All the New Year fireworks displays are now a distant memory and the year is getting into the swing of normality after what seems to have been an extraordinarily long festive break this year, writes Charles Wyndham at www.polishedprices.com.
In Antwerp, I simply could not believe how many people there were out shopping, to the point that it was almost impossible to get a parking place. All this on what I thought was meant to be the first ‘real’ day back at work.
Stock markets generally have risen quite sharply and some of the shine has come off the price of commodities, yet there does not seem to be that much improvement in the sovereign debt issue, nor the looming crunch of individual state debt in America.
Reading the financial gurus the messages remain as contradictory as being swamped by people out shopping.
So too in our industry the messages are perplexing.
Rough shows no immediate signs of coming off the boil; polished did not perform badly in 2010 but way below that of rough.
The disparity between rough and polished continues to flash a red neon light at us all.
Even more so than usual I do not think anyone has the vaguest idea what is going to happen, though my instinct is to remain pretty cautious.
Into this turmoil our mutual friend Boney* ended last year by making a whole string of changes to his price list, some 902 changes I believe. However, it was stressed that these changes did ‘not reflect any short term market improvement’.
He must be right in one sense as I gather that some changes were made to prices that had not changed for nigh on 6 years.
Lobbing changes in some cases around 30% speaks volumes for just how successfully Boney has been in keeping his finger on the pulse.
There could not be, in my opinion, any clearer example of the stifling effect that his price list has on the industry by creating this glass ceiling on prices for polished.
Looking at rough and polished in isolation to each other, as I have argued before, it is ever more apparent that it is not rough that is necessarily grossly overpriced but that polished is grossly undervalued.
The belt and braces that the industry seems to feel this pricing mechanism gives, is impeding polished prices to run their own course, and so becoming an ever growing risk to the industry.
The disparity at these sorts of levels between rough and polished simply cannot go on forever which does not mean to say that I know when it will change, I don’t.
There is no better illustration of just how long a market can continue to act irrationally than the America subprime, however, even when irrational behaviour seems to become the norm, at some point reality has to strike.
The longer the industry clings to Boney, the worse the correction coupled to enfeebled growth.
It really is as simple as that, just as watching a few millions of dollars go up in smoke in a few minutes as various fire work displays are ignited to celebrate the clock ticking over by one more second and so give some people the feeling that things will be different from the reality of the second before.
*Charles Wyndham, owner of PolishedPrices, Rapaport's main competitor in diamond pricing, is often very critical of Martin Rapaport's prices and personality, often referring to him as "Boney", a comparison to Napoleon Bonaparte (http://en.wikipedia.org/wiki/Martin_Rapaport).
