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Diamond Records
6 World News
2013 Was truly the Year of the Diamond.
SPECIAL FEATURES
12 Record Breaking Diamonds
12
18 Winning and Breeding 24 Drugs and Money 30 Under The Radar
Breed To Win
76 How To Break Into Fort Knox
The world of equine investment is explored and you’ll be amazed at the dollars involved.
NUMISMATICS
18
68 Cash In Your Coins HARD ASSETS
40 Black Swan, Yellow Gold
Under The Radar
72 Treasure Assets
It’s Tax Season so let’s take a look at the relationship between bullion and the government.
LIFESTYLE AND LUXURY
48 Watches of the Skies 54 Floating Seastead City
30
56 $628k Rare Lalique Decanter 57 First Curved-Coin by U.S. Mint 58 An Outdoor Sports Lover’s Dream
Sky Watches Go up in the clouds (and space!) with Ed Estlow and these elegant timepieces.
MINING & MINERALS
34 A Different Kind of Search for Treasure
48
84 Mining News CURRENT INFORMATION
90 Preferred Dealers
Bust Into Fort Knox
94 Events
Jason Vaile takes us on a tour (or a heist!) of America’s fortress.
96 Hindsight
76
www.ahametals.com American Hard Assets | 3
EDITOR’S NOTE
Spring Time is Here Spring is here again and I’m sure that is welcome news to many of our readers from different parts of the country this year. That was a difficult
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winter, wasn’t it? To say the least! Thank goodness that is behind us and
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on to warmer temps!
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Now that we’re in the middle of our second year of American Hard Assets Magazine, we continue to see our readership increase both online and in print. Along those lines, this is a good time to ask you to please visit our website at www.ahametals.com. There you will continue to find the interesting precious metals content you’ve come to expect from AHA along
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with relevant pieces covering the spectrum of the hard assets business.
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The arts, coins, wine, horses, travel and more await you there as well as
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inside the magazine. We’ll also continue to bring you the latest in content
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from our partners, real-time market updates, exchange rates and prices, and links to important stories of the day.
FEATURE WRITERS: Ed Estlow, Gabriel Benson, Eavan Moore, Jonathan Kosares, Jason Vaile, Judith Rosby, Amber Ness
This issue, we’re bringing you a variety of content with a slight nod to
CONTRIBUTORS: Hector Cantu, Beth Deisher, Christy Stewart, Jonathan
tax season since yes, it is that time of year as well. The relationship be-
Kosares, John W. Garibald, Jeff Patton
tween bullion and this time of year will be explored, as well as our usual
DISCLAIMER: American Hard Assets is 100% American owned. All contents
great stuff about other assets you may not always think about, like horse
of American Hard Assets (AHA) are for information purposes only. AHA does
investing, the booming diamond market, and a different twist on mining
not guarantee the accuracy, completeness or timeliness of the contents. None
-- underwater.
of the information contained herein constitutes a solicitation, offer, opinion, or reccomendation by AHA to buy or sell any security or commodity, nor legal, tax, accounting, or investment advice or services regarding the profitability or suitability
So, we’re all set to kick off the warmer springtime weather and are ex-
of any security, commodity or investment.
cited to bring you the second issue of the year. As always, don’t hesitate to give us feedback on the magazine or online to help us get better. We are committed to bringing you the news and stories you want and need to see. Thank you so much for continuing your commitment to this publication and keep up with American Hard Assets for all your metals news in the future. Good Investing!
All commentary and advice in this publication is of a general nature only, and doesn’t consider your individual circumstances or financial objectives. You should always consult a licensed financial advisor for your personal investment advice. Please do your own research.
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HARD ASSETS UPDATES | World News
WORLD NEWS UPDATES
China passes India as world’s leading gold consumer
Source: RT.com
China has outpaced India in terms of gold consumption in 2013, with people there increasingly investing in the precious metal, according to the Thomson Reuters GFMS Gold Survey.
“Greater wealth and disposable incomes created pent-up demand when prices were high, so when they dropped there was this phenomenal surge in buying.”
The influential report says Chinese demand increased by 32 percent within a year, reaching 1,189.8 tons in 2013, which marks a fivefold increase since 2003, says the Financial Times.
