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How many Carats is the Diamond Necklace in Simpson's window?
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Amarante




 
 
 


Post  Wed, Jan 02 2019, 1:56 pm
This is a LONG but fascinating article on how the South African diamond cartel controls production and pricing and effectively has manipulated people into buying into diamonds as a show of "forever love".

What was especially fascinating to me was how they managed to join forces with the Soviet Union when that country discovered a source of plentiful by small diamonds - eureka - the tennis bracelet became a coveted item.

It's too long to post but I will post the paragraphs relating to the difficulty of selling diamonds and the poor investment they are since one will pay retail when bought and then be paid less than wholesale if one wants to sell.

https://www.theatlantic.com/ma.....nd/304575/

In 1976, the Dutch Consumer Association also tried to test the price appreciation of diamonds by buying a perfect diamond of over one carat in Amsterdam, holding it for eight months, and then offering it for sale to the twenty leading dealers in Amsterdam. Nineteen refused to buy it, and the twentieth dealer offered only a fraction of the purchase price.

Selling diamonds can also be an extraordinarily frustrating experience for private individuals. In 1978, for example, a wealthy woman in New York City decided to sell back a diamond ring she had bought from Tiffany two years earlier for $100,000 and use the proceeds toward a necklace of matched pearls that she fancied. She had read about the "diamond boom" in news magazines and hoped that she might make a profit on the diamond. Instead, the sales executive explained, with what she said seemed to be a touch of embarrassment, that Tiffany had "a strict policy against repurchasing diamonds." He assured her, however, that the diamond was extremely valuable, and suggested another Fifth Avenue jewelry store. The woman went from one leading jeweler to another, attempting to sell her diamond. One store offered to swap it for another jewel, and two other jewelers offered to accept the diamond "on consignment" and pay her a percentage of what they sold it for, but none of the half-dozen jewelers she visited offered her cash for her $100,000 diamond. She finally gave up and kept the diamond.

Retail jewelers, especially the prestigious Fifth Avenue stores, prefer not to buy back diamonds from customers, because the offer they would make would most likely be considered ridiculously low. The "keystone," or markup, on a diamond and its setting may range from 100 to 200 percent, depending on the policy of the store; if it bought diamonds back from customers, it would have to buy them back at wholesale prices. Most jewelers would prefer not to make a customer an offer that might be deemed insulting and also might undercut the widely held notion that diamonds go up in value. Moreover, since retailers generally receive their diamonds from wholesalers on consignment, and need not pay for them until they are sold, they would not readily risk their own cash to buy diamonds from customers. Rather than offer customers a fraction of what they paid for diamonds, retail jewelers almost invariably recommend to their clients firms that specialize in buying diamonds "retail."

The firm perhaps most frequently recommended by New York jewelry shops is Empire Diamonds Corporation, which is situated on the sixty-sixth floor of the Empire State Building, in midtown Manhattan. Empire's reception room, which resembles a doctor's office, is usually crowded with elderly women who sit nervously in plastic chairs waiting for their names to be called. One by one, they are ushered into a small examining room, where an appraiser scrutinizes their diamonds and makes them a cash offer. "We usually can't pay more than a maximum of 90 percent of the current wholesale price," says Jack Brod, president of Empire Diamonds. "In most cases we have to pay less, since the setting has to be discarded, and we have to leave a margin for error in our evaluation—especially if the diamond is mounted in a setting." Empire removes the diamonds from their settings, which are sold as scrap, and resells them to wholesalers. Because of the steep markup on diamonds, individuals who buy retail and in effect sell wholesale often suffer enormous losses. For example, Brod estimates that a half-carat diamond ring, which might cost $2,000 at a retail jewelry store, could be sold for only $600 at Empire.

The appraisers at Empire Diamonds examine thousands of diamonds a month but rarely turn up a diamond of extraordinary quality. Almost all the diamonds they find are slightly flawed, off-color, commercial-grade diamonds. The chief appraiser says, "When most of these diamonds were purchased, American women were concerned with the size of the diamond, not its intrinsic quality." He points out that the setting frequently conceals flaws, and adds, "The sort of flawless, investment-grade diamond one reads about is almost never found in jewelry."
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amother




Pewter


Post  Wed, Jan 02 2019, 2:04 pm
Amarante wrote:
Explain how this could ever be an investment - you are paying a significant retail markup plus you are also paying a significant amount for the fabrication of the necklace.

Anyone who has ever attempted to sell silver, gold or stone jewelry can attest to the small percentage one will get - not even close to retail.

You lose money as soon as you walk out of the store.

Wealthy people don't buy necklaces from a store as an investment. They buy jewelry with their discretionary income.

Gold bullion or uncut stones maybe - but still not as liquid as other investments.


