Archive for Rap List
Diamonds – One Bad Investment
Posted by: | CommentsI was speaking recently with a friend of mine who is still active in the diamond business about a deal he made in the past year that went sour. Here’s the story:
At the hight of the large expensive diamond craze (this market parallels the trade-up real estate market quite well), they had a customer who wanted some very expensive diamond. I think it was a pair of 5 carat high clarity high color stones with perfect makes. My friend didn’t have the diamonds in his inventory, but he found a colleague in the business with the stones. He found out what this dealer wanted for the diamonds, and added a small markup and offered them to his customer. The dealer at the time wanted something around 3% over the rapaport list price. The transaction was made and after a few days the customer decides they don’t want the diamonds.
The only problem is the dealer from whom my friend sourced the diamonds decides he doesn’t want them back. He refuses to take the return. So my friend is no saddled with this pair of extremely expensive stones (the total was over $300,000 I believe) that he bought at a high price (which he only justified because he was flipping the stones). Unfortunately, the market crashed shortly thereafter.
A few weeks ago he was telling me how he’s still stuck with those two stones. He told me that he was trying to sell them for -35% below rapaport list price, and he couldn’t find a buyer. I was shocked when he told me that he would probably sell them for -40% or even less if he had an offer from a reliable firm who’s payment would be just short of an absolute guarantee.
Just to make it clear, selling at -40% from a cost of +3% is a loss of almost -42%. If we call the Rap price X and the total weight Y, then the cost of the diamonds is X*1.03*Y. The revenue generated from a sale at -40% would be X*0.60*Y. The X and Y cancel each other out, and you’re left with 0.60/1.03 – 1 to arrive at the profit percentage.
One of the intended messages of the “diamonds are forever” motto is that a diamond’s value is eternal — that it is an investment forever. This story is just one example that shows just how brutally false that idea can be.
Friends helping Friends in Difficult Economic Times
Posted by: | CommentsThis was an interesting one for many reasons. The stone is discussion is quite large. It’s an unusually low color. It turns out not to be certified. It’s two friends, one with money, one without. Lots of intrigue!
Q: Hi Ira. I found that your website is very helpful. Thank you.
My friend ask me to buy her loose diamond but doesn’t know the fair price for it. It is a round, 8.29 ct, O color, diamond VS1 clarity. Polish and Symetry very good, dimensions 13.10 x 13.20 x 7.9. Table 62%, flourescence [sic] Weak Yellow. We are having trouble to find an agreed price since rapaport does not prove the spec of this diamond.
Please help. Thank
A: Hi Natalie. Tread carefully. Tread VERY carefully. I just spoke with a close friend of mine who is active in trading these sorts of diamonds and he said that a solid wholesale price for such a diamond would be about $6000 per carat. So that would be around $50,000 total for the diamond. I’m going to assume she wants significantly more because she probably didn’t buy it at a low wholesale price.
This, of course, assumes the grades you gave me are legitimate. Is the diamond certified? Is so, from what lab?
Real faint yellow fluorescence (and not medium or strong that some 3rd rate lab calls faint) shouldn’t affect the price.
If this person really is your good friend, I would suggest buying elsewhere. It’s a zero-sum game — for every dollar one of you gains, the other one loses a dollar. That can’t be good for a friendship.
Can I ask what your friend is asking for the diamond? Is she basing it off of what she paid for it once upon a time? If you would rather not answer publicly in the comments, feel free to email me. If you’d be interested in buying something else, not from your friend, also contact me privately.
Q: Thank you for your respond. My friend asked me to buy her diamond because she is currently in financial trouble. I’m willing to help her but I’m not going to get my self ripped-off. The price she offer me is around 57,000. She got this price by looking at rapaport report on 5 ct M color VS1 and 10 ct M color VS1. So it is 17,100 (M color vs1 10ct) + 11,300 (M color vs1 5ct) / 2 = 14,200. From that price she give me twice 30 back (14,200 – 30%) – 30% = 6958 per carat.
Is this a good deal?
