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Gem Stones as an investment - Experiences, knowledge?

IceExplorer

IceExplorer

Shiny_Rock
Joined
Oct 23, 2009
Messages
462
I've recently received a solicitation from a company that specializes in trading gemstones. They claim no previous experience or knowledge is needed (sounds too good to be true right?) They deal solely in sapphires, rubies and emeralds. The benefits for these particular gems... they are on an open market where diamond inventories are regulated by a closed (controlled) market, according to them. The claim is the markets are much more stable than the stock market and they can get 9%-12% returns. I asked for a market chart to substantiate their claim. Apparently, because the sales are done in closed auction, a chart (like a stock chart) isn't available.

The one benefit that is interesting is, the client holds the inventory they purchase. The gem will come with full certification (GIA or EGL-USA), encased

They've sent me some information to 'educate' me. Which follows philosophy of: Gaining Credibility with your prospective client (marketing 101).

The email that was sent following the initial phone call is as follows:

Dear XXXXXXXXXX,

Just a few points to ponder concerning the opportunity we have been discussing. The following benefits are unique to the gem trade and are something you deserve to take advantage of. Our commitment to you first and foremost is our promise of service and a solid return rate.

· Entry level positions
· Third party certified
· Unregistered asset (tax discreet)
· 15% commission fee (On profits only)
· Inflation hedge

Am I allowed to post the website that has their 'education' material?

Thanks for any comments or thoughts on this.
 
"RUN FORREST RUN"
My advice is run away!
 
Scam.

Post it over in the colored stones. They would probably call it the same.
 
Since you and I are not jewelry businesses we have to buy at retail prices but have to sell at wholesale prices.

So much for the investment.
 
I find this confusing. The client (that would be you?) holds the inventory, but then "entry level position" and "15% commission fee on profits". If the client holds the inventory, I'd assume you have to pay for it? So then how are you an employee? Would you be a sales rep and go from store to store trying to peddle their stones that you've already paid for? This is really unclear, so I would be highly suspicious.

Is there any way of viewing the inventory in person before choosing to participate? If not, RUN.
 
"according to them" and "not available"

of course its this way: its their game [read scam].

run.

MoZo
 
Thanks for moving this over. I wasn't sure where to put it.

Is there any way of viewing the inventory in person before choosing to participate? If not, RUN.
Click to expand...
-Yes, I could go to their office and view before I buy. Then I would take the inventory with me. I would then hold it for as long as I wanted. When I'm ready to realize my investment (sell for a profit), they would market on my behalf and charge 15% of the profit made.

scam
Click to expand...
This is the feeling I'm getting...
 
PT Barnum all the way.
 
SCAM--you cannot buy gemstones as a total newbie and expect to make money...you can collect them to enjoy them or to make jewelry out of.
 
I'm sure they'd sell you a bridge in Brooklyn too!
 
Scam. There was a similar scam in the 40s and 50s when the last recession hit. A lot of people purchased diamonds and were guaranteed a return, and then lost everything.

The fact they advertise no experience needed flashes a red flag because that means new bees are the target. They don't want people who know what they are buying or the market....
 
There is more money in selling Avon cosmetics I think. At least it is safer.
 
OMG, you should like totally do this, dude!

Oh shoot, I write up the rest later... forgot to take my anti-depressives today and the crack is wearing off...

back in a sec
 
WHAT A CROCK!

An uncut stone is extremely illiquid, you can't get your money out of it unless you find a particular collector willing to buy it from you. These people do not make it clear how they will find a "market" for your stones. This "closed auction" thing sounds like a pyramid scheme; they will "sell" your stone to the next schmuck that signs up. There is not a ready market for gemstones. You're be better off with mutual funds, exchange-traded funds, or bonds.

IF, for some reason, you have the urge to invest in gems, you're better off going to Sothebys or Christies, consulting with their experts, and finding a stone you can afford. Many times, pieces they sell will end up being sold a few years later at a higher price. They do charge quite a premium (up to 20%) though, and the appreciation would have to exceed that.

