Store-of-value: How important is this, when purchasing?

[Paul-Antwerp]

Hello all,

This topic basically follows up a thread of last month, which started out as a discussion about diamond-investment, but gradually evolved into an exchange about store-of-value: https://www.pricescope.com/forum/viewtopic.php?f=3&t=180517&start&view=viewpoll

Although I agree that a diamond for a consumer generally is not an investment, I think that it cannot be denied that diamonds are a store-of-value. I wonder however how the consumers on this board see this, and how they answer the following questions:

1. Is the store-of-value-aspect of a diamond a reason for you to prefer buying a diamond over another luxury purchase?

2. When purchasing a diamond, is the general concept that diamonds are a store-of-value, a conscious factor in your purchase-decision?

3. Is store-of-value one of the aspects you discuss with your prefered diamond-vendor, when making a diamond-purchase?

4. If your vendor would give you a prediction on a diamond's specific store-of-value, would it potentially influence your purchase-decision? Would you want to be informed even?

I am very interested to see your answers and comments. If you need me to clarify certain questions, please ask.

Live long,

 

[diamondseeker2006]

Please define store-of-value so we don't have to read the old thread. I think I understand the meaning and my answer is no, that is not a consideration when I buy diamonds. I just love fine quality jewelry! However, I do like the fact that diamonds can be heirlooms and be valuable in the future whereas cars, trips, clothes, electronics, etc. will not usually have tangible value after a certain point.

 

[Karl_K]

However, I do like the fact that diamonds can be heirlooms and be valuable in the future whereas cars, trips, clothes, electronics, etc. will not usually have tangible value after a certain point.

That is part of store-of-value that Paul is referencing.
What he is asking is how much that is part of your decision to buy?
Another part of many would be that if you hit hard times you can sell it(usually at a loss but it does store value).

 

[Paul-Antwerp]

DS,

Real estate, precious metals, precious stones, even art and livestock are alternative stores-of-value. While they may be inconvenient to trade daily or store, and may vary in value quite significantly, they rarely or never lose all value.

In a house, a new buyer may want to renovate it or tear it down completely to rebuild a new house, but the store-of-value remains in the value of the land and possibly the basic structure of the house.

In polished diamonds, as long as diamonds are a desired item, they can always be regarded as 'rough diamonds' to be re-cut to the then desired shape or cut-quality. If you have to pay a certain price for a H-SI1 and 25% more for a G-VS2, that is not because both diamonds are hugely different, it is because the store-of-value hinges on the graded colour and clarity.

Is this somewhat clearer?

Live long,

 

[GreenBling]

It is not why I buy diamonds but it is what I use to justify the spending.

 

[diamondseeker2006]

Yes, I understand. I guess as I said before, I generally prefer spending money on things that have value, but I don't think my love for jewelry is fueled by that idea! I just think it is beautiful...all created in nature for our enjoyment...and I do enjoy it and that is why I buy it! I do not buy with a pessimistic view that I would ever need to sell it, though. I don't buy what I can't afford. It disturbs me here when people list new rings on pre-loved saying they have an emergency that requires them to sell their new engagement ring (at a loss). They should have emergency savings before they spend many thousands on a ring, in my opinion.

 

[Paul-Antwerp]

Forgive me for trying to dig deeper. I am asking these questions because I want to understand both the conscious and unconscious reasons for a consumer to buy diamonds.

It really does not matter if you regard it as a safe-haven in case you need the money. That would mean that store-of-value is only important if you consciously want to keep that option open.

Greenbling, if you say that it justifies your spending, I think that it clarifies my point.

If a H-SI1 of a certain size costs $7,000, why do you accept or justify for yourself that that amount is worth spending? You do have other options:
- You could spend the $7K on another luxury-purchase, like a designer-coat, handbags, shoes or a cruise. Why diamonds?
- Or you could choose an equally beautiful CZ, and spend only $15. Why diamonds?

