The Investment U E-Letter: Issue # 267
Thursday, August 21, 2003

Diamonds… Don’t Sell After All?
By Dr. Steve Sjuggerud, Chairman, Investment U

“I’ll admit I don’t know a thing about diamonds,” I said at the end of Monday’s article on lab-grown diamonds. I then said “that one article (the Wired Magazine story) may not be the full story - I just found it to be interesting.”

It seems the article caused quite a stir. Apparently a number of our readers and a number of specialists in the diamond industry thought it ranged from incorrect to scandalous.

As I mentioned, nearly everything in my article appeared in Wired Magazine. If you haven’t read the article, I urge you to read it: http://www.wired.com/wired/archive/11.09/diamond.html

As I said: “the Wired story may not be the full story.” In the interests of learning the full story, we’ve asked two respected names in the field of colored diamonds and precious stones for their comments. Enjoy…

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From Stephen Hershoff, President of Pastor-Genève

In response to Dr. Sjuggerud’s article, I would say this: Don’t sell your diamonds now. Nor should you panic over The Investment U E-letter # 266: Apollo Diamonds, sent 18 August, 2003 via e-mail. This e-letter was compiled from an article in Wired Magazine entitled “The New Diamond Age.” The interpretation of the original article does not present an accurate view of the market. It does not address the fact that various - and at first undetectable - diamond substitutes have been available for over a decade, with no negative results to the natural diamond market.

Please also remember that the author of letter #266 is not qualified to analyze or advise on the future of the diamond market, as he readily admitted. And you should also know that the following was omitted from the original Wired article, “The New Diamond Age:”

“Man-made diamonds are more like synthetic emeralds, introduced in large quantities in the mid-1970s. But then the gem laboratories discovered that the synthetic stones could easily be distinguished using a standard microscope. The price (of manufactured emeralds) is now less than 3% of natural stones.”

The Gemological Institute of America (GIA) in New York can identify “created” (synthetic) diamonds 100% of the time. If there is any doubt as to natural origin, an “Undetermined” comment is assigned. And, in April of 2001, the Federal Trade Commission said that it was “unfair or deceptive” to call a man-made diamond a “diamond.”

There are those who show off counterfeit Rolex Watches, hang art reproductions in their homes, carry imitation Louis Vuitton handbags and wear cubic zirconium or even “cultured diamond” jewelry. These, however, are not investments - they are consumer goods. The existence of such products has no effect on the strength and price direction of genuine - or in the case of diamonds - “natural” goods, particularly rare colored diamonds.

And David Marcum, President of Florida Jewelry Appraisers, Inc., had this to say:

Regarding the article, “Sell Your Diamonds Now,” by Steve, and also the much-talked-about article in Wired Magazine, it is vital you understand that the Wired article is old and misleading news.

The most significant inaccuracy was that the author did not check with the world’s premier information source on synthetic diamonds; namely, the Gemological Institute of America. If the author had, he would learned the following.

First, large synthetic diamonds have been made for at least 10 years, and identifying them has never been difficult for a competent laboratory. All contain some kind of “seed” crystal that can be identified, or other characteristic (e.g. platinum particles) that are inclusions to the actual growth process. The bottom line is that all synthetic diamonds do not spontaneously grow - even in the right conditions. Seeds are always “added” to an existing crystal, which is a giveaway in the identification process.

Second, natural yellow diamonds are not more expensive than natural fine white diamonds. Fine white synthetic diamonds are harder to make than synthetic yellows. Therefore, the yellows are what is generally grown in the lab. And the fact is, competent gemological laboratories worldwide can easily tell synthetic yellow from natural yellow diamonds.

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As I said a week ago, “the goal of these Investment U E-Letters is to educate you to open your eyes a bit and to help you see the investment world in a different way than you’ll find from your financial planner or CNBC.”

I think the diamond debate, from Wired Magazine to professionals inside the industry, meets those criteria. I know more about diamonds now than I ever have.

Today’s IU Cribsheet

• I appreciate the knowledge and passion that our Investment U E-Letter readers have regarding their investments. We ought to have these lively discussions going on our message board.
• If you are interested in buying or selling white or colored diamonds, or would like to learn more about their value now, you can contact Stephen Hershoff of Pastor-Genève, by calling 866.774.7723. Or you can contact David Marcum by calling 800.676.7077. Please note that David is a Pillar One Partner for The Oxford Club and offers Oxford Club members discounted rates.

Good Investing,

Steve

Related Articles:

• Apollo Diamonds: Turning the Stone Industry Upside Down?
• Advice on Commodities: Uranium Stocks, Gold, and Why “Buy and Hold” in these Markets is Risky Business

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