President's Corner October 2013 - The Frog and the Scorpion

I lost the only clinical mind with who I could discuss the state of the financial markets and issues related to the diamond industry. After 12 years of service my loyal dog, Portash, returned his pure soul to heaven.


Since Portash died, the issues and financial problems are piling up daily and there is nobody around to give me sound advice.

 

Consider the US government shutdown or the daily loss of confidence in the stability of the financial system. The only story that comes to my mind is the age old story of the frog and the scorpion. The story is as follows:


A scorpion wanting to cross the Sea of Galilee tries to persuade a frog to carry him across on his back. The frog asks the scorpion why he should take him as he will sting and kill him. The scorpion retorts that if he were to sting him then he would also die, so it is against his best interests to do so. Agreeing with the scorpion’s logic and wanting to help, the frog finally agrees. In the middle of the lake the scorpion stings the frog. When the frog asks the scorpion why he stung him, the scorpion answers that this is the way we operate on this side of the world.

  

It appears that the best way to treat an impasse is to kick the can down the road for a little longer. A few megalomaniac legislators should not have the power to interrupt the energy flow of the world financial system – but they do. Businesses suffer, trade is down, and all of this is reflected in the stock market.


And although I do not represent myself as an expert in such matters, it would not surprise me if even peoples’ sex lives are affected. I doubt it would affect population growth though, as the two most populous countries in the world, India and China, don’t even blink when confronted with a financial impasse. Peoples’ sex lives can affect the economy though, as low sex drive results in a decreased desire to shop and the government shutdown brought consumer confidence to its lowest level since the collapse of Lehman Brothers.

 

My dog always found a silver lining and a way out of a crisis. He would comfort me and in his own mercurial manner relay to me his thoughts on the matter, “Don’t worry Papa, it’s only show business. By the time you finish writing down your thoughts, it will be business as usual and in one week everything will be forgotten.”

 

 Leibish and his dog, Portash

My good friend, Portash

 

They turn on the printers and a few trillion dollars will be made available – some in crispy new notes and the rest in government obligations; not forged money, just diluted. Luckily, diamonds don’t get diluted; sales may decline but they are eternal.

  

Like a port in a storm, the fancy color diamond market is showing no sign of slowing down or dilution. We made an offer on 40 stones at the 2013 Argyle Tender, about 30% more than the number of stones we bid for last year, and were successful in winning only 7 of them.

 

The top stone in the tender, a 2.5 carat fancy deep pink, was sold for USD2.5 million - a new record for an Argyle diamond. We figured that the best thing to do with this stone was to re-cut it to a fancy red and offered a high price for it; however, we were outbid. The eventual buyer paid no attention to the impasse in financial markets – apparently, sometimes bad news is good news.

 

The 7.59 carat vivid blue recently put up for auction did not sell even though it received the highest bid ever for a blue diamond of that size, $16.12 million. It will be interesting to see how it will affect the imminent sale of the biggest vivid pink diamond ever on the 13th of November.

 

The impasse is over, at least for the next few months when the fun and games will start again. We have seen a dramatic increase in the sale of important diamonds in pink and yellow and doubt that this trend will change.
And the tender goods just arrived…

 

 

Best regards,

Leibish

Leibish Polnauer

Leibish Polnauer, President and Founder of Leibish & Co. Fancy Color Diamonds

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