In the same way, if a H-SI1 costs $7,000.- and a G-VS2 $8,500.-, why do you accept or justify for yourself that both prices are equitable, while there is no visible difference? What is the ultimate driver of that decision, and is that conscious or unconscious?

Please give me more insight.

Live long,

 

[GreenBling]

Gold would have stronger store-of-value. India is biggest gold consumer in the world with China catching up. It is a known fact that people in these markets buy gold jewelry for its value. I think most people buy diamonds have that in mind subconsciously however the choice to buy diamonds instead of gold chain or a Hermes Birkin is due to other "values" like beauty, status, rareness, romance, etc...

 

[04diamond<3]

Paul - I think it depends on the person. There are plenty that would go for something that's perfectly cut, such as a hearts and arrows diamond and spend 7k - 8.5k and justify the spending because to them it meet their requirements for what they think they should have. I and probably a good number of other people would shop around and not just buy something because it's "perfect cut" or "so and so cut it", I would hunt for a deal (maybe that's my frugal husband now embedded in my brain) but I know that if I spend 7k on an EGL certified diamond, it may not be perfect to others, but it would meet my needs... I keep thinking that maybe as I age I will come to appreciate and justify paying the cost for a "true hearts and arrows" stone. I'm in my mid 20s, so I think my priorities are a bit different than others that have been buying and buying high quality things for a while.

 

[Paul-Antwerp]

Thank you for the reply. Greenbling,

Gold bars could have a better store-of-value, as there is hardly any sales-cost (distribution, profit, tax) at the initial purchase. Also, it is easy to trade back. However, it also depends on how volatile in either direction one considers the gold-market. With gold-jewelry as opposed to gold bars, the matter may become more complicated, and I wonder how diamonds would compare to gold jewelry.

Interesting to see that you state emotional factors like status and romance as more important.

In any case, you cannot give a wrong answer to my questions. I am learning here.

Live long,

 

[Paul-Antwerp]

04,

Of course, it depends on the person. For each individual, the motives while purchasing are different.

Just to be clear, this is not in any way about cut-quality.

However, when you talk about prefering seemingly cheaper EGL-graded stones, because it meets your needs, it raises another question. In reality, when trading back this EGL-stone in the near or far future, the EGL-grade will have no realistic value. It will be almost like selling an uncertified stone, and the true grade of the stone will matter. In that way, the chance of you recovering the same percentage as for a GIA-graded stone becomes slim.

Are you aware of the actual store-of-value for the EGL-stone being smaller? If so, do you care or do you simply prefer the status of having a bigger stone, or one with a higher color or clarity on paper?

Again, no wrong answer possible. It is your ultimate free choice. Just trying to understand the motives.

Live long,

 

[GreenBling]

Thank you for the reply. Greenbling,

Gold bars could have a better store-of-value, as there is hardly any sales-cost (distribution, profit, tax) at the initial purchase. Also, it is easy to trade back. However, it also depends on how volatile in either direction one considers the gold-market. With gold-jewelry as opposed to gold bars, the matter may become more complicated, and I wonder how diamonds would compare to gold jewelry.

Interesting to see that you state emotional factors like status and romance as more important.

In any case, you cannot give a wrong answer to my questions. I am learning here.

Live long,

Thank you for starting this thread. Very interesting discussion. Got me thinking what motivates me to buy diamonds.

I'm Chinese from HK. We have a long history of wearing 999 gold jewelry. Brides are given gold jewelry by close relatives. Parents of both sides would give gold bangles, the thicker the better, sign of love for the daughter and status of course. It was a big fashion trend in the 80's/early 90's to wear gold jewelry. You dont have to be wealthy to own gold jewelry. Someone with average income can afford a ring or earrings. gold jewelry is something that holds value and pleasing to the wearer.

I think, purely my own opinion, that as the city becomes more prosperous, people have more desposible income to spend on luxury items that may not hold as much resale value, diamonds being one of those items. I believe that diamonds are generally purchase by people who want what comes with the diamonds (the romance, status, bling etc...) who don't necessarily buy them for its monetary value.

