Because Winter Is Coming

For those of you who suffer from Seasonal Affective Disorder
may I make a humble suggestion?

Bring a little sunshine into your life with the Sun-Drop Diamond.
to be auctioned by Sotheby's Geneva this November.
The diamond is a mere110 carats and VVSI of Vivid Fancy Yellow color
and I can guarantee that it will brighten up even the darkest days of Winter.

The stone was exhibited earlier this year at London’s Natural History Museum. The rough for the Sun-Drop Diamond was discovered in South Africa in 2010, and was cut and polished by Cora International, one of the world’s leading manufacturers of exceptional diamonds, with its headquarters in New York. This stunning diamond comes to the market with an estimate of $11-15 million.



So who will buy this magnificent diamond? My guess is swift bidding between secretive collectors, society jewellers, oligarchs keen to impress their women, and maybe, just maybe, interest from Prince Albert of Monaco who has showered his bride Charlene with gems.

We had rain here this week and there is already snow in the Sierra Mountains.
It's going to be an early Winter.

Have a great weekend!

Jewelry Biz - A Tale of Two Cities, Akron and Geneva

Jewelry has the distinction of being one of the few luxury goods that has both a high end and a low end, in the way that a private jet does not. The high end of course is the private client and auction business and the low end is the retail chain store business like Zales and Kay Jewelers.

On the high end:
I really don't know how to describe the high end other than tremendous.
Take this month's Sotheby's Geneva Magnificent Jewelry Auction for example

Magnificent Jewels of Important Historical Provenance
& Rare Coloured Diamonds Soar at Sotheby’s Geneva,
Bringing CHF 37,011,375 ($36,682,714, €24,553,028)

Magnificent Vivid Green Diamond Sells for CHF 3,106,500 ($3,078,914, €2,060,825),

a New World Auction Record Price Per Carat for a Vivid Green Diamond--

--The Roxburghe Rubies Bring the Unprecedented Sum of CHF 5,821,000, ($5,769,309, €3,861,602),
A World Record Price for a Ruby Suite—

Since extraordinary jewels are bringing extraordinary prices

The Wall Street Journal asks

Diamonds: An Investor's Best Friend?

They are rare, beautiful, valuable and a girl's best friend but traditionally diamonds haven't really been considered an asset class in their own right.
Diamonds do not have the "safe haven" status of gold, and their prices are more volatile than the precious metal. While spot gold has gained around 25% in value this year, diamond prices have fallen by at least 10%, in line with the poor performance of the luxury industry, according to U.S.-based IDEX Online Diamond Prices, which tracks global asking prices for polished diamonds.

While respected authorities in the jewelry business advise against buying diamonds for investments
David Bennett, Geneva-based chairman of jewelry for Europe and the Middle East at Sotheby's, says: "Like art, we would not advise someone to buy diamonds for investment purposes. People should buy diamonds for the joy of wearing them."
we've still got
the growing demand for tangible assets and portfolio diversification has led to the launch of a number of diamond investment funds this year, which believe they can achieve double-digit returns for investors.

Have a few extra dollars in your bank account?
Here are some investment options:
KPR Capital launched a Cayman Islands-domiciled open-ended investment diamond fund with a minimum buy in of $250,000.
Alfa Capital, the Russian investment group, launched a diamond investment fund with a minimum investment of €1m and an estimated yield of 15% to 17%.
Emotional Assets Fund was launched, investing in a number of assets from fine art and rare stamps to diamonds and diamond jewelry. The fund is targeting a growth rate of 15% per annum with a minimum investment of £100,000.
Dazzling Capital, a London-based company investing directly in period jewelry, also opened its doors this month, co-founded by former Christie's auctioneer Humphrey Butler.
The company, which accepts a minimum investment of £10,000 with an estimated return on investment of 11%

Names like Emotional Assets Fund and Dazzling Capital certainly sound contrived
especially when we know that white diamonds are not rare, they are scarce due to controlled distribution, yet returns have gone up because sales at the high end are off the charts.
But given that diamonds will bring an 11-15% return, why would you buy into a fund when you can just buy actual diamonds and get the pleasure of wearing your investment?

I'm dubious about buying diamonds, individually or in funds, unless they are rare and colored (fancy) "If you want to buy diamonds for investment purposes, they should be big and fancy (colorful)," says Holly Midwinter-Porter, a gemologist at U.K. jeweler Boodles. "Red and green are the rarest, and unlike white, man-made diamonds, are finite as they are only found in one or two areas in the world." She says returns on rare diamonds can enjoy double digit growth a year, and their portability makes them more appealing than gold or art to some investors. And if you are looking for a big red diamond I have one for sale.

But I do think that buying period diamond jewelry, like the emerald set in this photo, is an intriguing investment.

