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| Finances: Diamonds are for Suckers |
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| on Wednesday, February 21, 2007 - 03:37 AM - 837 Reads |
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I have a friend who works at a jewelry store. I mentioned to her recently that I don't believe in diamonds. She asked why, and I rattled off the standard handful of reasons I'd read about. She had rapid answers to my concerns. Some of these were obvious marketing tripe, but others were interesting items that I hadn't read anywhere. After a little research, it does in fact seem like there is quite a bit of old information still being thrown around, but the principal objections are still not addressed.... 1) Monopolistic pricing. Diamonds are quite common in nature. The biggest reason why they have been so expensive over the years is that one company has worked very hard to control almost all of the diamond supply in the world. It is true that the amount that De Beers controls is less now than it was even a handful of years ago. I've looked, but haven't found any good recent data distinguishing De Beers the company, from the overall diamond cartel. Even if it isn't still a monopoly, it is effectively an oligopoly, regardless of how structured. It is in none of the supplier's best interests to flood the market with more diamonds because everyone would lose in a price war. I think the biggest indication that this control still exists presumably without a De Beers monopoly is the simple fact that diamond prices didn't plummet with additional "competition."
2) Blood Diamonds. No, I haven't seen the movie yet, but conflict diamonds, or blood diamonds, or whatever you want to call them exist in significant number. It is estimated that 5-15% of diamonds on the market today were used to fund wars. There have been a number of measures in the past few years to ensure that these diamonds do not reach the market, but this is little more than political box checking and good PR. Smuggling and forging the necessary certificates are more annoyances than road blocks. There are a whole host of reasons why I find this particular situation abhorrent, but it would take too long to discuss it here. This point alone, however, should concern anyone considering a diamond purchase.
3) Resale Today. If you think new cars depreciate when driving them off of the lot, try selling a recently purchased diamond back to a jeweler and see what kind of price you can get. I can only speculate at the various reasons as to why this is the case, but at ten to fifteen cents on the dollar, it makes for an absolutely atrocious investment.
4) Resale Tomorrow. If you think today's resale is bad, consider the case in a few years. Man made diamonds (synthetic or cultured diamonds) are ramping up in production. Manufactured diamonds are chemically and physically indistinguishable from mined diamonds, with the possible exception of having too few impurities. The diamond that costs several months pay today, will be purchased for several days pay in a few years.
5) Marketing. This is the big one for me. I don't mind advertising, but I loathe marketing. I don't mind hearing about a product that I might like if only i were to hear about it. I can't stand emotional pandering to manipulate the opinions of the masses. The diamond cartel has had the single most successful marketing campaigns of the 20th Century, and perhaps of all time. Diamonds weren't the most common type of engagement ring until the mid 20th Century, approximately coinciding with the creation of the slogan "A Diamond is Forever." The notion that a diamond is as unique and special as one person's love for another, is partially what makes resale so rare. Because so few people consider selling their diamonds, very few realize how little they are actually worth.
6) Romance. Romance is about one person demonstrating their love to another by doing something nice or sacrificing for them. Can't there be more rewarding sacrifices than spending 2-3 months of your salary to purchase something that will actually be worth (resale value) about a week's pay? Diamond rings seem to be as much about status symbols as anything else. It is what society has been conditioned to expect. Women compare their diamond rings in an antiquated competition over who has the most bread-winning husband. If you just think diamonds are pretty, don't buy into the marketing hype of unique and special and billions of years old, and buy an indistinguishable manufactured diamond. If you need something that's been in the ground for a long time, get a nice ruby or an emerald, or something that actually retains it's value.
The diamond industry is a well-designed scam, that will one day in the near future collapse. A free market needs competition and accurate information to operate properly. The diamond industry currently has neither, and progress will eventually change this. |
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