Diamonds aren’t forever?

DeBeers is legendary for taking diamonds to superstar status.

Marketing crystallized carbon, as common as sand on some ocean shores, as though it was as rare as an intact star falling from the heavens.

What isn’t forever is the demand for these stones. 

In the past five years the demand for diamonds has dropped by 12%. Not surprisingly, some analysts blame the Chinese economy for the latest decline. De Beers disclosed a 23% collapse in profits to $360 million this summer. At the end of August, DeBeers reportedly dropped the price of its diamonds by 9%. Anglo American plc did as well, some anonymous source suggested.

It was quite news worthy and I remember the presenter I was viewing seemed quite shocked under her professional composure.

The report reminded me of an old television program called Barney Miller. A sitcom based in a New York City police station from the 1980’s. There was one episode in particular that has stayed with me to this day.  It certainly made a lasting impression.

One of the officers was having a conversation at the station about buying diamonds with a elderly victim who had been robbed. The officer was planning to invest some money in the gemstone and was seeking another opinion.

The old man was encouraging the officer to buy land instead, but the young officer was sure he was making the right choice.

“Land” the old man kept suggesting. You can live on it; you can grow food on it.

The young officer continued to make the case for the gem.

Finally the old man said something to the effect of: 

Yes, it will hold its value – until people just don’t want them anymore. People will always need land.

So here we are 30 years later and it seems as though the demand for ice is becoming luke warm.

I am glad I was never partial to the gem. As an investment – or otherwise.

As diamond prices drop these past weeks, I have realized that my own smart money has been safe and secure, growing and giving steady returns…elsewhere.

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Sources:

Lynda at Sonoran Sun | Private Equity Investments 

De Beers cuts diamond prices by up to 9pct

De Beers Said to Cut Diamond Prices asMuch as 9%

The price of diamonds is collapsing