02 Jun

A Masterclass in Pink Diamonds

It’s been an eventful few weeks in financial markets and in the economy, with a new Prime Minister settling into the job in Australia, the housing market starting to slow down, and fears over inflation continuing to build as energy prices skyrocket.

The stock market has also continued its recent bout of volatility, with some investors thinking it’s now a good time to buy, while others see much more downside in the months and years ahead.

In the pink diamond world, we are continuing to see near record levels of demand, with Australian Diamond Portfolio working with a large number of Australians who are diversifying and protecting their portfolios with this unique asset class.

The continued strength in the pink diamond market, which we discussed in last week’s report that showed prices for pink diamonds rising just over 6.5% in the first three months of 2022 (which would work out at close to 25% for the year if the growth rate is maintained) is of course a major driver of this demand, though the lack of volatility, and the diversification benefits pink diamonds offer are also clearly important to the many clients we are working with.

Below, we touch on a few items of interest that have come to our attention in the last week which illustrate the continued challenge investors in traditional assets will face going forward, all of which reinforce why pink diamonds remain a great place to protect and build wealth.

We also have another Masterclass in Pink Diamonds which we’d love to welcome you to.

Bumpy road ahead for investors

We came across four items this week which reinforce how difficult it’s going to be to make money in traditional asset markets in the years ahead.

The first concerns the outlook for employment. As we’ve discussed before in these market updates, record low unemployment, which we are seeing in many economies (including Australia) is a lagging indicator, suggesting we are close to a deterioration in the economic outlook.

This week we saw evidence of this in the United States, with the number of job postings for companies in the S&P 500 dropping to just over 850,000 jobs by the end of April (see chart below).

New job postings for the S&P 500 are down sharply from the October 2021 peak
# of new job postings each month for the S&P 500 (Jan 2020 – Apr 2022)

Graph of number of new job postings each month for the S&P 500

Source: Revelio Labs, BofA Global Research

That’s the lowest level in almost a year, and about 35% lower than the total number of jobs on offer a few months back.

It’s a clear sign the economy is slowing.

Moving on from this, and the other item that caught our eye (and that most Australians will be sympathetic too), is just how expensive housing now is in the United States.

As per the chart below, the ratio between the price of a median new home, and the median household income is a record 6.7x. It has skyrocketed in the last two years.

Median US new home price / Median US household income

Graph of median US new home price divided by median US household income

Source: Charlie Bilello, Compound

It’s great for existing homeowners. It’s not great for people saving for a deposit or paying off huge home loans, and it will prove particularly problematic when prices fall, as they’ve started to do on the east coast of Australia now.

The third stat concerns the US stock market. Given that it has fallen by roughly 20% in the last few months, many investors are wondering whether or not now is the time to get back into the market, thinking the correction is over.

They might be right, but history would suggest otherwise, as the price to earnings ratio for the market, which is a subject we’ve discussed before, is still above 30 to 1.

Graph of price to earnings ratio

The market might not be as expensive as it was a year ago, but it’s still more expensive than it was when the Global Financial Crisis hit just over a decade ago, or when the 1987 stock market crash occurred.

Indeed, it’s a similar level to that seen just before the Great Depression, which kicked off a two-decade cycle where investors made basically no money at all in the markets.

And finally, we come to inflation, with news out this week that consumer prices in Europe are rising at a record rate, up more than 8% in the last year. The key driver is of course energy prices (as alluded to in the news headline below), which are up nearly 40% year on year.

Headline from CNBC: Euro zone inflation hits yet another record high as food and energy prices soar

Australians may need to get ready to see similar inflation levels Down Under by the end of this year, with some analysts stating inflation will go much higher than the current levels around 5% before 2022 is finished, with wholesale power prices more than doubling in the twelve months to end March.

Indeed, this week we saw the extraordinary news that one energy retailer (ReAmped) encouraged their customers to find another supplier, warning them their energy costs may double shortly, with the ReAmped CEO Luke Blincoe noting; “The markets are just rocketing every day. The best thing we can do is advise customers to look somewhere else because the price increases that we will need to put through are so significant that we just would rather they were elsewhere and getting better deals.”

Add all this up and it points to years of little to no returns from stock and property markets, and a sustained bout of inflation that will eat away at the real value of most people’s investment portfolios, and the money they keep in the bank.

It’s not ideal, but it’s exactly the environment that hard assets like pink diamonds can be expected to thrive in.

Pink Diamond Masterclass – spaces are limited!

Australian Diamond Portfolio will be hosting its next pink diamond Masterclass at 12pm on Wednesday July 6th.

Masterclasses are held in our high-security private boardroom within the Guardian Vaults  complex and begin with a short tour of the Vault to demonstrate how secure, insured storage of investment diamonds works, as well as answer any other questions you may have about vaulting.

The Masterclass then moves to our boardroom where I’ll run through the investment case for pink diamonds. The topics covered typically include;

  • How and why pink diamonds fit into your investment portfolio.
  • Review of the historic performance of pink diamonds.
  • Key factors driving pink diamond prices.
  • Elements of colour & key factors in valuing a pink diamond.
  • How to buy and store pink diamonds.

* These topics are a guide only. We thoroughly encourage any additional questions/topics on the day.

These sessions are the perfect opportunity for those who are interested in investing in pink diamonds to ask any questions they have about this unique asset class, and the opportunities it offers.

Australian Diamond Portfolio Masterclasses are strictly limited to 15 attendees, so be sure to register at the link below.

Register for Masterclass

As always, we hope you’ve enjoyed this week’s edition of “In the Loupe” and we look forward to any questions or comments you may have.


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