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Market NewsCommentA new benchmark

A new benchmark

By Charles Wyndham.

Today is the launch of PolishedPrices’ Benchmark price list, fingers crossed that we do not have too many software glitches. 

The goal is very simple, to provide a reference price list which the trade can use in conjunction with our weekly Percentage movements list showing the difference between the benchmark and the average of our weekly actual transactions.

We have spent considerable time speaking to people in the trade as to what they would find useful, and this is what we have come up with and we look forward to comments to see how it can be improved.

In the course of our various discussions, I have to say that there have been some quite amusing encounters.

Whilst at last there seems to be unanimity, certainly with those to whom we have spoken, that people want an alternative to Boney’s list, what it should be has less unanimity.

In fact, from this simple premise the Tower of Babel then ensues as to what people really want, and the reality seems to the outsider that most do not really know what they want.

Some simply appear jealous that they were not one of our dear Boney’s troglodytes whom he supposedly contacts to get a view on prices, and as they were not, they want a list that will be open to ‘friendly persuasion’, for want of a better expression.

There seems to be some idea that a list should be encompassing the needs of the wholesale market, retail and right up to the consumer, talk about squaring a circle. 

So the list or wish list for the new list went on and on.

The facts are that Boney has most successfully cornered the market on the ‘asking’ price list scenario. His is the ultimate brand for the asking list.

There has been a very long time when the industry revelled in the smoke and mirrors of deliberate obfuscation that any such asking price list must have and especially one where there is no defined methodology and even more so when there is such a blatant conflict of interest.

The industry has allowed itself to be hijacked by the views of an individual because this self serving list has in many ways provided a most convenient and cosy comfort zone.

In my opinion, not unnaturally, the only rational alternative to a Boney list is one based on actual prices where there is a set methodology and where those running the list do not trade in diamonds rough or polished.

What can possibly be the point of trying to start a new asking price list?
We could all follow Boney’s example and start are own such list making sure that we only ask ourselves what the prices should be.

The advantages of a list based on actual prices are that the very transparency and methodology prevents the arbitrary increases and decreases that have characterised the Rap list and wrought complete havoc on the industry, it also removes the glass ceiling that Rap seems to have been so intent upon putting on whole swathes of polished diamonds.

There is of course a price for this transparency or flip side, the very transparency that the industry has shied away from so doggedly by hugging the Rap list to its bosom and at the same time complaining about it.

A list based on actual prices will go up and down, it reflects a market and cannot make a market which quite clearly at times the asking price list did.

Whilst the making was on the way up no one complained, that was until the famous list decided that prices had increased by 25% in one week which completely threw the market off kilter; but now, with prices being dropped in what appears to be some random game down a helter-skelter, the cries of anguish are ringing loud and clearly.

The only logical alternative to this randomness is to have a list based on actual data.

The strength of any such list primarily depends on the volume and quality of data, the only perfect price list would be the one that lists or incorporates every single transaction made everywhere.

All PolishedPrices can do is to welcome all bona fide data and to try and make this a cooperative approach  by offering equity in the company that owns the list to increase the volume of data as much as possible. There is no question that the more the data the sounder the list.

However, whatever quantity of data, which prior to the sharp slowdown was around 7,000 transactions a week at up to $50 million, is put through the system the one thing that our list already shows is that there is no one price for a diamond.

This simplistic statement should not come as a surprise but it always seems to  as we show the list to individuals who invariably pick on one price and say they have sold for much more or much less than the prices shown.

The answer is that our list already demonstrates the startling differences at which the ‘same’ stones are traded. It also shows that there can be some pretty odd anomalies, where for example an E colour could be traded at higher than a D colour.

But that is how a market works, just as within a specific category one person may be an anxious seller or someone has found someone who particularly needs that diamond. Differences of tens of percent are not uncommon.

The cosy world of smoothed numbers has never really existed but the industry seems to have been loath to accept these seemingly irrational differences and also the degree of actual volatility.

But it is these facts that actually give the oxygen to those trading in the market rather than some fictitious straight jacket provided by an ‘asking’ price list.

I would suggest that transparency actually provides more opportunity in the long run and I hope that as many companies as possible will provide data to PolishedPrices’ data agency so that it has as wide a base as possible.


 

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