Rise & Fall of Diamonds. By Edward Jay Epstein.

RISE & FALL OF DIAMONDS

By Edward Jay Epstein.
International Herald Tribune
Yesterday's Diamond Chat.

By Uncle Monty.

@-@
Responding to the global recession, the De Beers diamond

cartel has cut back production at its South African mines

and reduced the price of its rough diamonds between 15

and 20 percent. Even so, industry sources in South

Africa are now estimating that diamond prices could

fall another "59-63 percent." But the real fear of the

diamond cartel is not just that retail prices will decline -

it has managed that problem before - but that the public

will begin to sell its hoard of diamonds, or what is

called at De Beers "the overhang."

@-@
At the heart of this concern is the reality that, ex-

cept for those few stones that have been permanently

lost, every diamond that has been found and cut into

a gem since the beginning of time still exists today.

This enormous inventory, which overhangs the

market, is literally in - or on - the public's hands.

@-@

Some hundred million women wear diamonds, while

millions of other people keep them in safe deposit

boxes as family heirlooms. De Beers executives

estimate that the public holds more than 500 million

carats of gem diamonds, which is more than 50 times

the number of gem diamonds produced by the diamond

cartel in any given year. The moment a significant portion

of the public begins selling diamonds from this prodigious

inventory, the cartel would be unable to sustain the price

of diamonds, or maintain the illusion that they are such

a rare stone that their value is, as the ad slogan claims,
"forever."

@-@

@-@

As Harry Oppenheimer, who headed the cartel

for more than a quarter of a century, pointed out,

"wide fluctuations in price, which have, rightly or

wrongly, been accepted as normal in the case of most

raw materials, would be destructive of public confidence

in the case of a pure luxury such as gem diamonds, of

which large stocks are held in the form of jewelry

by the general public."

@-@

The genius of the cartel was creating this "confidence"

in the myth that the value of diamonds was eternal.

In developing a strategy for De Beers in 1952, the ad-

vertising agency N.W. Ayer noted in a report to De-

Beers: "Diamonds do not wear out and are not con-

sumed. New diamonds add to the existing supply in

trade channels and in the possession of the public. In

our opinion old diamonds are in 'safe hands' only

when widely dispersed and held by individuals

as cherished possessions valued far above

their market price."
@-@
Here's a diamond ring valued at over $1M.

@-@
In other words, for the diamond illusion to survive,

the public must be psychologically inhibited from

ever parting with their diamonds. The advertising

agency's basic assignment was to make women value

diamonds as permanent possessions, not for their

actual worth on the market. It set out to accomplish

this task by attempting through subtly designed

advertisements to foster a sentimental attachment

to diamonds that would make it difficult for a wo-

man to give them up. Women were induced to

think of diamonds as their "best friends."

@-@
This conditioning could not be attained solely by

magazine advertisements. The diamond-holding public,

which included individuals who inherited diamonds,

had to remain convinced that the gems retained their

monetary value. If they attempted to take advantage

of changing prices, the retail market would be chaotic.

@-@
Even during the (American) Great Depression of the

1930s, there was only a limited overhang, since the mass-

marketing of diamonds had begun only a single generation

before the crash. So even though demand for diamonds al-

most completely abated, De Beers, by shuttering all its

mines and borrowing money to buy up the production

of the small number of independent mines that still

existed, was able to weather the crisis.
@-@

Truth About Diamonds Is

Probably Stranger Than Fiction.

@-@
Today, however, with many generations of the diamonds

it mass-marketed overhanging the market, and most of

global diamond production in independent hands, it no

longer is in a position to bring supply and demand into

balance. Adding to this precarious situation, diamond

cutters manufacturers and dealers, have, as of Feb. 15,

an estimated $40 to $50 billion worth of diamonds in

mines in the pipeline that will intensify the downward

spiral when the gems reach the market later this year.

@-@
If falling prices shatter the carefully nurtured illusion

that the value of the glittering stones kept in jewel boxes

and vaults is eternal, and the public begins selling even

part of its hoard, De Beer's nightmare scenario would

come true: The overhang would flood the market.

-^-

Edward Jay Epstein is the author of

"The Rise and Fall of Diamonds."
@-@

Diamond Notes By Uncle Monty.

