful to preface his comments with the date.

LOL! Paul told me that John came up to introduce himself when you came into the store and that you nearly knocked him down with a feather when you told him you knew who he was as you were Fly Girl on Pricescope. Glad you had a good time with them.

Wink

 

[Fly Girl]

Date: 10/28/2008 9:41:09 AM
Author: Wink

Date: 10/28/2008 8:43:20 AM
Author: Fly Girl
Thank you for posting this, Wink. I had a chance to meet Paul, and John Pollard, during Paul''s Minneapolis leg of his North American tour, and he is truly brilliant and charming. I was delighted to meet both gentlemen.

I have been thinking for some time that the great buys are in lower colored stones, and you can find excellent cuts in the Crafted by Infinity line. Also, while some premium brands have been charging a higher premium for some time, it has been noted on PS many times that there are certain premium brands that don''t. As diamond cut quality becomes more widely accepted and recognized, I agree that the price spread between lesser cut quality and top cut quality will widen.

PSers may well look back on these early days with fond memories when the cost of top cut quality diamonds goes up as they become more well known.

Who knows how deep this recession will be? That is why Paul was so careful to preface his comments with the date.

LOL! Paul told me that John came up to introduce himself when you came into the store and that you nearly knocked him down with a feather when you told him you knew who he was as you were Fly Girl on Pricescope. Glad you had a good time with them.

Wink

It was pretty funny. You''d think John would be used to meeting PSers by now, but my transformation to a real person did seem to take him by surprise. As in, you''re not a virtual person, you actually live here?

Yes, John.

 

[strmrdr]

Date: 10/28/2008 9:15:15 AM
Author: Wink

Date: 10/28/2008 12:24:31 AM

Author: strmrdr

After thinking about it for a while I''m not sure I want to comment because no one really knows how things are going to go and Paul''s opinions some of which I agree with and some I don''t are just as good as anyone''s and better than most at this point.

Lets just say that for the next year or 2 my outlook is more gloomy than his is for the polished market.

A couple days ago I drove by some jewelers in my town and it was dead and there are no adds yet for Christmas help like there usually is by this time.

Which is just as Paul said, the average goods and sellers are going into distress. Those of us who sell to the higher quality niches are actually having increases this year. I have been somewhat pleasantly surprised, but after talking with Paul I realize this is as it should be. I think you are actually more in agreement with us than you think.


Wink

My opinion comes down to credit.
The industry thrives on credit.
Credit is very right right now.
Is the funding available for Christmas stock available is going to be the first huge hurdle.
If the cutters and the few wholesalers left don''t have the capital to keep the memo system going it is going to be brutal because the average jeweler on main street isn''t going to be able to fund stock.
The market for commercial paper is totally dead so they have to do it out of pocket and who knows if they can.
If they cant then they will be forced to raise funds anyway they can and prices will tailspin down.
That is short term worst case for the industry.
Long term lets say they pull it off is it going to be enough to keep them going next year until credit loosens up so they can restock?
dunno.......

 

[Shameless]

Hijack on:

Wink... you wouldn''t happen to be into saltwater reef tanks, would you?

Hijack off:

 

[strmrdr]

Date: 10/28/2008 12:17:29 PM
Author: strmrdr

My opinion comes down to credit.

The industry thrives on credit.

Credit is very Tight right now.

Is the funding available for Christmas stock available is going to be the first huge hurdle.

If the cutters and the few wholesalers left don't have the capital to keep the memo system going it is going to be brutal because the average jeweler on main street isn't going to be able to fund stock.

The market for commercial paper is totally dead so they have to do it out of pocket and who knows if they can.

If they cant then they will be forced to raise funds anyway they can and prices will tailspin down.

That is short term worst case for the industry.

Long term lets say they pull it off is it going to be enough to keep them going next year until credit loosens up so they can restock?

dunno.......

correction above for a typo.......

 

[diagem]

Date: 10/28/2008 12:58:44 PM
Author: strmrdr

Date: 10/28/2008 12:17:29 PM
Author: strmrdr

My opinion comes down to credit.