For me, apart from its sparkles, it is the idea that it is forever, that it could be something that reminds my son of his mom, that I can pass down to future generations that romanticize the purchase.

 

[TC1987]

1. Is the store-of-value-aspect of a diamond a reason for you to prefer buying a diamond over another luxury purchase?

Yes, somewhat. I try to minimize my purchases of depreciating assets. Cars, for example are worth probably 40%-50% less in two years, and it would probably take decades for the value to start increasing. Cars also take a lot of room to store, require annual licenses, inspection, and insurance, and sometimes also are annually taxed. A diamond is small, portable, easily sold in a hurry (especially if one is willing to take a loss), and is essentially expense-free after the initial purchase price, and the government is not sending me a tax bill for them every blessed year. A conservative diamond is also not likely to ever go completely obsolete the way furniture, vehicles, golf clubs, stereos, and TVs might. Designer clothing is something I almost would never consider purchasing; I can sew for myself. I ruin every handbag by overstuffing it, so I only buy cheap ones now.

2. When purchasing a diamond, is the general concept that diamonds are a store-of-value, a conscious factor in your purchase-decision?

To some extent. As an investment, they aren't great unless you can really buy low and sell high, flip them fast for a profit. Potential loss on a trendy thing like "chocolate diamonds" or the "champagne diamonds" or blue diamonds is the kind of thing that has strong influence and stops me from buying. I am looking at it as minimizing or avoiding a loss, instead of maximizing an investment, in other words.

3. Is store-of-value one of the aspects you discuss with your prefered diamond-vendor, when making a diamond-purchase?

No. I'd never take the advice of someone who is trying to sell me something, at least not without doing my own research. But I would avoid buying a very trendy shape like marquise or princess, or something odd like a heart, or an obviously fancy yellow diamond. I'd always consider how easy would it be to sell this, and who is my market, and what are they willing to pay for it secondhand.

4. If your vendor would give you a prediction on a diamond's specific store-of-value, would it potentially influence your purchase-decision? Would you want to be informed even?

I don't consider the vendor an unbiased source of information. I sell, too, and it's the vendor's job to sell the vendor's product, not to give the potential buyer a complete competitive analysis, UNLESS that competitive analysis shows that this deal spanks the competition. Everyone should take a marketing class, to learn the various strategies that are used to sell products. And consumers should always do their own research. PS and its vendors continue to do a fantastic job of giving consumers information and tools. And that's a good thing, because the consumers can then decide what their priorities are and what compromises they are willing to make.

 

[04diamond<3]

04,

Of course, it depends on the person. For each individual, the motives while purchasing are different.

Just to be clear, this is not in any way about cut-quality.

However, when you talk about prefering seemingly cheaper EGL-graded stones, because it meets your needs, it raises another question. In reality, when trading back this EGL-stone in the near or far future, the EGL-grade will have no realistic value. It will be almost like selling an uncertified stone, and the true grade of the stone will matter. In that way, the chance of you recovering the same percentage as for a GIA-graded stone becomes slim.

Are you aware of the actual store-of-value for the EGL-stone being smaller? If so, do you care or do you simply prefer the status of having a bigger stone, or one with a higher color or clarity on paper?

Again, no wrong answer possible. It is your ultimate free choice. Just trying to understand the motives.

