07 Aug 2019

Paradigm Shift will Drive Demand for Diamonds!

Ray Dalio is the founder, co-chief investment officer and co-chairman of Bridgewater Associates, one of the largest hedge funds in the world, with assets under management of over USD $125 billion.

He is a genuine heavy hitter in the asset management industry, and when he talks the markets tend to listen.

The reason I’m sharing this is because just over two weeks ago, on the 18th July 2019, Dalio published a widely read and quoted article on LinkedIn titled “Paradigm Shifts”, as well as an even more detailed research piece on the same subject.

“Paradigm Shifts” looks at the changing economic, political and financial market environments that have occurred over the past 100 years, with Dalio starting his research piece by sharing one of his famous Investment Principles, in this case noting how important it is to; “Identify the paradigm you’re in, examine if and how it is unsustainable, and visualize how the paradigm shift will transpire when that which is unsustainable stops.”

Ray Dalio

Ray Dalio – founder, co-chief investment officer and co-chairman of Bridgewater Associates which has assets under management of over USD $125 billion.

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01 Aug 2019

Is Australia About to Run out of Luck?

Some of the team from Australian Diamond Portfolio, myself included, have just completed three days on the Gold Coast, where we attended this year’s Australian Investors’ Association National Conference.

Aptly titled; “Investing Beyond the Boom”, the theme of the conference and the data presented very much reinforced why investors needs to look at alternative solutions in an age where property markets are still jittery, cash rates are at all-time lows and falling, whilst equity and bond markets are at all-time highs, with risks everywhere.

Given this background, we were delighted, though not surprised to witness first-hand the interest from would be investors in alternative assets like rare coloured diamonds, with our booth swamped with inquiries over the three days.

One talk in particular, titled “Is Australia About to Run out of Luck”, delivered by highly respected independent economist Gerard Minack shone a spotlight on the risks in the economy right now.

What did this talk highlight?

Minack’s talk, and other material he has published this year essentially covered the downside risks to the economy, looking at falls in house prices, and the negative wealth effect this has as consumers close their wallets and try to save more. This was something we covered in last week’s “In the Loupe” where we included four charts which combined, give us great concerns regarding the ongoing risk in the housing market.

Other factors included the fall in building approvals, which by definition means less work for those in construction, with all the negative implications that has for income growth and consumer spending etc.

Most importantly, it will negatively impact employment, where leading indicators are weakening, which means unemployment and/or underemployment may well rise in the months and year ahead.

Add it all up, and Australia is a facing tough road in the next 10 years economically, with a real chance of recession. None of us can control that, but we can make sure our portfolios are positioned to protect and grow wealth as these economic forces play out.

Australian Diamond Portfolio at the 2019 AIA Conference

Australian Diamond Portfolio at the 2019 AIA Conference

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24 Jul 2019

Where to now for Australia?

It’s been just over two months since the Scott Morrison led Liberal party, in conjunction with their Coalition partners were returned to office.

Since the election, we’ve seen much change in financial markets, the most notable of which has been the two interest rate cuts by the Reserve Bank of Australia (RBA), who have now brought the cash rate down to just 1%, a new all-time low.

Equity markets have had a minor rally, up 3% since the election result, whilst the dollar has been fairly flat, still trading near USD $0.70.

But the biggest news has been in the property market, where a number of developments have helped stabilise prices, after over a year of price falls which saw Sydney and Melbourne prices lose over 10% of their value.

These developments have included

  • First Home Loan Deposit Scheme: The Federal Government will help up to 10,000 Australians a year buy their first home, by providing a government guarantee on 15% of their home loan
  • APRA changing interest rate buffers: In the past, APRA made the banks calculate whether or not they thought borrowers would be able to repay loans if the interest rate on their mortgage was 7%. Now APRA is letting the banks set their own interest rate buffers, which in theory means they’ll able to lend more money to people.

On top of the cuts to interest rates, and the removal of uncertainty regarding changes to negative gearing and capital gains tax, these developments have helped stabilise property prices. It has also seen a notable uptick in auction clearance rates across the country, which you can see in the chart below.Weekly clearance rate, combined capital cities

The stabilisation in prices and uptick in auction rates has led some commentators to forecast a return to boom times. We are not so sure at all, as we see a number of warning signs highlighting how uncertain the economy is, and how stretched households are.

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17 Jul 2019

ADP in the News as 2019 Argyle Tender Released

The 2019 Argyle Pink Diamonds Tender was unveiled last week, with this year’s collection comprised of 64 rare coloured diamonds, including three exceptionally rare Fancy Red diamonds, weighing 56.28 carats in total.

The stunning collection was released on site at the Argyle Diamond Mine in the East Kimberly Region of Western Australia, and will be showcased in Perth, Hong Kong and New York in the coming months.

Commenting on the incredible diamonds that make up the 2019 tender, Rio Tinto Copper and Diamonds Chief Executive, Arnaud Soirat, made note that; “These diamonds, each a natural treasure, are a testament to the enormous range and depth of offering from the Argyle ore body, nearly four decades from when production commenced.”

