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The Iced Out Age

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January 01, 2008 – Comments (4)

In my last blog post I went into some of the reasons why I think diamonds are going to get cheap. In this post I will cover what I think will happen when they do.

An enduring feature of our culture is that a fad starts in the upper crust of society and works its way down the economic ladder over a period of years. As it does work its way down the upper crust abandons it and finally in a very much cheapened form it ends up in the lowest economic tier.

Currently diamonds are still relatively expensive, so the hip-hop fad of putting diamonds on eveything (called "icing out") is still confined to those who can afford to spend hundreds of thousands on jewelry and the like. MTV and the awards shows regularly show examples of this.

But what happens as diamonds get as cheap as rhinestones? At first the lower upper class (the new money, not the old money who think flashy things are tacky) and the upper middle class will start put diamonds on all sorts of stuff. So diamond encrusted glasses, watches, jewelry and maybe even small appliances will be common. As diamonds get cheaper and cheaper the lower middle and working class will buy diamond encrusted stuff. This will probably include cars, clothes, skateboards  and all sorts of stuff. Meanwhile the upper classes will conclude that sparkly stuff is tacky and will probably head towards a plain but expensive look.

Eventually the iced out fad will have worked it way down to the lowest tier and will be abandoned. There will be really a lot of stuff with diamonds on it thrown out. Now diamonds are stable under normal conditions for geologic epochs. So far future archeologists (when current doings are utterly forgotten) will wonder about the layer with all the small faceted diamonds in it and make up theories as to how they came about. Those theories will be wrong.

 

Happy New Year All

Chris - still wants his 1kg flawless diamond crystal desk toy 

4 Comments – Post Your Own

#1) On January 01, 2008 at 2:20 PM, dwot (39.29) wrote:

Industrial use diamonds are already cheap...

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#2) On January 03, 2008 at 1:31 PM, abitare (35.09) wrote:

I think you are right on the diamond story. Some knuckle head fund manager has been aquiring
 Zales shares, you should write him that the diamond fad is ending.  He should find a better investment and send you a check for the financial advice.

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#3) On January 03, 2008 at 10:43 PM, chk999 (99.97) wrote:

Jewelry stores historically have had very high margins. (Which translates as they charge you way more than the stuff is worth.) If diamonds become cheap, they will still have a big markup and will still be profitable, they will just overcharge you for the gold and the workmanship. My thesis isn't that jewelry stores get hammered, its that diamond miners and DeBeers get hammered. I have no opinion on Zales (other than Blue Nile might be a big competitor in the future) but doubt that their business will change much. The iced out age is still a few years off.

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#4) On January 04, 2008 at 10:17 AM, TDRH (99.48) wrote:

What will replace the consumer's value of scarcity.   If it is not diamonds, it will be something else.   I read somewhere, in ancient Egypt, for a short time glass was actually as valuable as jewels, because they lost the ability to make it.  Indians gave up Staten Island for a bag of beads. 

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