Live long,

Yes and no...Right now, I'd prefer having something bigger, but I wouldn't invest 2 or 3k more to have it GIA graded. It's not a priority to me right now. I am aware of the issue with getting a return on the stone because it's EGL yes. But to me, right now, I feel like if it's a gorgeous stone, it could be found anywhere. I would prefer it to be certified and EGL just makes it more possible for me to own something bigger. Example, I'm in the market for a bigger stone, I have a 1 ct F SI3 very good cut stone, and I'm looking to spend $4500 - 5k for the new stone. If I get something lets say from JA 5K would only get me something similar in size to what I currently have. If I go through our other vendors that have EGL certified stones, I can get an ideal cut stone J SI1 1.5ct for about 5k give or take. I don't have it in budget for me to get a hearts and arrows diamond with the same info for 8k. I realize the difference in grading, which is why I'm looking for SI1 or VS2, and I'm fine with a J if it has fluorescence. The No, is because after this upgrade, after all the kids are gone and we can vacation for the rest of our lives (yeah right), we'll have more that we could invest in a "perfect" colorless flawless stone (which is my hubby's wish is for me to have a "perfect" stone). And yes, i would prefer a good cut quality stone! I'm looking at ideal only. but I know it won't be "perfect"...but something in the higher cut area will be nice.

 

[Lula]

1. Is the store-of-value-aspect of a diamond a reason for you to prefer buying a diamond over another luxury purchase?

A diamond is small, portable, easily sold in a hurry (especially if one is willing to take a loss), and is essentially expense-free after the initial purchase price, and the government is not sending me a tax bill for them every blessed year.But you have to pay insurance fees for every year that you own the diamond.

3. Is store-of-value one of the aspects you discuss with your prefered diamond-vendor, when making a diamond-purchase?

No. I'd never take the advice of someone who is trying to sell me something, at least not without doing my own research. Ditto this

4. If your vendor would give you a prediction on a diamond's specific store-of-value, would it potentially influence your purchase-decision? Would you want to be informed even?

I don't consider the vendor an unbiased source of information. Everyone should take a marketing class, to learn the various strategies that are used to sell products. Great advice on the marketing course. I took several during my undergrad years and they've been invaluable. Now I just need to learn to tune out the peer pressure and opinions that are so freely given by friends and family about every purchase .

I agree with much of what TC1987 says, with the additional comment that I don't consider any purchase that comes with taxes, payments to the bank, or insurance payments to have much "store-of-value." I also don't consider items that are purchased at retail prices with limited options for resale (and certainly limited options for resale at retail prices) to have store-of-value. I do not consider items that are subject to the whims of fashion to hold much store-of-value. For example, those who purchased a 2 or 3 carat princess-cut or marquis diamond years ago might find their options for resale greatly reduced compared to their resale options when the stone was purchased a decade or two ago.

 

[kenny]

Yes, that diamonds store value is a factor in my purchases.
I hate pissing away money on stuff that vanishes like vacations or restaurants.
Real estate, a piano, a diamond or fine Persian hand-knotted rug hold retain some inherent value, besides being useful and offering pleasure.

I'll add that I suspect the better diamonds (large of high color and clarity and cut) is a better store of value.
Yes I paid more for my red diamond, but I think it being so rare makes the value it stores more secure.
Maybe I'm deluding myself, but this thread is about customer psychology so I'm revealing mine.

About the EGL thing.
I think it is tragic and people are getting ripped off.
The think they have a Lexus, but it's actually a Toyota with a Lexus badge.
I think EGL should be sued and shut down.

I realize people vary.
Some want what's too good to be true, they buy the "hope" of getting a GIA G VS1 $10,000 diamond for $6,000 because EGL says it's G VS1, ignoring the likelihood that if it went to GIA it would come back as a I SI1 or worse and sell for $5,000 with a GIA report.
They think they saved $4,000 but actually threw away $1000 while the vendor laughs all the way to the bank.
Some customers insist on sticking their head in the sand after learning those grades from those labs are lies.
But hey, people vary and if they want to believe a lie, or that a virgin had a baby or they were abducted by aliens in a UFO it's no skin off my back.

 

[Billy Mays]

I may not be an expert but I have a pretty strong background in investing. I have spoken to a diamond hedge fund in the past about this. They have looked at large marquee stones and also what they consider investment grade (nothing lower than an F or a VS2).

