News

While it seems there is nothing but bad news when it comes to COVID-19 that gets any media attention, I for one am hopeful that this week marks a turning point of sorts for Australia, with New South Wales beginning a return (however slowly) to what might be termed normal.

We are certainly looking forward to being able to welcome clients of Australian Diamond Portfolio back to our offices in Sydney, as well as re-open our doors as it were to potential investors who may wish to learn more about the incredible investment opportunity pink diamonds offer today.

To that end, in this week’s market update, we look at an incredible news story that is gaining attention in the United States that highlights the very real risk that we see much higher inflation in the years ahead, and why this supports the investment case for pink diamonds.

We also touch on the just completed, last ever ‘Argyle Pink Diamond Tender’, the results from which we expect to hear about in the media within the next few weeks.

A mockup of what a trillion dollar coin might look like. Credit: DonkeyHotey via Flickr.

One platinum coin, one trillion reasons to buy pink diamonds

In the United States, the government owes 28.8 trillion dollars to households, businesses and other governments, an amount equal to $228,000 for each and every American taxpayer.

As a share of economic output, the government debt to GDP ratio is over 125%, having risen from just 56% in the year 2000.

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14Be it the uncertainty in markets, or the continued challenge posed by COVID-19 and the associated lockdowns, times like this make me very happy that I work in the pink diamond industry, given as an asset class they are truly rare, beautiful, and have a history of protecting wealth and outperforming other assets.

These views, and why it makes so much sense to be a pink diamond investor today were only reinforced by a great write up in the ABC late last week, which focused on the pink diamond market, and the finalisation of the last ever Argyle Pink Diamonds Signature Tender.

We look into that in more detail below.

An Argyle ‘Signature Tender’ pink diamond from the 2019 Tender.

Raise a glass to Argyle Pink Diamonds

As we’ve been saying for the better part of a year now, the closure of the Argyle Diamond mine would kickstart a wave of media coverage, with this extra attention helping to propel the surge in prices that saw pink diamonds return 30% on average in the last financial year.

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It’s hard to believe, but we are now three quarters of the way through 2021.

While all of us hope that as a nation we have ‘opened up’ in time for Christmas, there is no denying that it has been a year of frustration in Australia, with large parts of the nation and millions of citizens affected by lockdowns, limitations on freedoms, and continued disruption to their personal and professional lives.

While this would have been difficult enough to deal with in Australia given it’s now almost two years since COVID-19 started causing issues, the fact that most developed world nations in the Northern Hemisphere are/have returned to normal already (with many abandoning all COVID-19 related restrictions) only makes the situation more challenging.

Amazingly, despite the sharp contraction in economic activity caused by COVID-19 related lockdowns, it’s been one of the most rewarding years ever (so far) for investors in traditional assets like shares and property, with house prices up more than 10%, and the ASX 200 up by a similar amount.

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After a few updates that have predominantly concentrated on diamond specific stories in the media, we are changing track this week to look at the re-emergence of Stagflation, an economic phenomenon last seen in the 1970s.

Stagflation of course refers to a phenomenon of lower economic growth and employment, combined with rapid increases in consumer prices and is generally considered the most challenging part of the economic cycle for society to go through.

It also tends to create a very difficult environment for investors, though as you’ll see, Stagflation is also likely to prove very supportive for investors in hard assets, including pink diamonds.

Read on below for more.

The return of Stagflation

The below headline from a 10th September CNBC article, quoting a Bank of America economist highlights the fact that there is an increased focus on the potential for Stagflation to rear its ugly head in the US and global economy.

It’s not just Bank of America either, with the following headlines appearing in mainstream publications in the last few weeks:

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It’s hard to believe we are almost half way through September, with Christmas 2021 fast approaching. Like all of you no doubt, we hope that the situation with COVID-19, and the lockdowns and restrictions on our freedoms and movement are but a memory by the time Santa comes to town in a few months, and that 2022 is a better year for us all.

In this week’s market update we look at some interesting economic data which serves as a real wake up call for those thinking that the global economy is surging right now.

We also look at some interesting statistics on global diamond production, which reinforces why it’s so important to specialise in pink diamonds when investing in this unique asset class.

A wake-up call!

Two data points that we came across last week highlighted how fragile the global economy remains, which has important implications for how to invest in the years ahead.

In the United States, we saw the latest non-farm payrolls report, which is the most widely reported employment figure that market participants in the United States look at.

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While it may feel like Groundhog Day in New South Wales and Victoria right now, investment markets continue to move.

Late last week, attention turned to US Federal Reserve (The Fed) Chair Jerome Powell, who spoke about the outlook for the US economy, and for financial markets, in light of the spread of the Delta variant of COVID-19.

For some time now, market players have expected The Fed to announce that they would soon taper their quantitative easing program, which would involve The Fed printing less money going forward.

