"The Diamond Invention" -- where are we now?

[raddygast]

Just curious. I know 99% of the posters on this forum are diamond freaks, but many of you also know (consciously or subconsciously) that the market has been artificially fabricated, and diamonds are certainly not rare gems in the grand scheme of things.

Anyway, this article was written long ago, judging from some things it says towards the end. A great read for those of you who haven''t already done so. However, I was wondering: what has changed?

I have heard that the DeBeers monopoly is no longer really a monopoly, and that there is actually competition out there. I''m not sure how true this is. I am wondering why we haven''t seen any fluctuations in diamond prices -- perhaps all the world mining operations are operating closely in concert, in some sort of mutual alliance to keep themselves profitable by not flooding the market?

Or perhaps N.W. Ayer''s marketing has been so utterly complete and total that demand still easily gobbles up all the supply?

http://edwardjayepstein.com/diamond.htm

 

[Garry H (Cut Nut)]

well I am a real hopless case.
I drive a Merc too.

Imagine all that marketing that sucked me in.

And you would be a journalist or a fruit cake.
And a political activist

But you are normal and we are the nut''s right?

 

[valeria101]

It took me a bit to understand why that often cited book hasn''t got published... Garry explains it pretty well

 

[strmrdr]

A lot has changed yet at the same time very little has changed.
DeBeers still steers the industry just in different ways.
Price fixing is rampant in the setting business.
Workers are still being exploted.
Countries natural resources are still being stolen by huge multi-nationals.
One change - The pipeline to the consumer is getting shorter so DeBeers can get a greater percentage of the retail price.
Normaly as distribution gets more efficiant prices go done.
Instead they are going up.
Some mines are getting played out but more are opening up so thats a wash there.
Overall as long as people are willing to throw money into shiny rocks the more things change the more they stay the same.

Garry is still in denial... just kidding ya a little Garry.

 

[strmrdr]

Date: 1/15/2005 7:35:15 AM
Author: Feydakin
I must be terribly evil then.. I don''t even wear diamonds (I prefer color) but I push them on other people..

sarcasm on --
Yea your as bad as the crack dealer down the street pushing that evil addicting ice on unsuspecting people!
Why even kids use that stuff you should be ashamed!

 

[denverappraiser]

I love a good conspiracy theory. As you point out, this one has been around for a long time and it hasn’t really improved with age. I’ll pick on one tiny part of their logic although the story is full of fallacies. Perhaps others will choose to discuss other elements.

Artificial market. I suppose this is true, rather like every other market. Value is a remarkably floating concept that tends to change from market to market, from person to person and from time to time. There was a time not all that long ago when ambergris (a whale product) was a valuable and reasonable commodity. It was a decent place to store wealth and some substantial fortunes were made and lost in the business. This was an artificial market that was created by the titans of the whaling industry. Slowly the world changed and demand for ambergris dropped off. Unlike diamonds, the supply has dropped to effectively zero and yet the prices still aren’t sky high. Why not? Under the author’s theory, prices should be directly connected to the dwindling supply. Whale poachers should be more successful than cocaine dealers (another example of an artificial market).

Nobody needs ambergris and never has. Lets talk about something with ‘inherent value’….water. Water is life. It’s hard to be more inherently valuable than that. Water turns out to be a remarkably poor store of wealth despite its obvious uses and it''s long shelf life. Even in places where water is scarce, it’s remarkably difficult to build a successful mercantile system around it. Under the author’s economic theories, moving water from high supply areas to a high demand area should be a fantastic business opportunity that should lead to great wealth on the part of entrepreneurs who delve into it. What’s the problem?

Neil Beaty
GG(GIA) ISA NAJA
Independent Appraisals in Denver

 

[perry]

My vote is for partial fruitcake.

There is truth in that the value of the diamonds has been created by marketing to produce a martket that otherwise would never have developed. If not for that marketing, diamonds would indeed be nothing more than a semiprecious jem.

However, people love marketing, and being marketed too. So this market will never go away. The suppliers can clearly manipulate the supply side of the market to maintain prices - and will. Diamond dust grinding medium does not have to be made from industrial grade diamonds afterall...

Perry

 

[belle]

They are about having and not having the ability to do as you wish with the spare resources you posess..

........or your credit rating...(haha)


well said steve.