Another option for investors is the vintage diamond jewelry market -- considered capable of more lucrative returns because of the added value of provenance. Mr. Butler brokered a $4.5 million deal with the Louvre in 2004 for an antique emerald and diamond necklace and ear rings by Nitot, presented as a wedding present by Emperor Napoleon to his second empress, Marie Louise of Austria. The owners had bought it for a fraction of the sale price 10 years before.

With fine vintage jewelry, intrinsic value + provenance = return on investment.

So I will be interested to see the results of tomorrows Sotheby's London sale of

Romonov Heirlooms: The Lost Inheritance of Grand Duchess Maria Pavlovna

On the low end:

Jewelers Hope Holidays Sparkle

After last year's horrendous holiday season, and the subsequent some 1,500 retail jewelry stores that went out of business, the big corporate chains such as Kay Jewelers and Zales are hoping for an increase in same store sales due to less overall competition.

Akron Ohio based Signet, which owns Kay and Jared, sees the demise in the industry as an opportunity. "Our balance sheet puts us in a stronger position competitively," Terry Burman, chief executive of Signet Jewelers Ltd., said in an interview.

In the current quarter, which includes the holidays, Wall Street analysts estimates Signet will post a 2% increase in sales at stores open at least a year. Last year, Signet's fourth quarter sales slumped 16% in the U.S. and 9% in the U.K.

I certainly hope that the analysts are correct given

The holiday season is crucial for jewelry chains, many of which record the majority of their sales and up to 100 percent of their profit in the period. Signet, for instance, books 40% of its sales and 70% of its profit in November, December and January, with the bulk of its sales coming in the last two weeks of December.

and

For the fiscal third-quarter ended Oct. 31, Signet, the largest chain jeweler in North America, posted a loss of $7 million, or eight cents a share, compared with a year-earlier loss of loss of $15.1 million, or 18 cents a share. Results for the company's latest quarter included a $5 million benefit from a change in U.S. vacation policy.

While I can afford an investment in Signet or Zales (versus a diamond fund)

Shares of Zale were up 10%, or 47 cents, to $4.40, while Signet shares were off 56 cents, at $26.32, both in 4 p.m. trading Tuesday on the New York Stock Exchange.
I'd still rather not invest in any retail jewelry business that caters to the low end.

My money is on fine vintage jewelry because that is what savvy consumers buy.

And my last word on the subject

London based estate jeweler Humphrey Butler, yes he of Dazzling Capital and the Napoleonic Emeralds, is selling the same set of Tiffany diamond bird brooches for $10,500

that Beladora.com is selling for $5950.

So even in the vintage estate jewelry market it pays to be discerning when making any purchase.

Jewelry Biz - "As If The Recession Never Happened"

The full Christie's results are out
From Idex

Christie’s fetched $46. 51 million at its most recent sale, Jewels: The New York Sale & The Annenburg Diamond, Rare Jewels and Objets d’Art: A Superb Collection. Diamond traders noted with satisfaction that the auction further solidifies diamond prices.

This auction wasn't just about the big Annenburg rock, the Fred Leighton jewelry sold too.

And here's the key information

The international auction house reports that 327 out of 385 lots sold, which achieved a combined sell-through rate of 85 percent by lot and 94 percent by value
(The trade says that the estimates were purposely kept low, but still, the results were impressive.)

And here's the money quote

“It was as if the recession never happened,” remarked Rahul Kadakia, head of jewelry at Christie’s New York..."

And let's face it, for Goldman Sachs gang there was no recession

Maybe that's who was doing all of the buying at Christie's this week.

Diamonds From Fantasy To Reality

The Fantasy

From IDEX
A 30.02 carat pear-shaped D, Internally Flawless type Iia diamond was sold for $4,002,500 to an unidentified private buyer at Christie’s New York jewelry auction on Wednesday. The winning bid represents a $133,000 per carat sale price. “The market for colorless diamonds remains absolutely firm and very much in line with prices realized for similar stones this time last year,” said Rahul Kadakia, Christie’s head of jewelry. Another top selling item was a 6.76 carats cushion-cut Burmese ruby and diamond ring that was sold for $866,500, or $128,000 per carat, to an Asian private buyer. A rectangular-cut D, VS1 diamond weighing 32.72 carats sold for $1,650,500, within the estimated range of $1.4 - $1.8 million. “The sale attracted buoyant participation from private collectors and members of the trade from all over the world, setting a great tone for the spring jewelry auction season,” Kadakia added.

Yes, there is still a market for big rocks, especially if they are D-IFs.

And, you would think from Kadakia's comments that the demand for diamonds is robust.

The Reality

What better way to describe reality than to show you this chart.

Diamond prices have tanked.

So...if you are in the market for something new or if you want to trade up, now is a good time to buy.

Bling Biz - The Year End Report

The industry news from IDEX

Online Shopping

2008 Online Holiday Shopping Sales Decline 3% to $25.5 Billion
(December 31, '08, 5:32 IDEX Online Staff Reporter)
Online retail spending during this year’s holiday season, between November 1st and December 23rd, declined 3 percent to $25.5 billion compared to the same period in 2007, according to comScore tracking analysis.