In my personal opinion, there is no inherent value in the stone. Don't take that the wrong way. By that I mean it never throws off cashflow, it isn't a standardized and liquid asset that can trade like a stock, someone controls volume of flow at the top which can very much influence price, there is the possibility of synthetics in the future, etc. It's like fine art. Many people have tried to make this into an asset class but it's never quite worked. You're not investing, you're speculating. If my point is lost or I didn't do a good job, I recommend reading Margin of Safety. In the first chapter or two he does a great job at explaining what "value" is. Of course, there are many commodities and "objects of value" that people will continue to speculate on so whether I am right or wrong probably doesn't matter.

Now given that I said all that, I'll answer your questions.

1) It's not a handbag. It doesn't depreciate and reach 0 at X time so yes, holding value matters. There is a reason people buy non non debeers stones - it's for that "value".
2) I view it as finding the best of something not great. I know for sure if I will never profit on this no matter what a dealer says and no matter what an industry report says. Bain consulting put out an interesting report which I'm sure you saw a couple years back. I went with the specific color and clarity because I thought the markup would be less.
3) Yes. I spoke with quite a few vendors about it. I looked at historical pricings and tried to gauge what I thought markups were and price shifts looked like. I did a lot of work in excel. Overall I found the exercise to be just a little bit better than useless but I felt I had to check it off the list.
4) It would be better if a non-biased source gave me that number. Of course there is nothing non-biased about this industry. The GIA is just like a ratings agency (Moodys/S&P) which is paid by a vendor who has the choice of going to AGS or EGL, right? Again it might be useful but taken with a grain of salt.

I probably misunderstood everything and wrote a bunch of gibberish but who knows maybe it made sense.

Hello all,

This topic basically follows up a thread of last month, which started out as a discussion about diamond-investment, but gradually evolved into an exchange about store-of-value: https://www.pricescope.com/forum/viewtopic.php?f=3&t=180517&start&view=viewpoll

Although I agree that a diamond for a consumer generally is not an investment, I think that it cannot be denied that diamonds are a store-of-value. I wonder however how the consumers on this board see this, and how they answer the following questions:

1. Is the store-of-value-aspect of a diamond a reason for you to prefer buying a diamond over another luxury purchase?

2. When purchasing a diamond, is the general concept that diamonds are a store-of-value, a conscious factor in your purchase-decision?

3. Is store-of-value one of the aspects you discuss with your prefered diamond-vendor, when making a diamond-purchase?

4. If your vendor would give you a prediction on a diamond's specific store-of-value, would it potentially influence your purchase-decision? Would you want to be informed even?

I am very interested to see your answers and comments. If you need me to clarify certain questions, please ask.

Live long,

 

[Paul-Antwerp]

Thank you for the reply. Greenbling,

Gold bars could have a better store-of-value, as there is hardly any sales-cost (distribution, profit, tax) at the initial purchase. Also, it is easy to trade back. However, it also depends on how volatile in either direction one considers the gold-market. With gold-jewelry as opposed to gold bars, the matter may become more complicated, and I wonder how diamonds would compare to gold jewelry.

Interesting to see that you state emotional factors like status and romance as more important.

In any case, you cannot give a wrong answer to my questions. I am learning here.

Live long,

Thank you for starting this thread. Very interesting discussion. Got me thinking what motivates me to buy diamonds.

I'm Chinese from HK. We have a long history of wearing 999 gold jewelry. Brides are given gold jewelry by close relatives. Parents of both sides would give gold bangles, the thicker the better, sign of love for the daughter and status of course. It was a big fashion trend in the 80's/early 90's to wear gold jewelry. You dont have to be wealthy to own gold jewelry. Someone with average income can afford a ring or earrings. gold jewelry is something that holds value and pleasing to the wearer.

I think, purely my own opinion, that as the city becomes more prosperous, people have more desposible income to spend on luxury items that may not hold as much resale value, diamonds being one of those items. I believe that diamonds are generally purchase by people who want what comes with the diamonds (the romance, status, bling etc...) who don't necessarily buy them for its monetary value.

