Diamonds are forever (because you can't sell them)

My hatred, in real life, is well known for diamonds. Diamonds are very worthwhile for certain applications. However their placement at the top of the 'precious stone pyramid' is not required or sustained by any kind of rational thought. Additionally the practice of vastly over selling the value of a diamond is detrimental to young couples at exactly the time that they need the money the most. Young couples need to be able to start their financial footing on a good foundation and not caring what stone is in a ring. Now I will buy that some people may want a Diamond over other precious gems, however the idea that Diamonds are more valuable and are worth more money is not correct.

I have come across a very telling article from 'The Atlantic'. I think posting a link to the article is likely a good enough discussion on the topic but I would like to add a couple of things to this.

I have recently read the book, 'Africa: History of the Continent', which is a whole other blog posting by itself. (The book was really really good though not without its faults.) What is interesting is the history of the exploitation of the resources of the continent, not just diamonds. I found the discussion of the specific history of south Africa in reference to the mining very telling. (What is a lot of fun is to read a huge history book like this and then have Wikipedia open at the same time. This allows for a 'Would you like to know more?' button in the book to be used and also allows you to finish the book as the author intended without major sections where you have to read stuff you could care less about.) There are very interesting articles on Wikipedia on the formation (in cratons), and diamonds as an investment. However I think this topic is well served in a lot of publications. The mining and trade of diamonds is artificially high. What is really sleazy is the original push for 'Natural Diamonds are purer than artificial diamonds' in the past and the current push for 'Imperfections make natural diamonds more desirable'. It is ridiculous to let oneself be swayed by such trite commercials. The only reason for the change in heart is that the process for creating artificial diamonds became so perfected that the artificial diamonds are better than natural diamonds.

Anyway, my biggest frustration with diamonds is that Hollywood makes everyone think that diamonds have some correlation with love. It is a ridiculous assumption. I have multiple movies in my collection where everyone goes ga-ga over a new diamond ring as a sign of engagement or marriage. It just seems like such a bad idea to spend a huge amount of money on something and leverage your future. I know a couple of people who bought extremely expensive rings (and weddings, and honeymoons, but those are a discussion for another time). Some of these people are not wealthy by any means. This they are buying something which is easily lost, doesn't store value (which would make it a real investment), and honestly is figuratively a huge neon sign staying 'Please Steal Me.' This is not an investment in anything as is indicated by the fact that you cannot sell it. Why are prices so high then? Well Hollywood makes the public believe that selling it is a bad idea and you don't love the person if you sell it. So there is no price discovery in the open market. Thus prices are artificially high. This re-enforces in the public that this is an investment because it is expensive which feeds the cycle (prices never go down, etc.). This is a very bad as it creates a sustained bubble in the price of diamonds (if it is sustained does that make it a bubble? I will think on that). Thus the asset is over priced which encourages over investment that doesn't support the price and then when you try to sell the asset you lose money. (Remind anyone of something else in the modern economic condition?)

Anyway, don't buy into the idea that diamonds are a way to store value (or to show love), because neither makes any sense, economically, realistically, or rationally.