 

[tavernier]

It causes me a lot of curiosity this matter.
I dream the day in that the private ships of DeBeers arrive to jupiter where it is said they rain diamonds of the sky and brings them until the earth or when it puts in a sightholder box the star of crystallized carbon that it weighs something like that as a "gogol" of karats. Or when Gemesis places in the supermarkets a precooked mixture of "makes it yourself in your house microwaves oven". Tint included.
Maybe that day the prices lower a little.
Speaking seriously: I believe that not more than one percent of the world population has had in its hands a diamond gem and if we are optimistic the day in that those exploited children will grow will arrive and they will buy for their fiances a engagement ring with diamonds carved by robots.
When the population from China that of India that of Russia that of Africa that of Latin America reaches the enough purchasing power, it will still have market for DeBeers and their few competitors.
For my the discovery of new sources will not make that the prices collapse, I believe that on the contrary people acquiring bigger purchase capacity until reaching the capacity to wear diamonds; neither I believe that the market of the diamond is a invention lacking of some foundation in the material reality.
Those stones have something...

 

[raddygast]

Well, most luxury goods are marketed. I just think this campaign was ingenious (and insidious, depending on how you look at it). All that stuff about how, when it was perceived by many (most) that diamonds were really too expensive as luxuries and not for everyone (i.e. only the rich), that DeBeers started pushing its "it''s your responsibility to buy the best diamond you can (from us), regardless of size." And I''m a bit cynical when I read that the "eternity ring" was basically just a ploy to sell Russian diamonds of smaller size, because otherwise DeBeers would take a huge loss after having agreed to sell the Russian supply for them (and if they hadn''t gotten involved, price fluctuations would arise.)

I''m not saying supply/demand should be the only factor. But look at other gems. There actually is a quasi-reasonable market for them, no? All the other colored stones: some gems are more in demand than others, and some have supply that is rarer than others, and this all seems to be reflected in the ups and downs of price. But they are still luxury commodities, so usually we won''t see prices go down as often as say, gold prices, or stock prices.

But after all is said and done, I think that what gets me most is this:

1) For a gem that is decidedly un-rare, diamonds are ridiculously expensive, and nobody seems to mind because they have been raised on it. It''s not "how difficult is it to get an ideal cut colorless and clean diamond" that determines the price. It''s "how much are these suckers willing to pay for this".

2) The diamond marketing in North America and Japan has been so utterly successful that if you walk around with an engagement ring with a sapphire or ruby or something else, probably 75% of people will not even realize it''s an engagement ring. I have no problem with marketing something to take over your competitors, but that''s not what happened. DeBeers didn''t achieve success by saying "look, diamonds are just optically superior to everything else, come look." They didn''t succeed by *only* making movie stars and royalty wear diamonds in conspicuous places. They succeeded mostly by ingraining in the hearts and minds of an impressionable generation that only diamonds were an acceptable sign of love suitable for an engagement ring, only diamonds were everywhere recognized and understood to be such, and only diamonds have been used throughout the ages for such a purpose. Which is of course utterly ridiculous. But the lie has now become the truth.

 

[raddygast]

Steve, what car do you drive?

 

[Garry H (Cut Nut)]

i drive a Merc because it has the "best engineering"
But really i drive it because i have a small thingy and need a status boost

This whole issue has been discussed a thousand times and you are really welcome to you opinion - bbut it is a beat up by a few weirdo''s

diamonds are abundant because they are expensive.
If the price dropped there would be no prospecting and fewer diamonds. It is a real and genuine market with many tensions and much level and positioning leapfrogging going on - fighting for survival growth fear of loss of position etc

 

[Richard Sherwood]

Diamonds were rare, valuable and highly sought after a thousand years before DeBeers ever entered the equation.

As far as a diamond not being rare, try mining a crystal large enough to yield a one carat stone. You''ll have to use heavy earth moving equipment and then sift through 250 tons of earth before finding one. That''s not rare?

As far as value being artificially created, try paying for the equipment, manpower and process of mining, extracting, sorting, cutting and selling a diamond. That''s artificially created?

DeBeers brought consistency to a erratic market by exercising control of the volume of diamond output. That''s the difference between the colored stone market and the diamond market. Colored stone prices can go all across the board with the discovery of a new mine, and then usually settle back down to where they were originally. Diamond prices have an order to them because a sophisticated firm used strategy in their marketing and supply. That''s a bad thing?

 

[Garry H (Cut Nut)]

De beers began as a miners co-operative.

 

[raddygast]

Well, I think in the end the mystique and allure of colored gems is rooted firmly in their beauty and long centuries of cultural tradition (in the case of rubies and sapphires and emeralds, for example), whereas the allure of diamonds is the result of a concerted marketing campaign.

I''m not saying DeBeers was evil, just that I find it very insidious how they actually manipulated the public into thinking that only diamonds are ok.

I didn''t know so much about diamond mining, of course. I knew it was expensive and problematic, and for that reason I agree that diamonds do have a real value (since they are not growing on trees), but in terms of being able to get a stone of a certain parameter: if you have enough money, isn''t it always possible?