Sure - anyone paying significant markup is investing poorly. Anyone purchasing a 45K necklace without doing some work on figuring its value is investing poorly.

Does set diamond jewelry never appreciate in value, no.

Really what I was trying to say was spending 45K on a necklace to hold and enjoy for 10 years is different than (to throw to another thread) leasing an expensive car. The jewelry is not disposable. Even if the 45K necklace is worth 35K in ten years - the person who bought it didn't reduce his net worth by 45K to purchase it - rather 10K.

That 45K necklace shows up on the balance sheet - its not a throwaway purchase.

You need to have a lot more money to afford a 45K vacation, then a 45K diamond necklace. Maybe that's my point. Those aren't the same.
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Metukah




 
 
 


Post  Wed, Jan 02 2019, 2:09 pm
SixOfWands wrote:
A diamond dealer is not paying retail prices for a finished piece of jewelry.


True. I guess I only read the first sentence.

(it may be an investment in a happy wife, if the woman is that way inclined. I know my SIL is, diamonds on her truly make my brother's life better)
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Amarante




 
 
 


Post  Wed, Jan 02 2019, 2:45 pm
amother wrote:
Sure - anyone paying significant markup is investing poorly. Anyone purchasing a 45K necklace without doing some work on figuring its value is investing poorly.

Does set diamond jewelry never appreciate in value, no.

Really what I was trying to say was spending 45K on a necklace to hold and enjoy for 10 years is different than (to throw to another thread) leasing an expensive car. The jewelry is not disposable. Even if the 45K necklace is worth 35K in ten years - the person who bought it didn't reduce his net worth by 45K to purchase it - rather 10K.

That 45K necklace shows up on the balance sheet - its not a throwaway purchase.

You need to have a lot more money to afford a 45K vacation, then a 45K diamond necklace. Maybe that's my point. Those aren't the same.


Then it's semantics - an investment is not generally defined as something that is worth less money than what one paid. Most people invest so that their assets are worth at least inflation but hopefully more than inflation if money is invested wisely.

And unless one truly is buying a stone for wholesale, one is going not going to be able to sell it for anything close to what one paid for it even if one got a relatively good deal.

Those who are actually in the diamond trades make money by purchasing wholesale and selling retail or for whatever they can get as a markup.
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amother




Pewter


Post  Wed, Jan 02 2019, 2:57 pm
Amarante wrote:
Then it's semantics - an investment is not generally defined as something that is worth less money than what one paid. Most people invest so that their assets are worth at least inflation but hopefully more than inflation if money is invested wisely.

And unless one truly is buying a stone for wholesale, one is going not going to be able to sell it for anything close to what one paid for it even if one got a relatively good deal.

Those who are actually in the diamond trades make money by purchasing wholesale and selling retail or for whatever they can get as a markup.


This is why we are going to disagree on this as I stated earlier.
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amother




Pumpkin


Post  Wed, Jan 02 2019, 2:59 pm
Amarante wrote:
Then it's semantics - an investment is not generally defined as something that is worth less money than what one paid. Most people invest so that their assets are worth at least inflation but hopefully more than inflation if money is invested wisely.

And unless one truly is buying a stone for wholesale, one is going not going to be able to sell it for anything close to what one paid for it even if one got a relatively good deal.

Those who are actually in the diamond trades make money by purchasing wholesale and selling retail or for whatever they can get as a markup.


She meant asset instead of investment.
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amother




Pewter


Post  Wed, Jan 02 2019, 3:21 pm
amother wrote:
She meant asset instead of investment.


Probably she meant that Smile

What she meant was - and stands by - is that necklace is not a throwaway. That a person who spends $50,000 on a polished diamond or diamonds hasn't deposited $50K in the gutter.

She also stands by that jewelry can go up in value - that the price paid at retail in 2018 for a diamond necklace is not for certain the most money that diamond necklace will ever trade for.
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amother




Pumpkin


Post  Wed, Jan 02 2019, 3:37 pm
amother wrote:
Probably she meant that Smile

What she meant was - and stands by - is that necklace is not a throwaway. That a person who spends $50,000 on a polished diamond or diamonds hasn't deposited $50K in the gutter.

She also stands by that jewelry can go up in value - that the price paid at retail in 2018 for a diamond necklace is not for certain the most money that diamond necklace will ever trade for.


It's my personal experience that the better the quality stones, the more the jewelry holds its value and increases. I find a similar correlation between the size of the stones.

DH loves to buy cars. It's his pleasure. He makes money buying and selling cars and has the enjoyment of driving them. Anything can be an appreciating asset if you are knowledgeable.

DH's friend makes a good living buying and selling used seforim. Most of us buy them new and don't make money.
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