If a diamond ring is a poor investment, is a diamond stock any better?
Diamonds are not like most other commodities. For one thing, they are very expensive, which leaves the market far less liquid - and therefore opaque - than stuff like copper, oil and gold.
For another, they are more a product of marketing genius than real demand. Copper is used extensively in manufacturing just about everything, from electronics to pipes, making its price rise and fall with economic growth. Gold is held by central banks, not to mention retail investors looking for a store of wealth and a hedge against inflation - reasons that have made gold attractive for eons.
But real diamonds are different. They are used primarily in jewellery, such as engagement rings, and the market here is relatively new and open to all sorts of uncertainties: Fashions and cultural norms have a habit of shifting through the generations.
Author and journalist Jay Edward Epstein did a fine job of skewering the impression that diamonds are a foundation of our image of romance, prestige and commitment.
"The diamond invention - the creation of the idea that diamonds are rare and valuable, and are essential signs of esteem - is a relatively recent development in the history of the diamond trade," he said at the start of his 1982 article, Have You Ever Tried to Sell a Diamond?, published in The Atlantic.
The gist: Prior to 1870, diamonds were only found in parts of India and Brazil. Then, the world became awash with diamonds after big discoveries in South Africa - so British financiers formed De Beers Consolidated Mines Ltd. to control the market, limiting supply and expanding demand.
The latter part sounds like pure genius. De Beers more or less invented the need to splurge big bucks on rings for our betrothed by giving diamonds to influential early Hollywood movie stars and creating the slogan "a diamond is forever."
There are a few things not quite right here, at least from an investor's perspective. The intrinsic value of diamonds is clearly questionable. Diamonds also have synthetic counterparts that, apart from being far cheaper, are excellent in quality.
Why isn't the world embracing synthetic diamond rings? Just because. Or, as De Beers puts it on its website: "People often buy diamonds to mark significant milestones and achievements in their lives and for these purchases only diamonds will satisfy the consumers' need."
But perhaps more important, our demand for diamonds could easily go the way of Beanie Babies if concerns about, say, "blood diamonds" grow more extensive or tastes change or supply is allowed to exceed demand. These are early days for diamonds, and the future doesn't look promising.