A: The $6000 per carat price I told you was, first and foremost, an estimate. So it’s most definitely not set in stone (no pun intended). Furthermore, that’s a low wholesale price that a traders might sell between themselves in the diamond bourse. So for you to pay 16% more is certainly reasonable. It’s like what you would pay on Blue Nile, or any other online vendor.
If a wholesaler had the stone in inventory and didn’t want to just move it for a small profit, but decided to hold onto it and wait for a buyer who needs that kind of stone, he could ask well above 6000 per carat. I saw some listed on industry wholesale sites for a lot more than 6000.
Is the diamond certified GIA? If so, I’d say go for it (if you like the diamond, of course)
Q: The certificate is not a GIA certificate. But it is made by a shop where they also has their lab. The owner is a GIA certified. Should it be trusted?
A: GIA graduate gemologists don’t necessarily know what they’re doing. The problem is that to have that stone certified by GIA it would cost you several hundred dollars. (Probably round 800). But it might be worth it on such a large purchase. I would recommend against buying it until it’s certified by GIA. After all, how objective could the store that sold the ring be? If it just turns out to be a diamond VS2 and not VS1, that’s already a significant difference in price.
Q: Yes your points are right. I will go with ur advise.
Thank you very much.
Color & Clarity Matching Diamonds in Jewelry
Posted by: | CommentsQ: Ive just bought some earrings (multi stone GIA F/SI1 with very good cut/pol/symm) . I got f colour to match an uncertificated 5 stone ring thats been assessed (independently) as F/G SI1. I intend buying a pendant ( trilogy 0.33ct each or maybe graduated 1.5 ct total) and solitaire ring (1ct+) down the road. Do you think I should keep to f colour to match, or go down to g?? Also do you think I should upgrade to VS2 for the larger stones or use a broker to find a good SI1? and if so what would be a reasonable fee to pay??
A: Let me address your questions one at a time.
1) Regarding the color on the pendant, I think you can definitely go down to a G, and perhaps even lower. If having all of the pieces match is crucial to you, then going down to G will not pose a problem, but will definitely save you some money.
But my broader question would be, why are you so concerned with having the different pieces match? Are they sitting in a case together as a set or are they worn? If they’re on somebody’s body, then nobody will be able to tell that the earrings are an F while the pendant is an H or an I. They’re simply too far apart. Color matching is really only an issue within the same piece of jewelry (ie, side stones to match a center stone in an engagement ring, etc).
One important thing to note is that the savings in dropping from G to H are significantly greater than the savings in dropping from F to G. I can’t explain to you why that is, it’s just how Martin Rapaport built his price list. This is why, by the way, you find in markets such as Dubai that demand is much greater for H, I, and J colors than it is for G color. The upgrade in color to G just isn’t worth the premium you have to pay for it. Its called the “G Premium.”
2) When “diamond guys” need to buy diamonds for their loved ones, they rarely buy stones with high clarity (VS2 or higher) We know that all that matters is that no obvious inclusions should be visible to the naked eye. Unless your wife’s friends walk around with 10x loupes in their pocketbooks, nobody will ever be able to tell the difference. And this is only regarding rings where diamonds get the closest amount of scrutiny (envision women bringing their hands to their faces to gawk at their rings). With pendants and earrings, you have significantly more leeway to go lower in clarity. An I1 or even a nice I2 will still have great sparkle and life as long as the diamond has a nice cut. It’s a shame to spend more money on a high clarity stone that nobody will ever get close enough to to tell the difference.
3) Now regarding how to buy the lower clarity stones, I recommend buying from internet sites that provide high quality photographs, such as James Allen, so you can evaluate the inclusions for yourself to see if they will be visible or not to the naked eye. If you would like, let me know and I would be happy to scour some online inventory to find you a great stone(s) with great value.
The following was the reader’s response to my answer:
Ira
Thanks for your comments.
The internet ‘science’ suggests you get better performance from a high colour grade, but the general tenure of your comments seem to suggest what Ive suspected after ,
1) research on the web
2) looking at some high/medium quality stones,
and that is that the ‘science’ surrounding diamonds is largely a markeing device to create perception of luxury and price differentials, to maximise revenue?!
Smart Man. Learned the lesson quite quickly.