Turns out we aren’t likely to see meaningful change for some time to come, as The Fed noted that there were still considerable risks in the economy,  and that they weren’t too worried about higher rates of inflation, even though inflation is over 5% per annum in the United States right now.

This lack of urgency from The Fed suggests that those inflation rates, and the fear of higher inflation, are likely to persist for some time to come.

Higher rates of inflation are of course one of the catalysts (though not the only one) that we think will support much higher pink diamond prices in the years to come, alongside the continued attention that this asset class is continuing to generate.

More on this below.

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With the challenges posed by COVID-19 and the associated lockdowns in Australia unlikely to be resolved soon, we want to again begin this article by passing on our best wishes to all of our clients and readers.

We hope you and your families, loved ones, friends and colleagues are safe and in as good a spirit as is possible, and we look forward to better days for all of us soon.

In this week’s market update, we focus on a recent article published in The Australian, discussing the closure of the Argyle Diamond Mine, the last ever Argyle Pink Diamonds Signature Tender, and most importantly, the continued investment case for pink diamonds.

As you’ll see, the outlook remains spectacular, with a key decision from Rio Tinto highlighting just how much faith they continue to have in this truly rare asset class.

Last chance to buy world’s rarest asset

Last week, the Australian published a great article, titled “Last chance to buy world’s rarest asset.” Pleasingly, the article quoted figures from Australian Diamond Portfolio, with our research suggesting that prices have risen about 500% in the last 20 years, with annual gains of between 10-15% depending on the specific stone.

The subheading to the article succinctly captured the brilliant performance of pink diamonds since the turn of the century, and why prices are set to soar in the years ahead, noting that “With Rio Tinto’s Argyle mine now closed and its final tender now in progress, demand for pink diamonds is set to skyrocket.”

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It seems like the COVID-19 situation and the associated lockdowns are going from bad to worse in Australia, with the ACT joining Victoria and NSW in ordering citizens to stay at home.

In NSW, the situation continues to deteriorate, with the Premier all but admitting that the virus can no longer be contained, and the significant economic disruption caused by lockdown set to continue for months.

On behalf of the team at ADP, I’d like to send our very best wishes to all of you reading this who are affected by this situation, and hope that things begin to normalise as we head toward Christmas this year.

In the meantime, while the economy is largely closed, the markets remain open. In this week’s update, we look at building inflationary pressures across the economy, the impact it will have on investment portfolios, and why higher inflation will support pink diamonds.

Inflation beast is stirring

In periods where inflation rises, very few asset classes, from cash to shares to property actually do well, with most going backwards in real terms. Hard assets tend to be one of the few investment refuges in such an environment, with the desire to protect against higher rates of inflation one of the key reasons investors are turning to pink diamonds.

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Despite the good news that Queensland looks like it will be easing restrictions and hopefully coming out of lockdown soon, much of the east coast of Australia remains “shut”, with attempts to limit the spread of COVID-19 likely to remain in place for months at this stage.

The economic cost, which we alluded to last week, is starting to express itself more directly on the employment front, with the latest data suggesting the country lost just over 175,000 jobs in July across all the mainland states.

Research from Roy Morgan also suggests there are now 2.76 million Australians, approximately 18.8% of the workforce, that are either unemployed or underemployed.

Given this backdrop, it’s safe to say that it will be a long-time before the economy can properly recover, with households likely to be particularly cautious when it comes to their finances, while businesses will remain reluctant to invest.

The impact on the Australian dollar is also likely to be negative, though it will of course support assets like pink diamonds.

We explore this in more detail below.

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It’s been another troubling week of developments on the COVID-19 front, with large parts of Queensland looking like they may join New South Wales in a multi-week lockdown, while variants of the disease are again causing problems in countries like Israel and America.

In financial markets volatility is again becoming a factor, with the Australian dollar for example beginning to suffer, while iron ore, our key commodity export here in Australia, now down about 20% from its all-time highs earlier in the year.

Last week also saw further evidence that inflationary pressures continue to build across the economy, with the latest data suggesting prices in Australia increased by almost 4% in the year to end-June.

Compare that to current bank interest rates which are close to 0%, and you can see why investors are increasingly looking for alternative ways to protect and grow wealth.

Pink diamonds will remain one of the key assets set to benefit as these trends play out in the years ahead, particularly as the costs caused by COVID-19, and the lockdowns designed to prevent its spread are only set to grow.

A public pool in Sydney forced to close due to COVID-19 restrictions. One of many attractions and businesses forced to close during extended lockdown measures.

Lockdown costs will grow!

Given the length of the lockdown residents in New South Wales are currently going through, and the lockdowns seen in Queensland, South Australia and Victoria of late, there is no doubt we are going to see a massive hit to economic output in Australia.

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