For those in doubt, I have not been compensated in any way, shape or form to write this review. On the contrary, I decided to take it upon myself to read it and make my own conclusion. I have been asked about the book by various entities, both from within the industry and outside it what my thoughts and opinion were on the book when it came out. I chose to read it during the summer while the diamond industry, auctions, and the investment community were all in slow mode – even though I was quite busy with my kids being off from school.
Fancy Color Diamonds – The Pricing Architecture by Eden Rachminov
I can only assume that before Eden Rachminov embarked on such a complicated voyage, he must have had many doubts and debates with himself as to whether he should proceed. It meant that the “secretive” and “opaque” world of fancy color diamonds would be transformed into transparent, which has become the case but in a positive way.
I admire his courage for deciding on moving forward with this idea, which was not popular with his fellow diamantaires. Every industry in history had some sort of rejuvenation, rebirth or even transformation. It is time that the fancy color diamond industry does so as well and somebody had to make the first move, so I think Eden made a wise decision. I am sure that many of his peers may disagree for various reasons, but so what? They have to remember that there would be more of a positive impact on a global basis then a negative one. In other industries, those that opposed change, and opposed consumer demand, were left behind and even were forced to eventually close their doors. As manufacturers from the previous generation are passing on the torch to the next one, the new generation has had to embrace change and advancement in order to “stay in the game” – or even survive.
On a regular basis I continue to advocate the fact that diamonds, and fancy color diamonds in particular, should be viewed as a wealth protection and accumulation asset class on its own due to their unique characteristics. Today, there is greater awareness and exposure than ever before about diamonds as an investment vehicle, yet not enough educational tools and understanding. There is not yet a formal body to oversee the order and standardization of information.
Eden has embarked on a journey to educate and help consumers and investors understand the mechanical, technical and valuation of fancy color diamonds from a physical perspective. This is the first step before we can transform his analysis into a financial form. Work like his is crucial for investment professionals like myself to aid new and seasoned investors alike in understanding many of the nuances of this formerly opaque subject.
My first impression when I read the book for the first time was that it was concise, easy to read and to the point. It is structured and covers all the important points and “layers” of a fancy color diamond. Eden was able to take all the elements that fancy color diamond professionals take for granted and use to make decisions, and put them all in structured order.
“Eden Rachminov brings order to a disorder”
In his book, Eden concentrates on helping retailers and other fancy color diamonds resellers. In fact, I think that even wholesalers within the industry can use the book to further sharpen their knowledge.
I wondered why would Eden want to write this book and the answer is clear that it is because better education about fancy color diamonds will allow retailers and resellers to increase participation with and pass on the message to consumers.
The most important fact about diamonds purchases is simple: Even though consumers will always go to the internet first to learn, 80% of sales are still done in stores. There is nothing better than physical contact between people to strengthen the relationship, especially in regard to large purchases. Anyone that has ever bought or sold something can attest to that fact that there is a natural vibe that happens between people. Collectors both old and new can better appreciate their collection by better understanding what stands behind the value.
It’s all about numbers and percentages. What is worth more? By how much? Why or why not?
One, very interesting figure mentioned in the book was from John King, the chief quality officer at the GIA. He said that in 2012, 3% of all diamonds entered into the GIA for certification were fancy color diamonds. Eden believes those numbers are actually much smaller based on both personal experience and based on earlier figures by Sydney H. Ball in 1935. On one hand, I personally am not in favor of relying on information written back in 1935, since technological advancements have allowed us to better know and track what comes out of the earth, as more information is available via public tenders when it comes to unique fancy color diamonds. On the other hand, I do somewhat agree with Eden, based on experience. For example, a fact to consider is that one fancy color diamond can enter the GIA several times for regrading before the owner/dealer is satisfied with the color grade on the certificate issued. This could happen if a stone gets “re-polished” and “upgraded” to possibly “naturally improve” the color of the diamond. Therefore the same diamond, although now different due to loss of weight during polishing stages, gets a new certificate. In reality, it is the same diamond. Sometimes this happens to colorless diamonds as well, but not as frequently as it does for fancy color, where a color “upgrade” may mean substantial increase in value. An “upgrade” is not as foreboding as it sounds, although it is risky because a color improvement is not a guaranteed outcome.