Millions of diamonds never see the light of day after they're bought. They’re hidden away, as Edward Jay Epstein states, in dark bank vaults, private safes, and security deposit boxes around the world by both the rich and famous and by just ordinary folks who have, it appears, probably unwisely spent their hard-earned money at their local jewellery store or pawnshop in the mythical belief has engendered by De Beers that their purchased diamonds will hardly go down in value. The old saying that "what goes up, must come down" is true of diamonds as pretty much everything else of material value. I am of the opinion that the value of diamonds is closely related to the market prices of homes and real estate property. When the housing market falls, like it has, so do the prices and value of diamonds, which have been artificially-inflated for years by the De Beer diamond cartel. Gold bars, on the other hand - now at over $US1,000 per ounce - tend to become better and more valuable when economic factors and indicators get worse and worse. Diamonds, however, do not when the world economic market is close to collaspe like it is and then with the possible flood of "quickie sales" of diamonds by those wanting to suddenly cash them in at the erroneous belief that they can suddenly treat diamonds like real gold. Sadly, they're in for a very rude awakening along with a major nightmare for greedy De Beer's. While I can feel abit sorry for those who may lose out on their diamonds, I have no such sympathy for the ilk of De Beer's or their diamond market practices and shyster advertising.

Personally, diamonds do nothing for me. I much prefer coloured gems like superb emeralds, classy amethysts, deep rubies, classic garnets, and mysterious opals, especially those set in fine estate and antique jewellery made of generations ago. Most people who buy diamonds haven't the vauguest idea or knowledge about what they are buying other than their belief that the more it glitters the more valuable it probably is. Again another old saying that "all that glitters isn't gold," is true of diamonds, too, in that if it glitters it must be a "good diamond" even if it is a flawed one or a third grade stone. Diamond consumers - other than diamond merchants and gem cutters - must rely on the honesty and integrity of the jeweller or pawnbroker as to whether or not the diamond (s) in the wedding ring is really any good and worth what they're paying for it. On principal, I suspect most jewellery and pawnshop owners have a vested interest in solely selling what they have at whatever price they can get and at whatever concocted story they can pass on to those buying diamonds at where the average consumer is already pre-disposed to buy such due to slick advertising and falling for the contrived legend that diamonds are "a girl's best friend" or are "forever." De Beers should be stopped from its crafty and misleading practices just like the distribution of "blood diamonds" is discouraged or ban by regulatory and professional practices and codes.

I think most young couples or lovebirds let their emotions rule over their heads when buying diamond wedding or engagements rings, bracelets, broaches and necklaces. Such has made De Beers even richer until now due to factors beyond their control like the present global economic downturn that sees the capitalist system ever shaky and in danger of a complete free fall resulting in increases of mass homelessness and huge job losses spanning the globe.

If diamonds were already a luxury, then today they are even more of a luxury to buy and to keep. To cherish diamonds is now to cherish poverty of one's own making for having bought such in the first place at grossly inflated prices. So whatever money you can now get out of them be sure to take and run real fast. But remember in future not to fall for the illusion and allure of diamonds that is a false dream at best and at worse a clever trick by the the world's leading diamond cartel that is called bareface De Beer's. It looks something like "The Grim Reaper," so closely illustrated perhaps in the above caption photo of the all-diamond and all-glittering skullhead so priced at US$50 million, will play final havoc on the best De Beer plans that may finally corner them and become themselves so stuck in their own grim death "forever." The quicker the better, I say.

YESTERDAY'S DIAMOND CHAT. By Uncle Monty. Yesterday, two separate couples ironically ask me for directions to Hatton Gardens, London's major diamond district that is located off Holborn Circle, EC1. The first couple were trying to find their hotel off Hatton Gardens and had gotten lost at Covent Garden. Then the second couple came by from out of town and in their early 40's and were going there to purchase a diamond ring for the her, so she told me. He, who I assumed was her lover, was beaming at the thought of getting her a diamond. I immediately warned him to be sure to ask for a better price at Hatton Gardens because the prices of diamonds have gone down and that it was unlikely they'll gain much more value than whatever price he pays. He looked perplexed at me when I told him and she was none too happy that I had warned him of declining diamond prices and of the fact that should they need to sell such a diamond ring later that they'd be lucky to get a fair price back. She then turned on me and said that her diamond ring "would never be for sale" once she got it. "He knows I want a big diamond ring. He's going to get it for me today," she said by almost screaming at me for daring to tell him the truth about sagging diamond values. Then she bellowed: "We've just WON half a million quid ..." Wooooooow. He then quickly butted in to correct her: "Yooooooooou didn't, I diiiiiiiiiid!!," has he then turned on her to castigate her for her comment of using "we" instead of "him" having won big on the Brit Lotto. I thought to myself, I can see that diamond ring may be more trouble in future than it's worth for him if she doesn't keep her mouth shut ... I thought, too, that from what I have recently learned about diamonds that they may also be more trouble for most folks than they're really worth both now and in the future. So when you're thinking of buying diamonds, just say "HELL NO." That's the safest option it seems to me!!

Truly, Uncle Monty. +St. David's Day of Wales.

- ^ -