GemThoughts

In the last week we have been reading about hundreds of man-made diamonds (MMD's) that were submitted to IGI for grading without disclosure.  Various observers tried to delve into the sourcing of the stones.  Rob Bates at JCK considered this a serious problem, as it could affect consumer confidence (rightly so), and expressed the hope that there will be some kind of "black box" solution.  Chaim Even-Zohar went into a full story about the history of Gemesis, which is being mentioned as a possible source of the stones, though they totally deny that presumption. I suggest that the starting point should be a realistic assessment of what has occurred and has been occurring for some time.  And what we need to consider for the future. MMD's (produced by HPHT and CVD processes) and HPHT treated diamonds have been in the market now for years.  In both cases, the essential fact is that the temptation not to disclose is powerful.  The added profits can be huge. ...

I recently appeared at the first conclave for FJATA (Fashion Jewelry and Accessory Trade Association), which was held at Mohegan Sun in Connecticut.  My presentation was on the blurring lines between fine jewelry and costume jewelry, and maybe that is a subject for another post.  But more important is what I heard as I sat in on the morning's session. The attendees, or most of them, are producers of the kind of products I only see when walking into a toy store or gift shop in a resort.  Cheap, and lacking any intrinsic value.  The presenters and listeners were all on the tech side, with a few principals sitting in.  The organization is only a few years old and its mission is to deal with the flood of governmental regulations confronting all manufacturers. From the jewelry point of view, the outlook is very tough, and I am guessing that we on the "fine jewelry" side have only a faint idea of what is going on - and what we are going to have to deal with. All...

We are coming up to the mid-year jewelry shows, and we will be using those events to measure the state of the industry.  At this point, there are enough signs to make us a bit ambivalent on how the rest of the year will go. One one side, the top end seems to be holding up well.  It appears that the affluent (and even the super-affluent) are continuing to buy, though at lower average price points.  Some reports from guild stores say that sales are good, though dollars are down.  That sense of caution seems to be supported by the stock markets, which continue to have declining numbers of trades, leading us to believe that people are sitting on the sidelines and holding on to cash.  Charlie Munger, Warren Buffett's partner at Berkshire Hathaway, says that is a bad idea.  The value of cash, he says, is being steadily eroded by inflation, and that will only get worse. That may be easy for him to say, as he hold billions in assets, but squirreling away cash o...

The diamond world now feels otherworldly.  We got a big hint when the Oppenheimer family decided to sell out, then BHP starts looking to sell their mining operations, and now Rio Tinto jumps in as well.  As a major supplier, Russia holds out.  Does anyone think that we are seeing "business as usual?" A few added points.  Rio Tinto's plan to go underground at the Argyle mine has incurred big overruns. BHP's Ekati mine (its only one) is declining in output.  Both companies see little future in diamonds, and present output contributes little to their overall profits.  De Beers (now an Anglo-American branch, in essence), in its current round of selecting sightholders, has opened the door much wider for tenders and allowing others to buy diamonds.  Then, on Rapaport's reports, we see that about 900,000 diamonds, worth about $6 billion, are listed for sale.  And these diamonds average just over one carat in size.  That alone is enough for every b...

The Hong Kong Show had more energy than any show we visited this year.  The crowds were big, though mostly Asian.  The show is bigger than ever, now probably the biggest in the world, and it has expanded to occupy odd spaces and ballrooms.  The early impression was that the show was a hit. A dramatic building, in a beautiful waterfront setting Then again, maybe it wasn't for many vendors. Traffic in many aisles was heavy, but many vendors were not happy - "lookers, not buyers."  I had no problem stopping almost anywhere for a chat or to work, with few other buyers coming in to the booths.  Among the hundreds of loose diamond vendors and stone dealers, for example, the business seemed more about selling each other than to retailers or manufacturers. Yes, there were some good stories.  One Hong Kong jewelry manufacturer related that business in the very high end was reasonable, but business in middle-priced 18 karat and diamond jewelry was "totally...

Sorry to have been absent for quite so long, but this is show season, and I have been traveling the world to "see what's new." It has been a difficult, perhaps strange, tour that ends with the Hong Kong show that begins tomorrow. Thus far I have been to Vicenza Fair, the JA Show, the New York International Gift Fair, and the Bangkok Fair. I walked every hall of every show.  I say difficult because the shows were not very productive from my point of view (I am working on merchandising fashion jewelry for a client). It has been strange because too much of the industry seems stranded in no-man's land. At every show I saw similar patterns. In a nutshell: Many vendors have shifted entirely out of gold, no surprise, and mostly went into silver, though bronze and steel are no longer unusual. Most of these companies have not made the transition well, essentially translating their gold designs into new materials. They probably know it since they appear a bit in s...

My wishes to everyone for a healthy and successful 2012.  This holiday season has been most enjoyable around here, highlighted with the Giants making the playoffs!  Let's see how far they go. And let's see how far we go!  The jewelry industry will continue to see profound changes from mining to retailing.  In parts 1 and 2 of this overview, I offered some thoughts on sourcing and retailing.  We know that the exiting of the Oppenheimer family from De Beers signals big changes to come in distribution; we already see that material costs, advancing consolidation and the boom in online sales have deeply affected all retail channels.  But how might manufacturing fare in all this? We have noted that an explosive population growth, and particularly the expansion of the middle class and affluent classes all over the world, must mean that opportunities to sell luxury products of all sorts are growing.  Judging by early reports from luxury retailers, hig...