The Graduate Gemologist

Today over at Diamonds2Cash we had a customer request a quote, looking to sell a diamond.

We ran the numbers like we always do and came up with an estimated value of what we would pay for the item in the current market.  We provided an estimate of $2,400 to the seller.

She wrote back stating we have provided two quotes for the diamond.  The other quote was for $3000, and she preferred that price better.

Sure enough, there it was…

Why such a big difference in price, for the same diamond?  We pulled up all quotes issued to her.  Sure enough, there it was – a quote for $3000 based on the same diamond specifications.

The difference?  It was from three years ago.  Diamond prices have been falling, her diamond has lost 20% of the value in the last 3 years.

I noticed another transaction a couple weeks ago, a dealer contacted us looking to buy an expensive diamond.  I looked up his previous purchase history.  I found an amazing diamond that we sold him in August 2008.  It was a 1.38ct D color, Internally Flawless diamond with excellent cut, excellent symmetry and excellent polish.  A perfect diamond!  The selling price for the diamond was $31,677.90.

That seems expensive…

I thought, WOW – that seems expensive.  I wonder how much that diamond is worth today, so I checked it out.  If we had the same class of diamond in our inventory today (we don’t), the selling price would be $15,605.

From 2008 to 2016 that diamond has fallen in price by 50%, that is a big loss.

Diamonds as an investment…

If someone had purchased that 1.38ct diamond in 2008 as an investment, they have lost 50% of their investment…. to make it even worse, with the affect of something known as drawdown the diamond now has to increase by 100% just to get a potential investor back to break even.

I’ve written previously about diamonds as an investment, and how some incredible diamonds worth millions have gone up in price so much.  Generally speaking, you should buy a diamond because you want the diamond.  If you think you are going to get rich off your purchase, you might want to reconsider.

It has been just over a year since I last posted about EGL International / EGL USA and the ‘fight’ with Martin Rapaport who decided to kick the labs out of his diamond trading network.  Check out EGL Everywhere Vs. Martin Rapaport and EGL International Shutting Down for some back story.

So what has happened in the last yea?  My original prediction was EGL International and EGL USA would both die.

EGL International died quick lasting only a few weeks before they shut down to reorganize.  Not exactly sure what EGL International has done, but think they may have popped up again and are now called EGL Platinum?!?  They even maintain the same logo!  I don’t know about anyone else, but that is not going to fool anyone – especially Martin Rapaport.

EGL USA has managed to stay alive, at least party.  They are still issuing diamond reports and operate their website at http://eglusa.com so they are still in business.

They have attempted to distance themselves from the EGL brand however, by starting GHI Gemological Lab with labs in NYC, Los Angeles and Miami.  I don’t think they are making much traction with the new brand as I have yet to see any diamonds trading with a GHI lab report anywhere…. they have not been allowed onto the major online diamond trading networks that I have access to.

The GIA sent out a laboratory alert today, informing everyone that they have found a new diamond treatment.  They currently do not know how it is happening, but they have described the issue as a treatment that temporarily changes the color.

Someone is essentially whitening the diamond (maybe they are using Crest Whitestrips!) , then submit the diamond to the GIA.  After some time the color fades again.

Currently diamonds have been submitted by only a few companies, the big offenders are:

L.Y.E DIAMONDS LTD

E.G.S.D DIAMONDS LTD

They have suspended accepting diamonds from these customers, hopefully they can determine the source of this new treatment quickly.

You can view the entire alert here:  GIA Laboratory Alert 2015-05-12

A quick report from the trenches, I attended the Hong Kong Jewelry show in March 2015.  They have a show every 3 or 4 months in Hong Kong – with the biggest being in September (but they are all big).

The show is actually spread over two events, one in downtown Hong Kong and the other at the Airport.  It actually takes two convention centers to handle it!  The Airport is normally loose diamond dealers and the downtown venue is more jewelry related.

I went only to the show at the convention center in downtown Hong Kong this time, as I was not hunting the elusive blue diamond.

How was the show?!?

Everyone always wants to know how sales were at the show, because big shows like this tend to drive prices.  If there is low demand at the show prices tend to drop after.

The dealers are always grumbling, greedy buggers who want more sales.  So if you ask them they always complain sales are bad, but usually by the end of the show they are a bit happier.  Perhaps they made a big sale or got rid of a hard to sell item.

This year was different, everyone was complaining a lot.  I saw a few booths like this on the 3rd day!

Yep, they just did not show up.  There was a sign on this booth that says due to slow sales they were not coming today and check back the next day.

I can’t imagine why a company would just not show up!  They pay a ton of money to rent the space.

The following day they were open again and they did have quite a few customers around the booth, so maybe it was a strategy but very strange.

Did prices fall?

All the grumbling by dealers seemed to be true.  The week following the show, wholesale diamond prices as reported by Rapnet did take quite a tumble.

Why low demand and prices?

So we have established demand is low and prices fell after the show?  But why?  This you will not see reported in the media, a Graduate Gemologist exclusive?

The reason is demand from China is down.  The reason is not that their economy is slowing bla bla bla.  The reason is because of major fraud and corruption investigations going on in mainland China.  Essentially China’s central government is after rich people that have gotten rich through corruption.

The result is the rich are keeping a low profile.  It is not just the spending on jewelry that is down, you can see it (in an even bigger way) in the casino industry in Macau – where all the Chinese go to gable.