Just seems to me that if you want a ruby of certain specifications over a certain size (say 3 carats) you''ll have a hell of a hard time finding one, whereas you can pretty much go to any high-end B&M store (or diamond dealer) and they may even have one on hand for you to look at.

And what Fedaykin posted also rings true. For me, as April is my birth month, I always resented diamonds because they were so incalculably BORING to me. I''m just not a sparkle nut (maybe it''s gender based?) I''ve always been about color: in clothes, cars, computer interface, jewellery, fridge magnets, pretty much everything. When I was younger it was about pencil cases and binders and report covers and soccer jerseys. But it was always about color.

I just find it a bit sad that there isn''t as much variety in the engagement ring business. I''m quite happy to do my own thing, and I''m not looking for acceptance, but I speak merely from the perspective of someone who would actually like to observe others'' e-rings and guess the stone based on look and color, etc. At the moment the only colored stones I can ever really see is on the home shopping network, and it''s always the same deal: "Get your citrine here! Everyone who''s anyone *has* to have a citrine over 10 carats. Get your beautiful trillion citrine in this ornate engraved setting for only 4 payments... Next up, a lovely 24 carat morganite heart...." heh.

 

[strmrdr]

lol Richard did you copy/paste that from when I brought this subject up?
Its word for word from last time...

 

[Garry H (Cut Nut)]

if rubies cost as muvch as diamonds there would be a lot more of them.

We could mine them in hard dock sources, not just inexpensive alluvial mining processes.

 

[valeria101]

Date: 1/16/2005 1:491 PM
Author: Garry H (Cut Nut)
if rubies cost as muvch as diamonds there would be a lot more of them. We could mine them in hard dock sources, not just inexpensive alluvial mining processes.

It seems the nice ones are, no ?

 

[Richard Sherwood]

Date: 1/16/2005 1:47:30 PM
Author: strmrdr

lol Richard did you copy/paste that from when I brought this subject up?
Its word for word from last time...

I''ve had to repeat it so many times it has probably burned neural pathways in my brain...

 

[strmrdr]

Date: 1/16/2005 7:35

8 PM
Author: Richard Sherwood

Date: 1/16/2005 1:47:30 PM

Author: strmrdr


lol Richard did you copy/paste that from when I brought this subject up?

Its word for word from last time...

I''ve had to repeat it so many times it has probably burned neural pathways in my brain...

Hate when that happens lol

 

[raddygast]

Sorry if I offended anyone. I just hadn''t heard -- anywhere -- that diamond values were not artificially inflated. This is the first defense of the stone in response to the usual rarity criticism that I''ve come across.

I thought it was a gemological fact that diamond rough is in fact abundant, compared to most other types of gem. I suppose the difficulty in extracting it and processing it makes it much more valuable -- no more alluvial diamonds, no?

 

[Garry H (Cut Nut)]

There are boat loads of alluvials in places that are well known.

But they are at the bottom of the sea - mainly off the cost of West Africa, but probably also of NW Aussie and the east coast of India.

But they are very expensive and dangerous to mine too.

You can find out about the boats with vacuum cleaners they use.

 

[strmrdr]

Date: 1/17/2005 2

2:55 AM
Author: raddygast
Sorry if I offended anyone. I just hadn''t heard -- anywhere -- that diamond values were not artificially inflated. This is the first defense of the stone in response to the usual rarity criticism that I''ve come across.


I thought it was a gemological fact that diamond rough is in fact abundant, compared to most other types of gem. I suppose the difficulty in extracting it and processing it makes it much more valuable -- no more alluvial diamonds, no?

Diamonds are in a lot of ways still price controlled.
A lot of the demand is marketing based.
I dont think there is a lot of question on that.

When you get into the question of if they would be any cheaper without the control you get into a murky area.
The diamond rough suppliers are pretty closed up when it comes to discussing profits.

 

[Garry H (Cut Nut)]

Date: 1/17/2005 9:25:34 AM
Author: strmrdr

Diamonds are in a lot of ways still price controlled.
The diamond rough suppliers are pretty closed up when it comes to discussing profits.

try this link Storm http://www.riotinto.com/investor/downloads/presentations/HY2004%20presentation.pdf
$86 million or 9% of their profit for the 1/2 year. All the audited stats are there - what is murky?
You can find the same for BHP Billiton, and Namdeb and the Botwswana Govt''s partnership with De Beers.
Alrosa in Russia is begginning to present clean info too.

De Beers were a public company up till 5 years ago - all their profits (tiny) were free and published - now they have turned private by buying out all the other shareholders - they still list far more info than normal private companies.

Why the need for conspiracy theories?