Even more importantly for investors, Soirat’s comments about this year’s Tender highlighted the shrinking supply and growing demand dynamics at play with regards to rare pink diamonds.

The Chief Executive confirmed that; “in late 2020 we’ll be stopping operations,” and that “Rio Tinto’s Argyle mine is the first and only ongoing source of rare pink diamonds in history. With the lifecycle of this extraordinary mine approaching its end, we have seen, and continue to see, unstoppable demand for these truly limited-edition diamonds and strong value appreciation.”

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12 Jul 2019

As sun sets on Argyle mine, prices for its last pink and purple diamonds to soar

Coloured Argyle diamonds are famed the world over for their stunning purple, pink and red hues that mirror the cotton-candy East Kimberley skies surrounding the mine at dusk.

With the Argyle diamond mine ore body depleting and closure likely to occur by the end of 2020, 90 per cent of the world’s coloured diamond supply will cease and the industry is expecting their value to explode as a result.

Rio Tinto copper and diamonds chief Arnaud Soirat with the Enigma fancy coloured diamond, unveiled at Friday's tender.

Rio Tinto copper and diamonds chief Arnaud Soirat with the Enigma fancy coloured diamond, unveiled at Friday’s tender.

Mine owner Rio Tinto on Friday unveiled its 2019 Argyle diamond tender collection, potentially one of the last tenders to ever be held.
The 64 diamond, 56.28 carat collection includes the most spectacular finds at the mine for the year and will be showcased in Perth, Hong Kong and New York before being auctioned by October.

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11 Jul 2019

The ADP Annual Report Is Here

This weeks “In the Loupe” is a little different to most. Rather than providing you with an overview of the latest developments in financial markets, or diamond specific news from the last 7 days, we’re instead sharing our just completed annual financial market, economic and rare coloured diamond update.

This detailed report looks at market and economic developments over the past year, both globally, and in Australia, where we look at property, the share market and of course the Australian dollar.

The update also includes some fascinating insights into the history of the Argyle Mine, and the outlook for supply in the coming years.

We also look at the short and long-term performance of the diamond market, and touch on the other aspects driving rare coloured diamond demand, including stability, diversification and discretion.

We hope you enjoy it, and look forward to any feedback you might have.

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03 Jul 2019

New Financial Year Begins With Another Rate Cut

The new financial year is a great time for investors to take stock of their investment portfolios and look at which asset classes they want exposure to, in order to best protect and grow their wealth in the years ahead.

This year, there is an even greater sense of urgency when it comes to investments, due to a handful of key factors, including:

  • The continued decline in Australian housing prices
  • The Australian dollar dropping below USD $0.70
  • The RBA cutting cash rates to a new all-time low of just 1%

On top of this, it’s also been a really volatile year in the share market.

Overall performance was OK, but at one point the ASX was down over 10%, trading below 5,500 points in late December 2018, as markets around the world went through one of their worst periods since the GFC.

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26 Jun 2019

Diamonds and Property!

As a follow on from our last two articles in which we compared diamonds with gold and with superannuation funds, this week’s “In the Loupe” is going to look at rare coloured diamonds vs. Australian property.

The article starts by comparing the long-term returns of diamonds to the returns on Australian property, as well as the recent decline in house prices.

We also look at other characteristics of both investments that are important for investors to consider, with a particular focus on diversification.

Long-Term Returns Favour Diamonds

Whilst residential property prices have increased in value for most of the last twenty-five years, the returns across the nation as a whole have been more subdued over the last decade or so, with prices increasing by just under 5%.

Diamonds, as you can see in the chart below, have risen far more noticeably over this time period.

diamonds vs property

Source: Australian Bureau of Statistics, Fancy Colour Research Foundation (FCRF)

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19 Jun 2019

Diamonds and Superannuation – What you need to know!

Following on from last week’s article where we compared diamonds with gold, this week’s “In the Loupe” is going to look at superannuation.

This is another very popular topic amongst the more than 10,000 investors who receive our “In the Loupe” newsletters, which is no surprise given superannuation is for many Australians the largest and fastest growing financial asset they have.

We are going to be looking at this from two angles, firstly comparing the long-term returns of diamonds to the returns on superannuation funds, as well as other characteristics that are important for investors.

After that we are going to look at how your superannuation can be used to invest in rare coloured diamonds.

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12 Jun 2019

Diamonds or Gold – There’s only one best friend!

At Australian Diamond Portfolio, we get asked a lot of questions about rare coloured diamonds, and the key drivers of the market. For this reason, our regular ‘In the Loupe’ market updates typically focus on the supply and demand factors impacting diamonds, and why we think prices will move higher in the coming years.

This week we wanted to write an article specifically comparing rare coloured diamonds with gold, as this is a question we are often asked by our clients.

Over the next few weeks we will follow up with other articles comparing rare coloured diamonds with housing, and also look at diamonds in the context of superannuation investments, another popular topic amongst our client base.

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