Macau casino revenue plunged a record 49% vs. a year earlier in February 2015.  This is a direct result  of China’s corruption crackdown and people trying to stay under the radar.  February is the 9th straight month of decline for the casino industry in Macau!

Thank goodness the Jewelry industry is not being hit that hard, but it is without a doubt a major contributor to the lack of demand at the Hong Kong show where the mainland Chinese dealers come to buy.

There are some people out there who will gasp at what I am about to do, as they think these diamonds are precious.  Someone Google’ed sell diamond and we ended up buying this 1.56ct Old European cut diamond. From the photos you can see the diamond looks nothing like a modern round brilliant cut.

I have no way of knowing how old it is, but lets say it was cut 100 years ago.  The shape is obviously not round (at least way out of round), it has a very large culet at the bottom which creates the 8 sided circle you see in the middle.   The diamond is very shallow with a depth of only 52.5%. It measures 7.75mm wide so it does look nice and big.

During it’s life the girdle had obviously seen it’s fair share of impacts as there are a lot of nicks and a few nice chips.

We already ran the numbers to see if we could get a high quality Excellent cut out of this diamond, but it does not have the depth required and we would end up with a diamond below 1ct.  So the plan has changed and we are going to stick with a Very Good cut and try and hold as much weight as we can.

This stone is being sent off to the diamond cutter for modernization.  Hopefully we will get back a diamond of at least 1.10ct that will give us a GIA cut grade of Very Good.

Will do a couple of follow-up posts about this little guy….

I received the letter below from EGL USA’s Mitch Jakubovic (reprinted with permission).  In my opinion EGL USA is in a fight for it’s life (and will probably not win), I will do another post about what is going on between EGL and Rapaport in another post… here is the letter EGL USA is trying to get out into the wild.

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November 10, 2014, New York, NY — In response to Martin Rapaport’s article, “Honest Grading,” in the November 2014 issue of Rapaport Magazine, Mitch Jakubovic, director of EGL USA, has issued the following open letter:

Mr. Rapaport,

Like you, all of us at EGL USA believe that honest, accurate gemological grading is essential. And, like you, we are extremely concerned about EGL International’s apparent disregard for it.

As you know, we’ve been engaged in a 10-year federal court battle — fighting EGL International’s flagrant practices of unfair competition and inflated grading. We pursued this action to protect both the integrity of our work and the interests of our customers and final consumers. The judicial decision — which is imminent — could literally make EGL International reports a thing of the past in the US.

In addition, through the years, we have repeatedly asked you to protect the industry by delisting EGL International. Recently, at long last, you heeded our plea. For that, we thank you. However, your simultaneous decision to dismiss EGL USA and issue defamatory statements about our work is simply unconscionable and unacceptable.

We are outraged by your contention that EGL USA is “aiding and abetting” the sale of EGL International reports.

EGL USA has been fighting the good fight for years, while others — including you — have continued to promote, publicize, and profit from EGL International. We can’t help but wonder how much aiding and abetting was provided by RapNet listings for the “hundreds of thousands of diamonds worth billions of dollars … sold to consumers with overgraded reports.”

Adding insult to injury, you claimed that your policy is to “work with good laboratories” and, unfortunately for EGL USA, you are “not sure” about how good we are.

Allow me to refresh your memory: For nearly four decades, EGL USA has provided exceptional gemological service. Just last year you yourself published a survey, “Grading the Graders.” In it, you confirmed that our standards are “comparable” to those of GIA and IGI, two decidedly “good” labs that you work with every day.

If there is confusion in the marketplace, you have certainly contributed to it. And we hope, as an industry leader, that you will finally use your power to improve this situation, instead of making it worse. But rest assured, whether you do so or not, whether you right the wrong and reinstate us or not, we will carry on.

All of us at EGL USA are proud of our outstanding work and our name. And we are incredibly grateful for our loyal customers. We will continue to serve them, working with other fair-minded trading platforms, to promote and protect genuinely honest grading.

Sincerely,
Mitch Jakubovic
Director of EGL USA

 

I previously posted about a Rolex 168000 from Nitza Lerner Fine Watches, how I suspected the dial was not original.  Rolex Service Centre (RSC) has had the watch now for several weeks, they said I would get a call on October 21.  Sure enough I got the call.

They have gone over the entire watch and found quite a few problems, here is a list of what they are suggesting the watch needs.

1. Full lubrication
2. Winding crown
3. Winding tube (free with lubrication)
4. New glass
5. Bezel glass ring (I think that is what she called it)
6. New bezel
7. Dial & hands

They will do a full polish on the case but are not able to work on the band because several of the links are cracked.  They stated that the watch is no longer waterproof and would not be waterproof after the service either (I did not ask why).

I purchased the watch used and it is old.  So I’m not concerned about wear and tear on the watch.  The part that gets me is as expected the dial is not original AND they state the hands are not Rolex either.  There was no mention of any of the other parts not being original, only that they were damaged and suggesting the parts be replaced.

The entire cost of the service and replacement of fake/broken/damaged parts will be $1,225 and none of the old parts would be returned to me.

They are waiting to hear back from me if I want to go ahead with the service or not, the watch is currently apart and will take 2 weeks to be put back together should I decide not to go forward with the service.

At least I have the confirmation from Rolex themselves that the dial (and hands!) are not original Rolex.