The industry thrives on credit. True..., so it might be good to finally go back to the old days which if you have the $$$ you can buy the goods???

Credit is very Tight right now.

Is the funding available for Christmas stock available is going to be the first huge hurdle.

If the cutters and the few wholesalers left don''t have the capital to keep the memo system going it is going to be brutal because the average jeweler on main street isn''t going to be able to fund stock.

Memo is one of the fatal sickness in this industry..., maybe this economic crisis will clean up some of the memo mess this industry has build up all these years...., (wishful thinking

)

The market for commercial paper is totally dead so they have to do it out of pocket and who knows if they can.

If they cant then they will be forced to raise funds anyway they can and prices will tailspin down.

Contrary to the previous economic crisis the Diamond went through back in the late 70''s..., this time around the industry is in much stronger economic hands..., who ever must raise funds..., will loose as the sharks will wait for those who are in need of cash to survive or pay up debts..., but thats fine..., its pure capitalism!

That is short term worst case for the industry.

Long term lets say they pull it off is it going to be enough to keep them going next year until credit loosens up so they can restock?

dunno.......

correction above for a typo.......

 

[Modified Brilliant]

Date: 10/28/2008 9:38:22 AM
Author: Wink

Date: 10/28/2008 12:53:54 AM
Author: JoeNewbie11
One cannot dismiss the current global economic condition and outlook and its affect on all commodities, even diamonds. Recently, the US Stock Market along with all other major markets around the world have led to one of the biggest destructions of wealth in history. This along with the credit bubble bursting, will hamper all consumer's ability to buy, both on the high end and low end. In the coming months and possibly years, these market effects will hit mainstreets around the world and a global recession is very likely according to many economists.

In my opinion, diamond prices are not insulated from these strong market forces. I am no expert, but my prediction is diamond prices will drop across the board, except for the rarer segments (fancies and large carat polished stones).

While it may seem so if you are listening to the press, my personal experience is contrary to the expected.

My business for the year was up at the beginning of this month by more than 15%. Last Tuesday and Thursday I held Round Table events with Richard Homer, having sit down dinners with several of my clients at which gems were shared. Before the Round Tables my October business was already more than double last year's October and now it is double that again.

While several of my guests bought less than they would have liked nearly all of them bought something. Those with money are being more selective about what they buy, but they are still buying. Those jewelers who offer value and excellent service will continue to prosper, although I will admit that I am working more than twice as hard as I used to. The days of sitting in the office waiting for clients to appear are over. Aggressive marketing and massive value will be required to prosper, but prospering is possible. Remember that many of the current great family fortunes were made during the great recession and I expect that the same will happen during these economic conditions.

Given the declining availability I think that there will be little decline, if any, in the finer goods, and that there will be, as Paul predicts, a drop in the pricing of the average goods, which will make it seem as if there has been an increase in the price of the finer goods.

I also believe with Paul, that the smaller goods of average quality in cutting that are more available will drop, but not by the 30 to 40% the press is already calling for. Those kind of drops I believe are reserved for the larger goods in three carats and up.

We will look back at these posts in a year or two and have our answers, so it is almost a perverse kind of fun to stick our necks out and put them on the public line for all to see...

Wink

I agree with Wink...everyone is working harder these days AND...my observations...

People are still buying diamond rings and getting engaged here in New England. Seeing 0.75 to 1.75 ct + on a steady basis. Mostly ideal cut rounds.
The local jewelry stores that have an "in house jeweler" and are buying "over the counter" are staying the course.
Repairs and special orders as well as custom designs seem to be doing well.
Showcases are packed with merchandise and screaming out "BUY ME!"
Cautiously optimistic that the gloom will diminish as we head into the more cheerful holiday season

www.metrojewelryappraisers.com

 

[WinkHPD]

Date: 10/28/2008 5:40:22 PM
Author: Modified Brilliant

Date: 10/28/2008 9:38:22 AM
Author: Wink

Date: 10/28/2008 12:53:54 AM
Author: JoeNewbie11
One cannot dismiss the current global economic condition and outlook and its affect on all commodities, even diamonds. Recently, the US Stock Market along with all other major markets around the world have led to one of the biggest destructions of wealth in history. This along with the credit bubble bursting, will hamper all consumer''s ability to buy, both on the high end and low end. In the coming months and possibly years, these market effects will hit mainstreets around the world and a global recession is very likely according to many economists.

