President's Corner Sep12 - At the JNA Awards- A Windy Road with Sharp Turns

I was once chatting with a UBS money manager in a beer garden in Zurich. He shared with me his wisdom about Internet stocks and told me about their recommendations.


Amazon, according to their forecast, will never make money. He then logically explained to me how the future will play out. I made no comment, just sipped my gin and tonic. It was a hot pre-summer day in April 2007.


I don’t usually listen to analyst projections as they have no way to factor in how many unexpected turns are ahead and how bumpy the ride can be. Analysts are like the old lady with no teeth in a Turkish bazaar offering to reveal your future for $5 from tea leaves; only with better teeth and more expensive clothing.

 

A few days ago we were the guests of honor at the JNA Gala Dinner where our e-Commerce Manager, Itzik, was nominated for Best Manager of the Year – Under Age 30. It was a glamorous evening perfectly catered and organized – reminded me of the Oscar Gala in Hollywood.

 

 JNA Award Ceremony 2012

Itzik Polnauer, Leibish & Co.'s e-commerce manager is nominated for best 'Young Leader of the Year - Under 30.' Photographed together with his father Leibish, his brother Yossi, and his other brother Shmulik Polnauer


As we just finished the second bottle of kosher wine, Warren Mok started to sing the Alfredo – La Traviata. I was in seventh heaven. At that very moment I remembered my deadline was approaching to write the President’s Corner….oh my goodness!


As I listened to the speeches and predictions from the CEOs of Chow Tail Fook and Rio Tinto, I was playing with my cell phone and looked for some inspiration for my newsletter. I was browsing the market. Let’s see what happened to UBS and Amazon since April 2007.


On the 16th of April 2007;

  • Amazon was trading at USD 44.95
  • UBS at USD 64.80.

 

Today, after a long road with many sharp turns;

  • Amazon closed at USD 257.47
  • UBS at USD 12.92.

 

UBS lost 80% of its capitalization in five years and Amazon was up 500%.


Itzik was shortlisted as a nominee against some of the biggest names in the industry but unfortunately he did not win. Though, we continued the party in a relaxed manner as we were happy he had made it this far. I listened as the CEO of Rio Tinto spoke - the same gentleman who just a few months ago announced that Rio Tinto is considering to divest itself of its diamond mining operations and use the money to enlarge their iron ore mining.

 

Thanks to the free Wi-Fi at the Ritz Carlton Hotel I received all 270 emails which I did not receive for 3 days in Hong Kong. I opened my favorite one first from a sharp guy in London, Julian Sinclair, from London Talisman Investments.


He sent me a graph with the following message:


Leibish, hope all is well.
I thought you’d like this chart of Iron Ore prices since May… Julian Sinclair

 

I wanted to go up to the speaker and show him the Iron Ore chart.


I recalled Juilan Sinclair’s comment 6 months prior:


It's long been my view that the big miners are overearning through mining what is ultimately one of the most abundant materials on earth - Iron Ore. Between a combination of Dutch disease, mal investment, misunderstanding of cycles, my bet is the next 10 years will show it will be a fool's errand in ramping up capex in these divisions. The miners misunderstand that this last 10 years they got rewarded for 'turning up', nothing in their business model, operational performance etc, shows otherwise.

 

This is Rio Tinto - owners of the Argyle Diamond mine that produces one of the hottest items in the jewelry trade: Argyle Pink Diamonds. This is just after we attended the 2012 Argyle Pink Diamond Tender and placed bids on a number of the finest stones – and this man wants to sell Argyle and buy another iron mine. Shall I tell him he is making a mistake?

 

 Shmulik at the 2012 Argyle Pink Diamond Tender Shmilik Louping Argyle Pink Diamonds at the 2012 Tender Diamonds of the 2012 Argyle Pink Diamond Tender

Shmulik Polnauer, Leibish & Co.'s GIA GG, Chief Diamond Buyer at the 2012 Argyle Pink Diamond Tender


I had to open the third bottle of wine just to calm myself down.

 

I felt pretty high as they announced that Chow Tai Fook was the winning brand of the year. I was pleased to hear, as the company was one of my first major corporate accounts when I started my career in the diamond business, some 30 years back. Suddenly, it occurred to me, all the major sponsor of the event divided the important prizes amongst themselves.


So, I came up with a bright idea. I decided to compete with the JNA Awards and present some awards of my own. The category would be a Papa’s Virtual Brand Award. I lined up a few candidates in order to have a ‘fair play,’ but decided to award the grand prize to my Leibish & Co. I gave it to my kids for their innovative thinking and dedicated work towards the success of our brand. For rolling out thousands of virtual stores around the world with nearly one hundred percent customer satisfaction – and all this without raising 2 billion US on the stock market.

 

Being so extremely busy at the show, following the awards ceremony we had to postpone any further celebrations and get to bed. We had a corner booth where many clients and dignitaries stopped by.


Just as an Argyle representative, and one of dear friends, had come by the booth to pay us a visit a lovely couple just closed on a sale of an exquisite pair of Argyle Pink diamonds. So, we passed on the ‘consumer complaint’ to him right away - it was hilarious.

 

Mordy Rapport, vice president of Rappaport, stopped by as the show was nearly finished. He is a smart young man with a witty spirit and a great sense of humor.

 

 Leibish Polnauer and Mordy Rappaport - Hong Kong Show 2012

Mordy Rappaport, Vice President of Rappaport Diamonds, came to our booth to say hello at the September 2012 Hong Kong Jewelry show


I grabbed him firmly and said, “Mordy, I need an optimistic statement on the record for my newsletter this month - but not something that sounds like your father and his pessimistic predictions on the market." He laughed and said “on the record, Leibish Diamonds and Diamond prices will go up and up and up......"


Like the show business in Hollywood, a good show equals good business and great fun!

 

 

Best regards,

Leibish

Leibish Polnauer

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

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