Three well known instances of re-polishing a diamond to improve its color have occurred in recent years, two by the same diamantaire. One is the Graff Pink diamond, which Laurence Graff bought at auction in 2010 as a 24.78 carat Fancy Intense Pink diamond. He chose to polish it again to improve its color and the result was a 23.88 carat Fancy Vivid Pink. He did the same with the historical Wittelsbach diamond. Two years earlier. In 2008, he bought the 35.56 carat Fancy Deep Grayish Blue diamond at auction, repolished it to a 31.06 carat Fancy Deep Blue, and changed its name to the Wittelsbach-Graff diamond. Italian fancy color diamond diamantaire
Bruno Scarselli did the same with an Argyle tender diamond named The Kimberley Red. He took the 1.77 carat, Fancy Deep Purplish Pink Argyle diamond and repolished it into a 1.61 Fancy Purplish Red, setting it in an exotic setting, and was able to reignite its appeal. Examples like these are success stories of this kind of endeavor, although the risk is not one to be undertaken lightly. However, the final results is a diamond with a new certificate and a better grading.
The Graff Pink. 24.78 carat Fancy Intense Pink diamond, turned into 23.88 carat Fancy Vivid Pink Image: Graff Diamonds
The historical Wittelsbach diamond, a 35.56 carat diamond, turned to 31.06 carat Fancy Deep Blue Image: Graff Diamonds
The 1.77 carat, Fancy Deep Purplish Pink, 2008 Argyle tender turns into a 1.61 carat Fancy Purplish Red Diamond
After Rapaport started to publish his famous red price list several decades ago, questions started arising about a fancy color diamond price list. Is it possible? Why yes or why not? Knowing that there are 27 hues, 9 intensities, and 11 clarities, it puts endless possibilities on a potential grid. Even beyond the color combinations, there is also the matter of the strength of the color intensity. If the GIA marks a diamond as a Fancy Intense, the question remains, how intense is it? Some grade on a scale of 1-10, while Eden puts it at 4-5 units in the scale (we shall see this later on). This would make our potential grid even more complicated! So is a price list possible? I think that based on advancements in technology, the answer is yes, one day, eventually. Think about it – if Google has such complicated algorithm, then there can absolutely be a complicated algorithm for diamond grading as well!
The question remains who will attempt this standardized list first and the answer is not yes or no, but rather when and how. It is not only a technical issue, it is also a matter of which price one will list, wholesale or retail?
A look inside Fancy Color Diamonds – The Pricing Architecture by Eden Rachminov
Now we get into the first part of the essential information of the book. Eden brings forth a list of 11 “layers”, that once “sandwiched” together, determines the final value of the fancy color diamond in question. Eden makes it a point that the order he brings forth of the 11 layers are generally considered in that order, which in a way shows us that although he is a 3rd generation diamantaire and grew up in this field, he leaves space for error. At times this order will change in certain scenarios.
It is clear that Eden is explaining an educational and systematic valuation system, something of a rationale. However, there is still an element that we have to take into consideration with all this, which is emotion. This is a layer that no computer, or algorithm can take into consideration on the final decision making process but does play a factor in diamond pricing on the part of the end buyer (like at auctions).
“An emotion can throw off any rational decision.”
The following is the list (in the order mentioned in the book) of layers
5) Inner Grade
6) Make (color dispersion and depth & ratio)
10) Aesthetic of the cert
11) Matching Pairs
After a short discussion about the matter with other dealers, I came to the conclusion that they are all on the same page when it comes to the list itself. In some cases 2 layers would inter change or the order is a bit different but overall all the experts I spoke to were in agreement. Therefore I think this list is a good one.
Perhaps there is a missing layer?
However there is a layer which I believe is extremely important, yet not mentioned in the book or by or any other manufacturer. This layer is gaining recognition on a global pace by both consumers and by the mining companies themselves, and that is provenance.
I think that as the general public as well as the investment community educates itself on fancy color diamonds or diamonds in general, the emphasis on the provenance report will gain traction. The provenance report is a simple document that allows the owner of a diamond to know where that diamond originates from as in what mine and perhaps where it was polished and where it was mounted.
An inside page of Fancy Color Diamonds – The Pricing Architecture by Eden Rachminov
Review of the 11 layers or “facets”
The most important factor or “facet” mentioned, and is agreed upon by fancy color diamonds experts, is the hue. Since yellow is the most common diamond color, and is the color that is most readily available, it is used as the basis by which to grade all other colors. For example, the author uses Fancy Intense Yellow as the basis to demonstrate how the other two most popular colors, pink and blue, are compared, and also discusses the differences in various weight categories. The author chose cushion shape, which is one of the most common shapes for fancy color diamonds, to compare the different colors as well. In short, we have a comparison for the top 4 facets of a fancy color diamond: hue, intensity, weight and shape, where the facet that will vary is weight.
