This article was originally written by The FCRF Team for FCRF and published on November 18, 2014.
Looking in more detail at their performance throughout the years, the value appreciation of sub-categories has differed quite significantly. These differences were driven not only by general economic swings, but also by the varying price points and uses of different FCD categories. For example, most categories of yellow diamonds are considered more of an ornament and hence more sensitive to end consumer spending whereas rarer pink and blue diamonds are considered as a means to store and display wealth, hence more resilient to economic swings.
Between January 2005 and January 2007, FCDs value experienced on average a steady 12% year over year growth, driven by increased consumer exposure to this asset class. Between January 2007 and January 2008, as the market overheated and liquidity was abundant, FCD prices leaped accordingly by 25%, mostly led by pink diamonds which grew by 26%. During this 12 month period, Fancy Vivid Pink appreciated by 44% on average.
As surging markets transitioned into a deep recession, the stark differences between different FCD products became more apparent. Yellow diamonds suffered a 45% decline in value between January 2008 and January 2009 as most retail consumers lowered their spending and demand plummeted while supply remained steady. The following year, Yellow diamonds increased 52% in value and continued to increase in value to fully recover their pre-recession value by Jan 2012. On the other hand pink and blue diamonds, with a more limited supply and held mostly by investors with longer horizons, were not put up for sale throughout the recession and hence held steady in value.
As the markets slowly recovered, trading in FCDs picked up driven mostly by growing demand in Asia. The wholesale market, which prior to 2009 was made up of only a few companies that exclusively traded FCDs, grew almost overnight to more than 10 companies exclusively trading FCDs and more than 50 companies trying their luck by adding FCDs to their product mix in order to enjoy their higher margins. As these new dealers invested with the expectation of capturing higher margins on FCDs, they opted to hold product for longer periods of time. Therefore, the already limited supply of FCDs contracted further as product remained off the market until prices appreciated significantly. This trend continues and can be observed in the overall 108% price hike measured since June 2009. During this period the strongest growing category, Fancy Pink diamonds, increased in value by 209% while the slowest growing category, Fancy Vivid Blue diamonds, only increased in value by 53%.
Retail brands have also shifted their focus to FCDs past 10 years. Extravagant colors have become a key element of haute couture and helped drive up prices of exceptional stones with special virtues. Luxury brands who previously only purchased FCDs occasionally started promoting heavily marketed special collections. One of the more recent public announcements was Tiffany’s debut of “Colors of Wonder” in September 2012. This collection, which was on display for public viewing at Tiffany’s Fifth Avenue flagship in New York, was hailed as “a milestone in its great diamond heritage”.
These luxury brands are trying to capture market share from Graff and Moussaieff who have been leaders in this space for decades. The heightened exposure in marketing and press has contributed to the increasing demand for high quality FCD product, particularly from Asian consumers who covet luxury branded FCDs. An example of this effect is the surge in demand for exceptional yellow diamonds which increased their value tremendously, placing them on par with Fancy Blue and Fancy Pink diamonds.
We expect these trends to continue and influence FCD price appreciation. As new supply from mines continues only as a trickle and more players try to enter the FCD trading space, one should expect FCD trading to become more challenging and product to be even more scarce.
The Fine Print
This offering is made in reliance on Regulation A under the Securities Act of 1933. The securities offered are speculative, illiquid, and an investor could lose the entire investment. Investors should read the relevant Offering Circular and consider the risks disclosed therein before investing.
Disclaimer
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. REGULATION A OFFERINGS ARE SPECULATIVE, ILLIQUID, AND INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE POSSIBLE LOSS OF YOUR ENTIRE INVESTMENT.
LUXUS, through its affiliated entities, is offering securities through the use of an Offering Statement that the Securities and Exchange Commission (‘SEC”) has qualified under Tier II of Regulation A. While the SEC staff reviews certain forms and filings for compliance with disclosure obligations, the SEC does not evaluate the merits of any offering, nor does it determine if any securities offered are “good” investments.
This profile may contain forward-looking statements and information relating to, among other things, the company, its business plan and strategy, and its markets or industry. These statements reflect management’s current views regarding future events based on available information and are subject to risks and uncertainties that could cause the company’s actual results to differ materially.
Investors are cautioned not to place undue reliance on these forward-looking statements as they are meant for illustrative purposes, and they do not represent guarantees of future results, levels of activity, performance, or achievements, all of which cannot be made.
Moreover, although management believes that the expectations reflected in the forward-looking statements are reasonable, neither Luxus Alternatives Inc. nor anyone acting on its behalf can give any assurance that such expectations will prove to have been correct nor do they have a duty to update any such statements to conform them to actual results. By accessing this site and any pages on this site, you agree to be bound by our Terms of Use and Privacy Policy, as may be amended.
Securities offered via Regulation A through Dalmore Group LLC, registered broker dealer, member of FINRA , member of SIPC acting as broker of record.
The securities herein offered by this issuer as herein above mentioned are highly speculative, investing in such securities involves significant risk, including possible loss of principal amount of investment.
FROM TIME TO TIME, AFFILIATES OF LUXUS WILL SEEK TO QUALIFY ADDITIONAL SECURITIES UNDER REGULATION A. FOR OFFERINGS THAT HAVE NOT YET BEEN QUALIFIED, NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED AND, IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY SECURITIES CAN BE ACCEPTED, AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED, UNTIL AN OFFERING STATEMENT FILED WITH THE SEC HAS BEEN QUALIFIED BY THE SEC OR UNLESS AS STATED IN THE OFFERING MATERIALS RELATING TO AN INVESTMENT OPPORTUNITY, AS APPLICABLE. ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION BY THE SEC OR AS STATED IN THE OFFERING MATERIALS RELATING TO AN INVESTMENT OPPORTUNITY, AS APPLICABLE. AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.