For me, apart from its sparkles, it is the idea that it is forever, that it could be something that reminds my son of his mom, that I can pass down to future generations that romanticize the purchase.

Thank you for the reply, Greenbling. It surely helps to realize that you are from HK. Indeed, you have a tradition of considering gold jewelry as a store-of-value. To some extent, possibly historically and culturally rooted, I think that buying gold (or diamonds for that matter) also indirectly means converting some of your savings from local currency into USD.

Live long,

 

[Paul-Antwerp]

1. Is the store-of-value-aspect of a diamond a reason for you to prefer buying a diamond over another luxury purchase?

Yes, somewhat. I try to minimize my purchases of depreciating assets. Cars, for example are worth probably 40%-50% less in two years, and it would probably take decades for the value to start increasing. Cars also take a lot of room to store, require annual licenses, inspection, and insurance, and sometimes also are annually taxed. A diamond is small, portable, easily sold in a hurry (especially if one is willing to take a loss), and is essentially expense-free after the initial purchase price, and the government is not sending me a tax bill for them every blessed year. A conservative diamond is also not likely to ever go completely obsolete the way furniture, vehicles, golf clubs, stereos, and TVs might. Designer clothing is something I almost would never consider purchasing; I can sew for myself. I ruin every handbag by overstuffing it, so I only buy cheap ones now.

2. When purchasing a diamond, is the general concept that diamonds are a store-of-value, a conscious factor in your purchase-decision?

To some extent. As an investment, they aren't great unless you can really buy low and sell high, flip them fast for a profit. Potential loss on a trendy thing like "chocolate diamonds" or the "champagne diamonds" or blue diamonds is the kind of thing that has strong influence and stops me from buying. I am looking at it as minimizing or avoiding a loss, instead of maximizing an investment, in other words.

3. Is store-of-value one of the aspects you discuss with your prefered diamond-vendor, when making a diamond-purchase?

No. I'd never take the advice of someone who is trying to sell me something, at least not without doing my own research. But I would avoid buying a very trendy shape like marquise or princess, or something odd like a heart, or an obviously fancy yellow diamond. I'd always consider how easy would it be to sell this, and who is my market, and what are they willing to pay for it secondhand.

4. If your vendor would give you a prediction on a diamond's specific store-of-value, would it potentially influence your purchase-decision? Would you want to be informed even?

I don't consider the vendor an unbiased source of information. I sell, too, and it's the vendor's job to sell the vendor's product, not to give the potential buyer a complete competitive analysis, UNLESS that competitive analysis shows that this deal spanks the competition. Everyone should take a marketing class, to learn the various strategies that are used to sell products. And consumers should always do their own research. PS and its vendors continue to do a fantastic job of giving consumers information and tools. And that's a good thing, because the consumers can then decide what their priorities are and what compromises they are willing to make.

TC1987, thank you for the clear replies.

As for approaching store-of-value as minimizing potential loss, instead of maximizing investment, I am totally with you.

That you do not even want to discuss store-of-value with your vendor surprises me. I see that you figured out that certain shapes might be less interesting in this regard, but I wonder if making it a topic of the sales-conversation for each stone considered would not have an impact on your purchase-decision. In that sense, I will follow up with more detailed questions. I hope that you will take the time to reply.

Live long,

 

[Paul-Antwerp]

04, Lula and Kenny,

Thank you for your personal responses. I hope that you will also look at my follow-up-questions.

Live long,

 

[Paul-Antwerp]

I may not be an expert but I have a pretty strong background in investing. I have spoken to a diamond hedge fund in the past about this. They have looked at large marquee stones and also what they consider investment grade (nothing lower than an F or a VS2).

