News

It’s been an interesting week in the news cycle, with Australians set to head to the polls this weekend to vote in the Federal Election.

While the polls seem to strongly favour a win for the Opposition, the last few years have taught us to treat such indicators with a grain of salt, going all the way back to 2016 when Brexit occurred and Donald Trump won the race for the White House.

Either way, while politics is in the news, the more important developments are taking place in financial markets.

Last week, we commented on the bloodbath that had developed in cryptocurrencies, which suffered a brutal sell off, with Bitcoin falling below USD $30,000 per coin at one point. Some of these assets have stabilised somewhat in the past few days, though almost all are still down heavily across the course of 2021.

This week, stock markets are back in the news, especially after a record decline in the United States on Wednesday 18^th May, which saw major US stock indices fall between 3% and 5%, some of their sharpest declines on record.

The weakness has translated to Australian shares too, which fell by more than 1.5% yesterday and are now down 7% for the year. That is obviously not a great result and is only made worse by the what’s happening on the inflation front, with the higher prices that we are seeing across the economy meaning stocks are down by closer to 12% in real terms.

Indeed, it was the impact that inflation is having on company earnings that drove this week’s major sell off, as we’ll touch on below.

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In just over six weeks, we’ll hit the half way point for the calendar year 2022.

So far, it’s been an incredibly disappointing one for investors in traditional assets, with equity markets down, property prices starting to weaken, and traditional safe havens like bonds having their worst year on record, having fallen by approximately 10%.

Cash also remains ‘dead money’ given how low interest rates are, and the fact that inflation is at multi-decade highs, while even new asset classes like cryptocurrencies are in free fall (more on this below).

While the team at Australian Diamond Portfolio never like to see anyone lose money on any particular investment, we can’t help but be proud that we’ve helped so many Australians not just protect but indeed grow their wealth through this difficult period, with hard assets like pink diamonds really coming to the fore this year.

We expect this will remain the case for some time to come, as we discuss below.

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It’s hard to believe that it’s already May.

The year has absolutely flown past to date, no doubt driven in part by how strong the demand for pink diamonds has been, with Australian Diamond Portfolio welcoming many new clients in 2022 so far.

While pink diamond investors have enjoyed the relative stability and continued price growth that have become hallmarks of this asset class for the past 15 plus years, it’s been a far more tumultuous year for investors in other asset classes.

Share markets are down, both locally and internationally, while bonds, which are normally seen as safe havens, are having one of their worst years on record. Cryptocurrency prices have also crashed, with Bitcoin down more than 20% so far in 2022, while inflation continues to fester.

On top of all this, investors are now having to deal with higher interest rates, something that they haven’t seen in years.

We look at this in detail below, looking at the challenges they pose and why they probably won’t go as high as markets currently expect.

Most importantly, we look at why rising interest rates are no challenge to the pink diamond market, and indeed may be a catalyst to send pink diamond prices even higher in the years to come.

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Welcome back to our regular market updates, and on behalf of the entire Australian Diamond Portfolio team, we hope that you and your loved ones enjoyed fantastic Easter and Anzac Day long weekends.

While many of us would have understandably taken the chance to refresh (it’s hard to believe the year is almost one third over already), it has been anything but a quiet time in investment markets.

Indeed, over the last couple of weeks we’ve seen:

• A sharp fall in the Australian dollar, which is down about 5% this month, and now trading just above USD $0.71.
• Renewed volatility in equity markets, with the ASX down over 3% in the last week.
• Oil prices drop back toward USD $100 per barrel, down several percentage points in the last couple of weeks.

The situation in the Ukraine continues to remain tense, while China is locking down large parts of the country in an attempt to contain the latest outbreak of COVID-19.

Those lockdowns will continue to fuel inflationary pressures, with market expectations of what inflation will average in the next decade now sitting close to all-time highs.

Meanwhile, in developed markets like the United States, signs of a major economic slowdown, and a potential recession continue to build, something we have warned about for some time.

This is the perfect scenario for alternative assets like pink diamonds to flourish, and indeed that is exactly what they are doing, as we touch on below.

Before that though, we look at an indicator that highlights why inflation pressures won’t go away anytime soon, and how much of an impact higher costs of living are already having for many people out there.

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Last week, we spent a large part of our market update focusing on the potential for a recession to hit in the United States, and likely other parts of the world, within the next 12-18 months.

Our update focused on two key indicators, the first being the difference in borrowing costs for various time periods (called the yield curve), while the second was the unemployment rate, with both of these indicators suggesting investors should prepare for a recession.

This week, we want to expand on what a recession might look like for financial markets, and by extension, investors in those markets.