I was surprised to see that in the distribution for value by weight, the highest multiple for dollar value was for the 4 carat category (for pink), after which it got a lower value by the 7 carat weight. I would have thought that due to rarity of pink in comparison to yellow, a 7 carat intense pink diamond would have a higher multiple than that of the 4 carat.
For blue vs. yellow, I was surprised to see that a 1 carat blue had the highest multiple compared to yellow, than any other weight category, even up to 7 carats. My conclusion is that a 1 carat intense blue is rarer than a 1 carat intense yellow than a 7 carat intense blue compared to a 7 carat intense yellow. In reality, the coefficient in the book represents the multiple a diamond can be valued at. Although a bigger diamond may be rarer and therefore considered more expensive, the smaller diamonds, being more affordable, have larger value creation possibilities due to consumer demand and financial flexibility.
The author now discusses all the colors according to groups. He does so in the framework of the high end market; which makes sense since pink, blue, red are not mainstream colors. Their rarity and current market valuation limit them to a select percentage of buyers.
When “upgrading” the color of a Fancy Deep Pink, it naturally gets upgraded to a Fancy Red.
The author makes a fantastic visualization of how modified colors look, and creates a table discussing the value each modifier brings to that base hue.
The” psychological factor”. I fully understand what the author is saying, but I think this concept needs a little elaboration. It is true that at times, some diamond polishers will make a girdle thicker to make it weigh more, or polish a diamond with proportions that are not optimal just so the weight will be kept the highest. This leads to diamonds that will most likely take longer to sell, or the price will have to go down in order to sell the diamond at all. In fancy color, it is the table that is the most important part of the diamond’s cut and shape. The depth of the stone plays less of a role, other than to keep weight.
Based on the shape value table on page 87, we can conclude that you can make a round color diamond that is half the size of a pear shape diamond but bearing the same hue and intensity, and the two diamonds will still have the same overall value. Mathematically speaking, this makes sense, but in reality removing so much weight off in order to make a diamond round will likely reduce the intensity, so this instance may not actually be realistic. A diamond that is optimally a pear shape (or any shape for that matter) is optimal that way for a reason, meaning that the color will not necessarily be as good in any shape whatsoever.
Although the book uses a single shape as example, it is very important and in fact imperative that the accompanying appendix to the book, which by itself has over 80 pages of tables with various tables and co-efficents is referred to. In conclusion, the final chosen shape will depend on the shape of the diamond as it in the rough, but also will be influenced by color retention and market taste and demand. Rachminov lists the following shapes as the most balanced between supply and demand, while taking the rough diamond available as well.
Cushion and radiant
Oval and heart
Pears and emeralds
Marquise is normally less in demand due to market taste, and will therefore be valued slightly less than all other shapes due to usability. The exception of where this shape will command a higher price will be when there is a specific demand for a color and weight. We see that anytime a consumer knows she wants a marquise shape (maybe she has long fingers and it looks better on her), and she shops around various retail stores who will then contact the same number of dealers, they will take the opportunity to increase the price because it was a specific call. The single dealer who will have that particular diamond, will let all the retail shops fight the order, by reducing their own profit margins just to get the sale. Eventually that dealer will get the order one way or another.
There are 15 shapes available, but the discussion is always about the top 7-9 shapes most in demand and supply. The other shapes will be made rarely as the demand is so low that it can take a long time sell them (like shield, briolette, lozenge).
The major concept here is that within each intensity grade there is what is called an inner grade. Since the GIA gives an intensity grade which is a general saturation, there is a need to understand that within the intensity grade there could be a range of strength of color, from weak to strong. There is an attempt to claim that there are only 4 (or 5 for yellow and pink diamonds) inner grades. The industry currently uses 10, which may be faulty, according to the author. It may have originated from the “school system” grading, but a larger scale may cause more errors. A scale of 1-4 can be easier and more precise according to this book.
Make of a stone
Here we discuss color dispersion, depth and ratio, which are 3 very important elements of the diamond’s appearance and ultimately the value that a diamantaire will assign it. This section is explained quite nicely, with visual representation as well as numbers about discounts and premium. The explanation itself is fantastic and easy to understand. A person will still need practice drawing price conclusions by viewing many stones to distinguish between 20-25% since that will have an effect on price.