In my personal opinion, there is no inherent value in the stone. Don't take that the wrong way. By that I mean it never throws off cashflow, it isn't a standardized and liquid asset that can trade like a stock, someone controls volume of flow at the top which can very much influence price, there is the possibility of synthetics in the future, etc. It's like fine art. Many people have tried to make this into an asset class but it's never quite worked. You're not investing, you're speculating. If my point is lost or I didn't do a good job, I recommend reading Margin of Safety. In the first chapter or two he does a great job at explaining what "value" is. Of course, there are many commodities and "objects of value" that people will continue to speculate on so whether I am right or wrong probably doesn't matter.

Now given that I said all that, I'll answer your questions.

1) It's not a handbag. It doesn't depreciate and reach 0 at X time so yes, holding value matters. There is a reason people buy non non debeers stones - it's for that "value".
2) I view it as finding the best of something not great. I know for sure if I will never profit on this no matter what a dealer says and no matter what an industry report says. Bain consulting put out an interesting report which I'm sure you saw a couple years back. I went with the specific color and clarity because I thought the markup would be less.
3) Yes. I spoke with quite a few vendors about it. I looked at historical pricings and tried to gauge what I thought markups were and price shifts looked like. I did a lot of work in excel. Overall I found the exercise to be just a little bit better than useless but I felt I had to check it off the list.
4) It would be better if a non-biased source gave me that number. Of course there is nothing non-biased about this industry. The GIA is just like a ratings agency (Moodys/S&P) which is paid by a vendor who has the choice of going to AGS or EGL, right? Again it might be useful but taken with a grain of salt.

I probably misunderstood everything and wrote a bunch of gibberish but who knows maybe it made sense.


Billy,

Thank you too for the reply. I think however that you are approaching the questions as an investment, with potential profit to be made. I am actually alluding to the probability that the recoverable value will not go down to 0, but will at least be 40%, 50%, even 70% or more of what one paid.

Live long,

 

[Paul-Antwerp]

Replies here vary from no interest in the aspect of store-of-value to clear understanding that it is a factor. That is all cool, as people indeed vary.

I am however surprised that even when people state that it is an aspect of their purchase-decision, they indicate not willing to discuss it with their vendor. Therefore the following question/scenario:

Suppose that you are considering the purchase of a diamond with one specific vendor, and the final choice is between two stones that seem comparable in the 4 C's and not extremely different in price. You also like the looks of both stones.

Suppose then that you would ask the vendor: 'Now, if I want to sell these stones back to you in 6 months for whatever reason, what price do you guarantee me?' and the answer would be:

"Well, I will guarantee you 70% (or 70 cents on the dollar) for stone A, and 60% for stone B."

If you ask for clarification of the difference, the vendor tells you: "Well, I estimate that if I need to buy back either stone, it will be likely that I can sell stone A quicker and for more than stone B. In that sense, the stone probably holds its value better, and I can take the risk of guaranteeing you a higher percentage."

Would such reply influence your final decision?

Live long,

 

[Billy Mays]

I may not be an expert but I have a pretty strong background in investing. I have spoken to a diamond hedge fund in the past about this. They have looked at large marquee stones and also what they consider investment grade (nothing lower than an F or a VS2).

In my personal opinion, there is no inherent value in the stone. Don't take that the wrong way. By that I mean it never throws off cashflow, it isn't a standardized and liquid asset that can trade like a stock, someone controls volume of flow at the top which can very much influence price, there is the possibility of synthetics in the future, etc. It's like fine art. Many people have tried to make this into an asset class but it's never quite worked. You're not investing, you're speculating. If my point is lost or I didn't do a good job, I recommend reading Margin of Safety. In the first chapter or two he does a great job at explaining what "value" is. Of course, there are many commodities and "objects of value" that people will continue to speculate on so whether I am right or wrong probably doesn't matter.

Now given that I said all that, I'll answer your questions.