However, the gold price is still vulnerable and faces a risk of further falls. Few analysts predict prices will recover this year, while the investors’ appetite for the precious metal remains weak.
The increase was mainly driven by purchases of Panda coins, gold bars and jewellery.
Thomson Reuters GFMS forecasts an average price of $1,225 for a troy ounce for 2014, which is nearly $20 below the current level. Physical demand remains sustainable, “but without a repeat of the bargain hunting surge”.
The lion’s share of sales came from high purity 24 carat gold products bought mostly for investment reasons rather than as jewelry. The same reason led the ‘kilobars’ and smaller weight investments, setting a new record of 366 tones, which was 47 percent more than in 2012. As for gold coins, only Turkey minted more than Beijing last year. “Gold has always been popular culturally in China, and now it’s increasingly seen as an asset class for individuals,” Andrew Leyland, the manager of precious metals demand at GFMS said.
6 | American Hard Assets www.ahametals.com
Besides becoming the biggest gold consumer, China has also become its world’s major gold producer with total estimated output at 437.3 tons, which is more than 9 percent of the global supply last year.
World News | HARD ASSETS UPDATES
WORLD NEWS UPDATES
Sierra Leone sells 125 Carats Octahedral Diamond
Source: Economictimes.com
FREETOWN: Sierra Leone said on Friday it had exported the largest diamond discovered in the west African nation last year -- a 125-carat stone worth around $800,000.
The agency said the miner, whom it did not identify, had visited his mining plot one morning “hoping to find his usual odd pieces of stones but was shocked to discover what changed his life for good”.
The “high quality” diamond was dug up by a miner in the eastern district of Kono in November, according to a statement issued by the state-run National Minerals Agency.
It was not revealed whether he had received the full market value for the piece.
The agency did not say where the stone had gone but confirmed it was “the largest single diamond found in Sierra Leone in 2013”, adding that it was “one of the finest and most valuable reported in the country in recent times”. “What makes the diamond exceptional is the fact that it is very rare for a diamond above 100 carats to maintain its original shape and to be without any crack or... impurities as was the case of this rare gem,” the statement said.
Sierra Leone remains one of the world’s poorest countries after a brutal 11-year civil war which ended in 2002, but its mineral riches -- which include diamond, gold, bauxite, titanium ore and magnetite iron-ore -- have attracted massive investments. Small-scale artisanal mining has sustained the country’s eastern region since diamonds were discovered in 1930, and it was here that the 968.9-carat Star of Sierra Leone -- the largest alluvial diamond ever found -- was mined in 1972.
www.ahametals.com American Hard Assets | 7
HARD ASSETS UPDATES | World News
WORLD NEWS UPDATES
The 2012 Australian Kangaroo One Tonne Gold Coin is displayed in Hang Seng Bank’s Headquarter in Central until Saturday. Photo: K. Y. Cheng
World’s Largest Gold Coin goes on display in Hong Kong
Source: www.SCMP.com
The largest gold coin in the world, on its first visit outside Australia, was unveiled at Hang Seng Bank headquarters in Central as part of a showcase tour for the historic Perth Mint.
“We distribute Perth Mint’s gold coins, and is very popular in Hong Kong and with Chinese everywhere…it demonstrates Chinese as a whole like to accumulate gold and gold bars.”
The 2012 Australian Kangaroo One Tonne Gold Coin is worth HK$305 million, far more than the AU$1 million (HK$6.9 million) legal tender. The gigantic coin that’s made from 99.99 per cent pure gold, weighs 1,012 kilograms. It is 31 inches wide, more than 4.7 inches thick, and took some 18 months to manufacture.
Despite the China’s huge gold demand, the largest gold coin will not be put on public display. Only ‘selected’ retail and commercial customers at Hang Seng Bank will be invited to view the coin at the bank’s headquarters. It will be on show there until January 11 before it heads to Berlin, Germany, for a world exhibition.
One one side, the coin carries the image of Queen Elizabeth II, the head of the state, and a leaping kangaroo on the other.