The company, which measures e-commerce, says this year is the first time since 2001 that there has been negative growth in the holiday season, which is attributable to the combination of having five fewer shopping days between Thanksgiving and Christmas this year and the “severe economic headwinds faced by consumers.”

Similarly, the fourth quarter of 2008 will mark the first full quarter to record negative growth since 2001, with e-commerce spending for the period of October 1 – December 28 down 4 percent to $36.8 billion.

Despite low retail sales, several top retailers registered growth in site traffic during December 1-24, compared to the same holiday period in 2007. Though eBay suffered a 4 percent drop in visitors, it remained the most visited retail site with 85.4 million visitors; Amazon sites had a 7 percent increase in site traffic totaling 76.2 million visitors.

Luxe Business

U.S. Luxury Sales Hard Hit in Holiday Season, MasterCard Finds
(December 28, '08, 9:30 Edahn Golan)
Luxury retail sales in the U.S. dropped 34.5 percent in the holiday season, according to MasterCard's SpendingPulse. This figure includes jewelry sales. Total retail sales, excluding automobiles, fell by 8 percent in December through Christmas Eve, compared to last year.

Excluding gasoline sales, the fall in retail sales was 2.5 percent in November and 4 percent in December.

The National Retail Federation projected holiday sales to rise 2.2 percent this year to $470.4 billion. In November, IDEX Online Research analyst Ken Gassman forecasted annual jewelry sales to be flattish to down about 1 percent. When jewelry price inflation is removed, jewelry sales in terms of units will likely be down about 7-8 percent for the full year, according to Gassman.

Ouch!

The Sell side is certainly screwed...but the Buy side is looking good, especially with diamond prices coming back down to reasonable levels.

Anyone who has held off on making a diamond purchase will benefit in the upcoming year with a larger selection at lower prices.

Bling Biz -- Idex Update

Diamonds One Year Price Chart

A lot can happen in a year....

Graff on a Gambol or Betting on the Billionaire Boys

Recession...What Recession?

Certainly that's the view from Larry Graff's glamorous world.

Style.com reports that London's uber jeweler to Saudis and Socialites, Graff, has just opened his flagship New York store.

Larry Graff and Stephanie Seymore aka Mrs Peter Brant

“We’ve had a record six months,”
said Laurence Graff. “Not in spite of the credit crisis but because of the
credit crisis.” He continued, spelling out the jeweler’s clearly
winning take on navigating global economic discord: “In times of chaos, you have to go back to the basics, one of which is treasure. Treasure never becomes worthless. And that’s what we sell.”

Opposite of what I read on Idex and RAP, I'm glad to know that someone out there in retail land is making big bucks with big bling.

Bling Biz News

A couple of interesting things are happening in the Bling Biz.

From Women's Wear Daily:

One Sparkling Sector: Demand Stays Buoyant For High-End Jewelry

— Top-tier jewelry companies aren't flinching in the face of the U.S. economic slowdown — and are proceeding full-speed ahead with their store expansion programs.

So even in this economy Graff, Chanel, Bulgari, Van Cleef and other high end jewelers are expanding. Recession or not, the expectation is that highest end luxe client will continue to shop.

But on the lower end, things sales aren't so sparkling.

From Idex:

Online super jeweler, Blue Nile reported that US sales were down 1% in Q1, compared to a 34% gain in Q1 of 20078. Demand for diamonds in the low end of $5,000 and below remains strong but in the $100,000 plus level demand is weak. Has the high end customer stopped shopping or just opted for the retail store schmooze rather than online efficiency?

While the company reported that first quarter revenues were $70.5 million, up 3.8 percent from the prior year, all of the increase came from sales in international markets, including Canada, the U.K., Western Europe, and to a lesser extent, market tests in Eastern Europe and Asia. Sales in non-U.S. markets were $5.7 million, up 124 percent from last year’s $2.5 million in the first quarter.

I think that the trend for international sales will stay strong due to the weak dollar.

Then again...some super smart people I know are starting to short oil and euros...maybe we're in for a stronger dollar soon.

Diamonds are Dearer

While we are watching commodity prices rise across the board, oil, corn, wheat. The same price increases have been seen in diamonds. Just look at what's happened to diamond prices since 2007.

As always the question is why?

From Idex online:

There appear to be five key factors that are driving diamond prices sharply higher: 1) solid demand from most markets, except the U.S. and Japan; 2) rising costs throughout the diamond pipeline; 3) a weakening U.S. dollar, the international currency for the diamond market; 4) a global rise in the price of virtually all commodities which has spilled over into the diamond market; and 5) stock market volatility, the last of which has caused some traders to move their wealth into diamonds, precious metals, and other assets that may hold their value, until the financial markets recover.

The big question is this: will these diamond price increases hold at retail, or will merchants negotiate them down?

I think the real question is can merchants negotiate the prices down?