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Tags: investment | style | rabbit | tortoise | diamonds

Investment Styles: Tortoise and the Rabbit, Diamonds vs. Fads

Investment Styles: Tortoise and the Rabbit, Diamonds vs. Fads

By    |   Monday, 17 July 2017 01:20 PM EDT

There is a story I used to hear as a child about the rabbit and the tortoise. You know the one, where the rabbit is fast and runs ahead, but the slowly plodding tortoise wins the race over the long haul. So, imagine some of your wealth in a safe, steady, slowly plodding 5% per year growth tortoise, and the stock market rabbit.

On Friday, October 16, 1987, after record raises where the Dow Jones industrial average had passed 2,100, the stock market dropped 108 points. The following Monday it dropped 508 points or 22.6%. This year alone, the Dow is up 8% and every day is practically a new record.

It seems like five stocks are where all the action is: Facebook, Amazon, Apple, Microsoft and Google.

Anybody remember similar euphoria years ago for AOL, Yahoo, or Cisco?

Subprime mortgages, well in hindsight it was obvious. Undoubtedly, the economy is picking up, and mobile is transforming commerce.

However, in less than 1 year at least 50 companies have raised hundreds of millions of dollars through something called Initial Coin Offerings, selling percentages of new crypto currencies service in exchange for other digital coins, whatever that means.

Is Uber really a bargain at $68 billion? Tesla now is worth more than GM. Did you know that bitcoin tripled this year? To the tune of $3,000. Unreality is usually not a good sign.

Sure, there is money to be made, as long as we are aware that no bell rings at the top of the market to warn us. Some of us are rightly a little nervous about how the current euphoria will play out. Be it 1 year or 5, eventually that bell is going to ring.

Consider then diamonds, something that performs with the slow steadiness of the tortoise, with literally thousands of years of value growth. More anonymous than crypto currencies, the ultimate in wealth security because you physically possess the asset, with a proven track record through thick and thin of 5% price growth.

As our prior articles have shown, in slower economic times diamond prices initially see a small drop, diamond mining then for economic reasons contracts precipitously, and the corresponding supply shortage creates a price spike. Followed by that slow steady stability. In good economic times, mine production can only go so far and maybe prices rise even faster.

Diamonds are a gift that gives in so many ways. You get the pleasure of giving or receiving something not only of immense emotional value, but also something that has unparalleled financial security and value. There simply is nothing like them.

In the past there were some very valid concerns with buying diamonds. People asked, “How do I know what am I actually getting, what is the right price, and how do I sell?” These questions are now addressed by objective third party certification and the concurrent ability to buy and sell diamonds of defined value.

With today’s analytical technology, it is easy to know exactly the exact specifications of any diamond, all backed by quality certifications. There are four value determinates: the weight, the color, the purity, and the quality of cut. Laboratories such as the GIA provide full definition and certification on these value discriminators.

With quality certification, the defined value diamond has become a reality. What is a defined value diamond? It’s a diamond where the specifications are objectively certified and therefore the spot market value is easily determinable. Yet because each diamond is subtly unique, there are still slight variations in spec. That may sound like a drawback, but consider that this has saved diamonds from the rampant speculation that has bedeviled and undermined real value in everything from gold to real estate to art and yes stocks and bonds.

Today, in the absence of any dominant mining house, or stockpiles, diamonds sell in the most pure of supply demand markets. With GIA certification, there is no speculation as to their individual qualities or value. Their pricing is pure free market devoid of speculation, a pure product of supply and demand. The absence of speculation and self-correcting supply is why diamonds have “only” slow steady growth and not some other speculative magic number, but it is also why they are so stable.

The key then is to buy the right diamonds at the market price.

Maybe in today’s euphoric times 5% annual growth of the tortoise does not sound too exciting, but history shows that sooner or later the stock market rabbit falters precipitously, and the tortoise keeps on going. What other asset is so secure, so compact, so globally tradeable, and yet can be enjoyed in and of itself? Diamonds, with defined value, the ultimate in security, the ultimate gift, they are not just for jewelry anymore.

Sean Cohen is the president of Van Zwam, the home of Defined Value Diamonds (DVDs), an easy to understand, simple and effective diamond investment program. He is the former president and co-founder of, NHC LLC and BWHC LLC a series of joint ventures with Tiffany & Company, President of Rand Diamond, VanZwam LLC, SSC Management, and past President of the International Diamond Manufacturers Association.

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As our prior articles have shown, in slower economic times diamond prices initially see a small drop, diamond mining then for economic reasons contracts precipitously, and the corresponding supply shortage creates a price spike.
investment, style, rabbit, tortoise, diamonds
Monday, 17 July 2017 01:20 PM
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