What This Guy Derrick Williams Should Learn From This
New York Knicks reserve forward Derrick Williams reportedly brought two women to his apartment who allegedly stole items from a jewelry case reportedly worth $750,000. This is what he should take away from this ordeal.
Priceonomics tells us he should invest his money in assets that will compound over time. Diamonds lose 50% of their value as soon as they leave the jeweler. Diamonds, which aren’t even that rare, are largely a marketing invention by De Beers, whose price is only kept high by restricting the supply.
Intrinsic value tells us that an asset’s value is driven by the discounted value of the future cash that asset will generate. For example, when you buy a car, unless you make money from that car its value is in its resale value. Depreciating assets such as this see the expense you pay in the form of the value the asset loses over its lifetime.
Some jewelry and precious metals, like gold and silver, can store value, appreciate, and hedge against inflation because they can be purchased on financial markets, and even used as currency because they are liquid and fungible. Diamonds are neither. Diamonds are valued based on color, cut, clarity and carat. These are complex criteria and not easy to apply stone to stone.
Can You Resell A Diamond?
When you first buy a diamond, you buy it at retail which is a 100 to 200% markup. If you want to resell it, you have to offer less than wholesale to incentivize a diamond buyer to risk their own capital on the purchase. Given the large markup you already paid, that’s a large loss you’re taking. There are some investment grade diamonds, but the ones you’re getting from the jeweler are probably flawed in some way as most people are concerned about size and not quality.