On its release two years ago, Perth Mint chief executive Ed Harbuz said it was “the pinnacle of ingenuity and innovation”.
Since the coin was released, its worth has falled to HK$305 million from HK$431.66 million, as the value of gold has dropped.
“To cast and handcraft a coin of this size and weight was an incredible challenge – one which few other mints would even consider,” said Harbuz, at the time.
Unveiling the golden disc, Andrew Fung Hau-chung, head of global banking and markets at Hang Seng Bank, said it was with luck that Perth Mint, a long-term customer of the bank, chose Hong Kong as a “strategically important” first visit.
8 | American Hard Assets www.ahametals.com
Fung said a number of considerations, from a lack of space to host an exhibition to a range of security and safety concerns, ultimately prevented a full public display.
World News | HARD ASSETS UPDATES
JP Morgan Holds Highest Amount Of Physical Silver In History
Source: GoldSilverWorks.com
Ted Butler, precious metals analyst specialized in COT analysis, reveals a remarkable insight in the physical silver market. Butler’s calculations show that JP Morgan (JPM) has accumulated the largest holding of physical silver in modern world. Since May 2011 when Silver peaked, the bank has acquired between 100 and 200 million ounces of physical silver (if not more). The equivalent in metric tonnes is between 3,110 and 6,220 tonnes.
the silver price with their HFT tricks in order to reverse the trend. By doing so, JPM could regain control over the silver market. Meantime, JPM has established the longest position in physical silver in recorded history. It holds its grip on the silver price through its short corner in COMEX silver.
To put that number in perspective, it exceeds the amounts held by the Hunt Brothers or Warren Buffett (in his investment company Berkshire Hathaway). On an annual basis, some 100 million ounces of silver reach the investment market, which translates into 250 million ounces between May 2011 and December 2013. That has a value of approximately $5 billion. Given the size of the too-big-to-fail bank, that amount of silver, how large it may seem, is easily affordable: • • •
JP Morgan’s quarterly profit is $5 billion (approximately 200 million ounces of silver). In 2013, the closing of the gold short position, as well as the 20,000 contract reduction in the silver short position, netted JPM more than $3 billion. In COMEX silver, JPM was the largest buyer in 2013.
Butler explains that JPM was able to pile up so much silver without being noticed through the big silver ETF, SLV. In his weekly commentaries to his premium subscribers, he has explained on several occasions that the physical silver holdings in SLV have been largely intact on a net basis, but there was a large “churn” in the holdings, which allows for a large buyer to go unnoticed. For instance, 60 million oz were liquidated in the two months after the price smash in May 2011; they were right away absorbed by a big buyer. The conclusion that JPM has been the big buyer in physical silver is confirmed by the following data: • •
In the JPM COMEX silver warehouse, the growth of silver over the past three years was 45 million oz. he recent delivery halted by the bank in December/January COMEX deliveries was 15 million oz.
The inherent motive for JPM to accumulate such a large amount of silver is most likely related to the fact that the bank was on the wrong side of the market when the silver price exploded. When silver went through its historic rally in March and April 2011, the weekly COT data indicated that speculators did not rush into COMEX futures, which means that the peak in the silver price was not driven by speculation in silver futures. On the other hand, there was buying in the big silver ETFs, including record short selling in SLV. The explanation that makes most sense is that JPM realized that it was on the wrong side of the trade, after having discovered how tight the physical silver market was. Consequently, the bank had to crush
Fr. 379b $1000 1890 Treasury Note PCGS Extremely Fine 40.
