While it’s not quite true that there is never a dull week in investment markets, it certainly feels like it these days, with banking collapses, government bailouts and takeovers dominating the news.
What started in California with the collapse of Silicon Valley Bank barely two weeks ago has swept across the Northern Hemisphere. Other banks in the United States have gone belly up, with smaller, regional banks (of which there are thousands) particularly hard hit, as the chart below highlights.
It shows an index measuring prices/valuations for regional banks, with the index essentially halving in this period of extreme stress. It’s worse than what happened during COVID.
US Regional Banks
It’s not just America either.
Over in Europe, the Swiss National Bank has effectively had to broker a marriage between the two largest banks in the country, with UBS taking over Credit Suisse.
Lest there be any dispute about how interconnected these events are, Credit Suisse chair Axel Lehmann put them to bed over the weekend, when he told reporters that the “latest developments that emanated from the banks in the US hit us at the most unfavourable moment. The accelerating loss of confidence and the escalation over the last few days have made it clear that Credit Suisse can no longer exist in its current form.
Events like this, and the policy maker reaction to them (essentially to flood the market with more liquidity), make two or three things clear.
- Money in the bank isn’t necessarily safe, especially when you factor in inflation.
- Owning shares in supposedly well managed financial institutions isn’t that safe either, as even the oldest, presumably most risk averse, and prestigious organisations still run into trouble, some of which proves fatal from a corporate perspective.
- That the global economy is in rough shape, and people need to be very careful with their investments, and tangible assets offer a number of benefits in such an environment.
We explore this in the next section.
Pink diamonds as investment solution
In crisis times, a lot of investors panic. The most obvious thing to do is sell whatever you own, shares, property, crypto etc, and convert it to cash.
We’ve seen a lot of that in the last two weeks, as evidenced in the chart below shared by @CallumThomas.
It shows the flows into cash like products over the past thirty years. What we’ve seen recently exceeds any other period with the exception of the COVID crash.
And it makes sense in a way, for as Thomas himself notes; “Given all that’s going on in markets and macro… and perhaps more to the point, given the relatively attractive yields on money market funds, we have seen a dash for cash. Why take risk in equities when you can get 4-5% risk free in cash (not to mention the implicit option value in holding cash).”
The only problem with the above statement, is that it doesn’t factor in inflation, which is still stubbornly high (well above 5%) in most of the world, including America and Australia.
An interest rate of 4% for money held in banks that are safe in a world of zero inflation makes cash a safe haven.
An interest rate of 4% for money held in a fragile banking system in a world of 6-8% inflation is a guaranteed loser of an investment.
Over the next few years, we expect more people will come to see it that way and turn to tangible assets instead.
Those investors that are already turning to tangible assets like pink diamonds (instead of opting for cash), are essentially front running this change in investor mind shift before it fully plays out.
They stand to make the most money in the next few years as this all plays out.
ADP 2023 Pink Diamond Guide Out Next Week
Next week, the team at Australian Diamond Portfolio will release our updated Pink Diamond Investment Guide for 2023.
This annual publication, which contains a treasure trove of detailed insights for new clients, experienced pink diamond investors, or those curious to know more about these rare, beautiful stones, which are also potentially very lucrative investments, is one of the most widely read publications in the global pink diamond market.
With updated performance figures for pink diamonds, and comparisons to an array of assets, our latest Pink Diamond Investment Guide also features updates on:
- The key reasons to invest in pink diamonds, from the opportunity to earn outsized gains, to inflation protection and hard asset protection, something that is top of mind for many investors these since the collapse of Silicon Valley Bank in the United States.
- An introduction to investment grade pink diamonds, and what to look for when investing in this discrete asset class.
- The process of investing in physical pink diamonds, and how to include them in a portfolio of assets.
- Australian Diamond Portfolio’s unique seven step investment process, which covers everything from original enquiries, through to investment, storage, insurance, valuations and eventual resale.
I’m incredibly proud of the effort that our team has put into this year’s investment guide.
Look out for it in your inbox next week, and we look forward to any questions or comments you may have.
The team at Australian Diamond Portfolio will also be on hand to assist should you wish to enquire about investing in these unique, rare, beautiful assets after you’ve read the guide, or indeed at any time.
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.