In my opinion, diamond prices are not insulated from these strong market forces. I am no expert, but my prediction is diamond prices will drop across the board, except for the rarer segments (fancies and large carat polished stones).

While it may seem so if you are listening to the press, my personal experience is contrary to the expected.

My business for the year was up at the beginning of this month by more than 15%. Last Tuesday and Thursday I held Round Table events with Richard Homer, having sit down dinners with several of my clients at which gems were shared. Before the Round Tables my October business was already more than double last year''s October and now it is double that again.

While several of my guests bought less than they would have liked nearly all of them bought something. Those with money are being more selective about what they buy, but they are still buying. Those jewelers who offer value and excellent service will continue to prosper, although I will admit that I am working more than twice as hard as I used to. The days of sitting in the office waiting for clients to appear are over. Aggressive marketing and massive value will be required to prosper, but prospering is possible. Remember that many of the current great family fortunes were made during the great recession and I expect that the same will happen during these economic conditions.

Given the declining availability I think that there will be little decline, if any, in the finer goods, and that there will be, as Paul predicts, a drop in the pricing of the average goods, which will make it seem as if there has been an increase in the price of the finer goods.

I also believe with Paul, that the smaller goods of average quality in cutting that are more available will drop, but not by the 30 to 40% the press is already calling for. Those kind of drops I believe are reserved for the larger goods in three carats and up.

We will look back at these posts in a year or two and have our answers, so it is almost a perverse kind of fun to stick our necks out and put them on the public line for all to see...

Wink

I agree with Wink...everyone is working harder these days AND...my observations...

People are still buying diamond rings and getting engaged here in New England. Seeing 0.75 to 1.75 ct + on a steady basis. Mostly ideal cut rounds.
The local jewelry stores that have an ''in house jeweler'' and are buying ''over the counter'' are staying the course.
Repairs and special orders as well as custom designs seem to be doing well.
Showcases are packed with merchandise and screaming out ''BUY ME!''
Cautiously optimistic that the gloom will diminish as we head into the more cheerful holiday season

www.metrojewelryappraisers.com

This matches what I am seeing out here in Boise. My business is stonger this year than last, not what I would expect from listening to the press, which is why I am no longer listening to the press.

Wink

 

[strmrdr]

I have been thinking about this for a while and it is just to early to tell what is going to happen.
There are way to many variables right now to call it.

Long term I think it will go up eventually(10 years) but for the next couple years maybe even 5 years I don''t know.

 

[WinkHPD]

Date: 10/28/2008 12:32:19 PM
Author: Shameless
Hijack on:

Wink... you wouldn''t happen to be into saltwater reef tanks, would you?

Hijack off:

LOL! I missed this before.

NO, but why do you ask???

Wink

 

[michaelgem]

Paul and Wink,

Terrific and professional presentation of Paul''s insight''s into the diamond industry.

Paul, you have a great command of English, and you did a terrific job of communicating your understanding of diamond industry economics.

I had not considered what you pointed out, that the recent close selling price for Ideals vs regular cutting means that Ideal cutters are at a disadvantage in having to bid more for the rough, since the lower yields in cutting means more expense than that small spread in selling price returns to them.

In other words, for it to be economically viable to cut Ideals (with lower yield from the rough) cutters must be able to obtain a better price spread for the polished.

It''s the age old dilemma of wanting to cut the most beautiful diamond, but having to produce the diamond that gives the best return on investment. This is important for jewelers and consumers to understand.

Thanks to Paul and Wink for all the insight.

Michael D. Cowing