1) It's not a handbag. It doesn't depreciate and reach 0 at X time so yes, holding value matters. There is a reason people buy non non debeers stones - it's for that "value".
2) I view it as finding the best of something not great. I know for sure if I will never profit on this no matter what a dealer says and no matter what an industry report says. Bain consulting put out an interesting report which I'm sure you saw a couple years back. I went with the specific color and clarity because I thought the markup would be less.
3) Yes. I spoke with quite a few vendors about it. I looked at historical pricings and tried to gauge what I thought markups were and price shifts looked like. I did a lot of work in excel. Overall I found the exercise to be just a little bit better than useless but I felt I had to check it off the list.
4) It would be better if a non-biased source gave me that number. Of course there is nothing non-biased about this industry. The GIA is just like a ratings agency (Moodys/S&P) which is paid by a vendor who has the choice of going to AGS or EGL, right? Again it might be useful but taken with a grain of salt.

I probably misunderstood everything and wrote a bunch of gibberish but who knows maybe it made sense.


Billy,

Thank you too for the reply. I think however that you are approaching the questions as an investment, with potential profit to be made. I am actually alluding to the probability that the recoverable value will not go down to 0, but will at least be 40%, 50%, even 70% or more of what one paid.

Live long,

Either way it's gonna hurt but one might hurt less is what you are saying?

 

[Paul-Antwerp]

No, Billy, that is not what I am saying.

If you look at diamonds as an investment, and that is an aspect of your purchase-decision, you are bound to be disappointed.
If however you look at diamonds as a store-of-value, it means that you can eventually recover part of your spend by re-selling it. The result may vary because of the length of the period between purchase and sale, your selling-abilities and your buying-abilities. To some extent, your final recovery is influenced by what you buy for how much.

I think that vendors generally avoid giving good information on this aspect, even though it is speculative to some extent, while it could serve as an interesting factor to consider for the customer. Hence my last question/scenario. Hoping to get some replies.

Live long,

 

[dianabarbara]

Dear Paul,

I share your curiosity on this topic.

The premise is that I am taking a lot of freedom to express what I think and that I do not mean to offend anyone.

Many people seem to value highly the trade-back-in option, which is sort of a store value, although not completely so as you cannot get monetary refund out of your stone.
However, I am not sure of how consumers would react on 'if you want to sell it back to me, I will give you 60%'.
My guess is that some LIKE to think that diamonds ARE an investment, even when clearly they aren't.
The minute you give them a number, these people, and others that simply have not considered potential financial losses, might be compelled to reconsider whether it is a good place to put their money and walk out of the door.

Having said that, I believe that some more informed and pragmatic customers would appreciate to know upfront what they could incur in sometime in the future, should they need to sell the stone.

Diana

 

[valeria101]

Still catching up with Old Pricescope !

In polished diamonds, as long as diamonds are a desired item, they can always be regarded as 'rough diamonds' to be re-cut to the then desired shape or cut-quality.

Indeed !

The expense of art over rough, is a sort of interest - paid in advance to myself, in the form of pleasure ...

 

[Austina]

I've never bought jewellery because it's an investment, I buy because I like to have sparkly pretty things. Why 'real' over fake, because I like the fact that it's been created by nature.

My husband doesn't understand my fascination, but is more than happy to spend the equivalent of a 3ct diamond every year travelling. To others that might seem a waste because once you've been there and back it's gone. To him it's money well spent to fly first class, stay in good hotels and visit new places. We're only here for a finite amount of time, and having spent all his working life working hard to earn the money, he's determined to enjoy life doing what he wants to do. I go along for the ride

 

[Witos]

When I was feeling cold feet, moments before swiping that card, I said to myself: "Worst case scenario: you sell the stone at a 30% loss." Then purchased it.

Then again, right before getting a nice Ferragamo belt last week I said to myself: "F*ck it, there is no point on working hard if I don't do stupid things like this" and bought it.

I guess my point is that when it comes to purchasing luxury items , the decision is very irrational, some of us need to rationalise it, but the intent is certainly passional and rationalisation helps to cope with buyer's remorse.