As we’ll explain, they are precariously poised, with several indicators suggesting they may be about to take another large dive.

While this would be unfortunate for those overly exposed to shares and other risky assets, it would most certainly be bullish for pink diamonds, as these developments encourage more investors into hard assets offering both portfolio protection and massive upside.

Why the market could be about to tumble again!

A lot people think investing is as simple as “economy growing equals markets going up”, and the opposite, “economy in recession equals markets go down”.

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There is never a dull moment in the world of investing, and this week is no different, with some key developments coming to the fore that are likely to have profound implications for pink diamond investors going forward.

These developments are in essence warning signs of a pending recession in the United States, with this week’s market update focusing on:

• The two key warning signs themselves, and why they matter in terms of a potential recession.
• The evidence that demonstrates pink diamonds are recession proof investments, bolstering investment portfolios.
• Why pink diamonds are likely to be a better investment than ever if we see another recession again, given other factors at play in financial markets and in the economy today.

We cover all this in detail below.

A recession is coming!

While it sounds like a very technical economics term, the concept of a yield curve is relatively simple to understand.

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Every now and again we come across a great piece of research that covers some of the key macroeconomic, geopolitical and market trends that are going to drive investment portfolios going forward.

That’s exactly what happened this week, with the body of our article below getting into the detail of a profoundly interesting update from a true gentleman and heavy hitter in the investment world.

Critically, for clients of Australian Diamond Portfolio, his outlook has important, and bullish implications for the pink diamond market, which are set to benefit from the trends identified.

High inflation, low growth and the road ahead

Howard Marks is an investment legend.

As one of the co-founders of Oaktree Capital Management, he has built a personal net worth estimated at more than USD $2 billion, which makes him one of the wealthiest Americans there is.

He is also an exceptional writer and communicator, with the memos he prepares for his clients widely quoted and read by the broader asset management industry, as well as individual investors managing their own portfolios.

In simple terms, Marks’ words matter.

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It’s been another interesting week in financial markets, with stock markets enjoying a strong rally, while commodity prices suffered major falls.

While many have cheered on this performance after seeing weeks of stock market falls and a seemingly unstoppable increase in the price of things like oil, it’s far too early to have any confidence that it will last.

Fortunately, there are some assets you can rely on to offer stability, as well as market leading growth.

Pink diamonds are one such asset, with prices continuing to rise at a rapid rate.

See below for the latest update details.

Pink diamond prices continue to rise

Last year, Australian Diamond Portfolio were proud to launch our very own Pink Diamond Index (ADPPDI), which tracks the price trajectory of pink diamonds as an asset class.

Built using price data from the many thousands of pink diamonds we track here at Australian Diamond Portfolio, the index showed explosive price growth in the 2020/21 financial year, with the asset class as a whole up by approximately 30%.

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It’s hard to believe that we are already half way through March of 2022.

The year has been a tumultuous one so far to say the least, with COVID continuing to pose challenges, including in China where it originated, with parts of the country again in lockdown as authorities try to minimise its spread.

Meanwhile, the terrible conflict in the Ukraine is rightly generating lots of attention and is the ‘front page news’ story of the year so far, with all of us hoping the bloodshed ends as soon as possible.

Financial markets and the economy have also gone into something of a tailspin in 2022, led by a booming oil price, which at one point this month traded at more than USD $130 per barrel.

Less than two years ago, in April of 2020, the oil price was negative. People were literally giving it away back then.

Today, the situation has completely changed, with the price increasing by circa 75% in the last twelve weeks alone.

Between rising risk of a recession, and heightened inflation risk, this oil price spike has many investors feeling like they have nowhere to hide.

We explore this below and highlight why pink diamonds are set to become the go to asset for astute investors.

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Financial markets have been particularly volatile in the last few trading days, with share prices falling, while commodities continue to soar.

Escalating tensions in the conflict between Russia and the Ukraine are the primary cause, with some of the strictest sanctions imaginable being imposed by Western nations, in the hope that it will force Russia to bring an end to its invasion.

This week’s market update looks at the impact the crisis is having on global markets, and why pink diamonds remain one of the few places investors can feel secure when it comes to protecting and growing wealth.

The latest market moves

In the last few trading days, equity markets have again begun to fall, including in the United States, with the S&P 500 now down more than 12% for the year

The bigger moves though have been in the commodity sector, with a range of commodity prices from oil to nickel to wheat all soaring.

This is evidenced in the charts below, which focus on agricultural commodities (wheat, corn and soybeans), with prices for some of them now at their highest level in 15 years.

Corn

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