If you can afford a certified unheated ruby, that COULD be your best bet, because they are becoming extremely rare. You are betting against the people of Myanmar, though, since they are a major source of ruby and they are currently under embargo. If that country ever stabilizes, there may be more ruby on the market. Not much, though . . .

To invest in a gem, it would have to be an absolute top quality stone, placed in a beautiful setting which will appeal to your future buyer. The general public tends to shy away from unset stones. You might consider a diamond, because they are in a very controlled market and they are constantly valued by Rappaport and others. If you need cash, there are plenty of guys in the diamond district (in NY) willing to buy it on any given day. I don't know how well you'd do with those guys, but they are always willing to buy.

BTW: You actually responded to a cold call on the telephone? A phone solicitation? I always wondered who did that . . .

See Kenny's post; he summed it up quite succinctly.
 
That email sounds nuttier than squirrel poo. I would ignore it. better yet, get a new email account and have some fun with them. (don't give out any real information though) Its cheap entertainment for me, a great deal more time wasting for them because they're looking for real victims.

-A
 
You guys are AWESOME!

I went into this, knowing fully well something wasn't right. I was curious if you fantastic PS'ers would come back with a different way to understand the market.
The biggest red flag for me was: They control the buy AND the sell. I have to buy from them and I don't get to know the vendor and I have to sell THROUGH THEM and don't get to know the the seller. Something smells funny... But it's nice to know they only make 15% on the profit of the sell. :rolleyes:

The other interesting part about this is, they referred me to the auction link on their website. 1M - 3M gems from Christie's and Sotherby's? Now THAT is credible! :errrr:

I forget who has the 'signature' but since I joined it's always hit home...

It's always better to have a mind clean diamond )or something like that.
 
I hope no one else falls for this scam! :angryfire:
 
Thanks!

The power of the internet....
 
They actually say that gem trading is a good way to cheat on taxes - that doesn't give me the warm fuzzies about their ethics.
 
Update:

They called me back and asked me if I had reviewed their information. I told them that I had and I still wasn't comfortable with the deal. They asked me why, at which point I told them:
1. I'm not comfortable with the fact you control both the acquisition an divestment of the gem.
-There is no market information that you can offer which confirm the upward trend, yet you claim it's an open market.
2. You offer a lab report from a lab that I've never heard of.
3. The fact that taxes avoidance is part of the strategy concerns me.

We were on the telephone but I could almost see him spreading the wax before he started tap dancing.

His answers:
1. We've been around since the 70's and we make our customers millions...literally! We don't make money except on your profits, we take a mere 15% - OF THE PROFIT ONLY!
(I suggested that may be the case but I have no way of knowing what kind of profit you make on the front end during the purchase of the gem). He told me they have the best buying power in the industry and they pass it on to me, the consumer.
2. Our labs are top notch in the industry.
3. This a loop hole that MANY people are taking advantage of. This isn't a well known fact so we aren't surprised you haven't heard of it.

After that, I said I still wasn't interested.

Last week I got a phone call from a 'closer'. He was highly concerned that I was going to miss this opportunity. As the son of the founder, I like to ensure potential customers are highly educated before deciding. He said he heard his colleagues talking about how disappointed they were I didn't come on board. He mentioned how they were saying how intelligent and astute I seemed and how I fit the profile of someone who could truly benefit from their services. (WOW! These guys must really care about me! :roll: )
He gave me 6 reasons why I should reconsider.
All of those reasons were answered by my telling him. I'm still not interested.
 
Talk about pushy sales; if it’s such a hot opportunity that makes millionaires of their customers, there’s no need to be stuffing this down people’s throats, is there? :nono:
 
I think the sales guy was right.... They have been around since the70's/ 80's. I know I have seen many of those gems in a wax sealed thingy and if you broke the seal they would not contemplate helping you re-sale the gem. Sorry but most I have seen out of their package ( as the owner could not get back in touch with the company as they changed their name) so they removed the gem and it was wafer thin and not a real investment gem by any stretch of the imagination.
That is why forums like this are so very important; they educate us all as to what is good, bad, ugly, and questionable.

bravo gang for helping everyone out. None of us know it all; but together we make a rather formidable buyer of colored gems...

Most respectfully;

Dana M. Reynolds, csmg
 
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