Low depth of a diamond will yield a higher value, while a “thicker” stone will have a discount. Yet the low depth will most likely weigh less, while the “thicker” stone will weigh more, and so weight will compensate on the premium of the low depth. This is pretty complicated – I wonder how the net will come out. And then there is the difference between a 9.8 carat diamond to a 10.10 carat diamond to consider.
My favorite part is the proportion statement made on page 121. Although a significant discount will be given to “an unconventional proportioned fancy color diamond”, on the other hand, this negative effect can turn positive if a second, similar stone is found and a pair is made, which will then turn it into a premium characteristic.
There is a great visual scale for each of the top 5-6 shapes; radiant, cushion, emerald, pear, oval and heart, the most traded and sold shapes in fancy color diamonds.
Clarity is seventh in the order of value facets. I would have thought it would be higher up in the list, given the data that I have collected throughout the years about fancy color diamond pricing. However, just to give the author the benefit of the doubt I will review all the way until the appendix before making a conclusive disagreement. After all, one would think with that in higher size diamonds, which are rarer, the premium of an IF would be much larger than that of an SI2. In fact, the price difference between the 2 clarities stated here is not that different, in yellow diamonds due to the abundance when compared to other Fancy Color Diamonds. When we review the price difference between an SI2 and an IF in both Pink and Blue diamonds, the conclusion is quite different. Prices in these 2 colors between the highest and lowest clarity will be significant; Just look at Auction results…
I also wonder why VS and VVS are in the same category… The answer is clear according to the book: fancy color diamonds are rare enough that VS and VVS should be in one and the same category.
After I read this section, I had my own conclusion: a diamond with more sex appeal and life will garner a higher valuation. A bubble gum pink, as it is known in the industry will be more valuable than an orangey looking pink, for example.
It is true that the concept of fluorescence is a myth and more of a marketing effect. There are many jewelry manufacturers who create diamond jewelry specifically with diamonds with fluorescence. There is a market for everything, as long as the consumer is properly educated and explained the effect. I have seen vivid orange diamonds where the fluorescence was orange and so the color was actually stunning, giving it a real punch. A yellow fluorescence to a fancy vivid yellow diamond, will give it a closer look to a zimmie diamond
Aesthetic of the GIA report
It is true that the majority of people will look at a fancy color diamond report and will be psychologically influenced from those of colorless diamonds. Again, it is all about education. In colorless diamonds those “perfect” diamonds will have a “perfect” certificate, like a triple x and none, and no BGN. Due to the fact that the majority of diamonds in the world up to recent years were colorless, this expectation comes as no surprise. In addition, over the years, the GIA has added features on the certificates of fancy colors that were not always there. They too (GIA) have a certain responsibility of the misconception of the certificate.
A page inside Fancy Color Diamonds – The Pricing Architecture by Eden Rachminov
I enjoyed reading the book. It is quite impressive that Eden was able to “clean up” and structure all the elements that are considered when properly evaluating fancy color diamonds. One detail that needs to be addressed is provenance, which is a key aspect about the industry as we look forward into the future. With the movements against conflict diamonds and social justice moving increasingly to the forefront, questions about diamond origin and how pieces are produced are raised more frequently and becoming a larger part of the decision making process.
To some it may even be as crucial as the appearance of the diamond itself. I also felt that the characteristic of diamond clarity should have been given more importance than it was. We have seen diamonds at auction sell for high prices with both high and low clarities, but the highest clarity diamonds are the ones that not only earn the highest prices but are also the most highly anticipated, and rightly so. For many diamond collectors and investors, the more perfect a diamond is, the more value it has. This book is an excellent start to fancy color diamond education in print, and will be beneficial especially for retailers and wholesalers of fancy color diamonds and jewelry.
Whether someone is new to the world of these gems or has traded them for decades, I believe that the only way for them to fully understand these unique gifts of nature is to constantly read more about them to understand them more completely. The consequence of this would be increased sales for the industry and thus all participants would eventually benefit financially and of course, emotionally.
If you decide to buy the book (which by the way, proceeds go to the Make a Wish foundation as well as continuous research and education by the FCRF), you can do so at www.fancycolorbooks.com
Please let me know your thoughts. Alternatively if you have questions, please feel free to share with me right here in the comments section below.