The last week has seen a number of troubling developments regarding the economy and financial markets, all of which should remind investors of the importance of holding genuine safe haven assets, including pink diamonds.
Some of the developments that caught our eye include:
- An uptick in the number of American’s getting diagnosed with COVID-19, with some 60,000 cases a day being reported (up 10% in the past week).
- The announcement of a 3-day lockdown in Brisbane due to the re-emergence of COVID-19, with other states immediately implementing travel restrictions, potentially ruining the Easter holiday plans of thousands of Australians.
- A huge sell off in stocks last Friday, as highly leveraged Family Office Archegos Capital was hit by a USD $20 billion margin call, forcing it to dump holdings into the market.
- The blockage of the Suez Canal, with one of the world’s largest cargo ships, the Ever Given, stuck for several days, costing the global economy some $400 million per hour.
Some of these issues are only likely to prove short-term distractions, including the Suez Canal blockage, with news this morning that the Ever-Given ship is back on the move, unblocking the canal that sees some 10% of total global traded goods move through it on a regular basis.
The COVID disruptions too are hopefully not enough to send us back into the kinds of lockdowns that we saw last year, especially now that vaccinations are being rolled out across the globe.
Indeed, of all these noteworthy events, it may be the stock sell off that proves the most important for investors, with the ramifications of the Archegos Capital sell down still spreading across the market.
Far from being limited to the hedge fund itself, impacts are being felt in the heart of the financial system, with French Bank Credit Suisse and Japanese giants Nomura Holdings both seeing shares in their companies fall by about 15% on Monday 29th March due to their exposure to Archegos.
In the short-to-medium-term, the main impact of the Archegos sell off is likely to be less leverage, and potentially more oversight on the use of derivatives in financial markets.
Those are the sorts of things that can help bring equity markets to a screeching halt, and reignite interest in safe haven, non-correlated assets like pink diamonds.
The pink diamond investment series
In the coming weeks, the team at Australian Diamond Portfolio are going to use our regular In the Loupe market updates to roll out a multi-part series comparing the investment case, and the outlook for pink diamonds compared to a range of other asset classes that are popular with Australian investors.
Some of the topics we will cover include the following:
- Pink diamonds vs shares:
This article will look at the pro’s and cons of investing in pink diamonds vs. shares, or the portfolio split one might like to take between the two asset classes. This will include analysis of current valuations in the share market, and why we think pink diamonds are likely to be a more profitable investment in the years to come.
- Pink diamonds vs other diamonds:
What makes pink diamonds truly special, and why are they the preferred investment of choice, relative to the other types of diamonds that are mined worldwide. This article will explore this in detail.
- Pink diamonds vs gold:
Gold is seen as a safe haven investment, but what does that really mean. This article will look at the volatility of the two asset classes, as well as the ability to specialise in the pink diamond market, and why that allows for outperformance relative to a homogenous asset class like gold bullion.
- Pink diamonds vs property:
Owning property remains the Great Australian Dream. In this article we’ll see how an investment in diamonds stacks up relative to residential property investments, looking at some of the risk factors most banks and mortgage brokers won’t talk about when it comes to real estate.
- Pink diamonds vs bitcoin:
No matter what you think about it, Bitcoin is front page news in the financial world again, with Elon Musk, who earlier this year was temporarily crowned the richest man on earth, deciding to use Tesla shareholder money to buy into the cryptocurrency. Not all is as it seems though, which we will delve into in more detail in the weeks ahead.
- Pink diamonds vs superannuation:
Love it, hate it, or prefer to ignore it – every working Australian has to contribute money to a superannuation fund. This article will compare the performance of superannuation funds to the pink diamond market and look at how Australian’s can use their superannuation to take advantage of the opportunity pink diamond investments offer in the current market.
As you can see, there is no shortage of educational information we are putting together, and we look forward to rolling this out in the weeks and months ahead.
Your questions answered
Whilst there are a number of topics highlighted above, we’d also like to use this series as an opportunity to answer any specific questions our clients may have.
Whether it’s comparing pink diamonds to an alternative investment or asset class like some of the proposed topics, or understanding some of the specifics of the pink diamond market itself in more detail, or what we at Australian Diamond Portfolio look for when sourcing stones, please let us know, and we’ll be happy to write about it in these articles.
As always, we hope you’ve enjoyed this week’s edition of “In the Loupe” and look forward to any questions or comments you may have.