Elephants and Suspended Animation

The good news is that we might be creeping out of a state of suspended animation.

We have been receiving enough data from our providers to be able to restart publishing our investible indices, about which, during our enforced withdrawal as business for everyone ground to a halt, we received a surprising number of requests.

So, the industry is slowly getting back to work which cannot be bad news for one and all.

However, what is ‘work’ going to be in this ‘fruit cake’ world we are in at the moment.

The industry was in dire straits before Covid popped out of the blue and wrought paralysis on much of what is going on.

Not everything is bad for diamonds compared to other products.

Despite weddings being banned I read from the De Beers website following its Cycle 7 sales of $320 million that ‘overall industry sentiment has become more positive.’ Somewhere else it said that bridal jewellery sales had held up well.

Compare that to another product which is closely associated with weddings… champagne.

Sales for champagne have fallen off a cliff, or perhaps gone down a drain.

But somehow I feel more confident about the future of champagne sales than diamonds, and that is not simply because I am partial to the odd glass of bubbles.

I find it so difficult to be positive about diamonds. Positive meaning that it at least regains what has been lost, let alone that it starts to catch up with other commodities or luxury products.

Covid has certainly had a major impact on consumer demand, how entrenched the changes will eventually turn out to be is a matter of conjecture. But it is difficult to see how the natural diamond business is going to resuscitate itself if it clings to its current outdated and broken model.

I found visiting the De Beers website as dispiriting as I thought that I might.

Firstly, there was remarkably little information available and the buttons for a techno dunce like me to find data were less than helpful. There were lots of photos with people wearing masks and Covid blah blah; but nothing that I could find about dragging the industry out of its mire. Rather it was all very much more of the same. From the market leader the ‘same’ has hardly been successful for the industry nor their own business for a very long time.

The threat of synthetics is the elephant in the room or rather one of the elephants, there is actually scarcely space to move for all the elephants.

Where is the manufacturing capacity going to get their rough to polish? The cut back in production might help prices but does not allow for work, this would appear to provide a perfect launch pad for synthetics on a much larger scale.

Again even if it helps prices, who benefits? A key problem is that the midstream has most definitely not benefited in the past from stronger prices, another elephant is that no one is making money in this industry.

So in real terms there is a lack of profitability, declining demand through a serious and very long term lack of advertising and a real competitor in synthetics, let alone in other luxury products, assuming consumer patterns remain vaguely similar to pre Covid.

The only area that synthetics cannot compete with natural is in the world of financial products.

There is demand for such products, though even that is threatened by the interminable cases and fall out from the frauds that have hit the industry, all made easier by the wilful lack of transparency.

Financial products demand transparency, as increasingly does a more savvy consumer.

Financial products provide a new customer, a cash customer, admittedly at the ‘cost’ of transparency.

Maybe, some in the industry might think the payback is worth it before the industry is squashed by all those elephants?