1890 Grand Watermelon note brings world record $3.29 million at Heritage Auctions
Source: Artdaily.com The legendary 1890 $1,000 Treasury Note, the rarest and most famous of all U.S. Currency notes, popularly referred to as the “Grand Watermelon note” — due to the design of the large zeroes on the reversed side of the bill, resembling watermelons — became the single most valuable piece of currency in existence when it sold for $3,290,000 on Jan. 10, far exceeding its pre-auction estimate of $2 million. Heritage Auctions that’s based in Dallas sold the note as part of the company’s Florida United Numismatics (FUN) Convention Rare Currency Auction in Orlando, FL, part of a series of auctions the firm conducted last week that have grossed more than $105 million total, the largest numismatic auction in history. It was in 1970 that this note was offered at auction where it fetched $11,000. “This note is an icon of American financial history — and is the only known example in private hands — we knew something extraordinary was possible,” said Dustin Johnston, Director of Rare Currency at Heritage Auctions. “Collectors knew this was not a chance that was going to come around again anytime soon, and they bid accordingly. The result being that this beautiful little piece of paper is now the most valuable of its kind in the world and has a new chapter to add to its legend.” The note sold to a private collector that wished to remain anonymous. www.ahametals.com American Hard Assets | 9
HARD ASSETS UPDATES | World News
Bitcoin’s Legality Around The World US Senator Carper’s committee tasked the Law Library of Congress with surveying over 40 countries for their official stance on Bitcoin and whether Bitcoin is actually in use. “Of those countries surveyed, only a very few, notably China and Brazil, have specific regulations applicable to bitcoin use,” according to the report. “There is widespread concern about the Bitcoin system’s possible impact on national currencies, its potential for criminal misuse, and the implications of its use for taxation. Overall, the findings of this report reveal that the debate over how to deal with this new virtual currency is still in its infancy.” The currency is only toddler-aged (5) so that’s no surprise. “This report has some good news – namely that the United States may not be as far behind the curve on virtual currencies as some have argued,” says Sen. Carper. “In fact, the United States might be leading the way for a number of nations when it comes to addressing this growing technology. While there is no consistent or clear definition or treatment of digital currencies throughout the world, this report underscores that Bitcoin and other virtual currencies are present and growing in major economies, supporting the call for increased global cooperation.”
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• According to the report, Germany, Finland, Singapore, and Canada are among the countries that have issued tax guidance on Bitcoin, while Ireland, Israel, and Slovenia have made gestures that they plan to. Carper says he urges the IRS to read the report to help determine its own treatment of virtual currencies. “At the end of the day, I think this report is an important reminder to those of us in Congress as well as federal agencies that this technology continues to play an increasing role in our economy here in the United States as well as around the world, and we need to ensure that our policy making in this area is thoughtful, effective and timely,” he says. So here’s the rundown: • Argentina: Bitcoin “may be considered money but not legal currency… Although bitcoins are not specifically regulated, they are increasingly being used in Argentina.” • Australia: The Ossies are keeping their eye on Bitcoin, and plan to tax it, so those dealing in it down under should be keeping good records. And they’ve seen Bitcoin’s dark side: “In October 2013, an Australian Bitcoin bank was hacked, resulting in the theft of over US$1 million of the currency.” • Belgium: They are waffling when it comes to creating regulation. “The Minister of Finance indicated that government intervention with regard to the Bitcoin system does not appear necessary at the present time.” • Brazil: It may not be ready for the World Cup, but it is ready for Bitcoin. It passed a law in October 2013 specifically for electronic currencies. • Canada: The Great White North famously welcomed the first Bitcoin ATM last year, in part because those who own it don’t have to worry about complicated laws around Bitcoin. Canada doesn’t consider Bitcoin to be legal tender, and is as interested in regulating it as it is Monopoly money… at least for now. People
10 | American Hard Assets www.ahametals.com
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Source: Forbes.com
using it for transactions need to pay tax as they would for bartering or speculative purchases. Unlike in the U.S., Canada’s financial regulator doesn’t regard Bitcoin exchanges as money services businesses, meaning they don’t need to register with it or flag suspicious transactions. • Chile: There’s no frenzy here yet, though Ayn Rand expats have invaded. “Interest in acquiring bitcoins is slowly growing. However, because there is no regulation on the use of bitcoins, transactions are informal in nature and mainly conducted among friends. In 2013, a group of American Libertarians founded a self-sustaining organic farming community called Galt’s Gulch Chile in central Chile with an economy based on bitcoins.” China: It quelched the bidding fury around Bitcoin in December 2013 declaring that “bitcoin is not a currency and should not be circulated and used in the market as a currency.” While people there are free to buy and sell it, financial institutions have been warned away. Croatia: “Bitcoin is not legal tender in Croatia but can be legally used.” Regulation could be coming in the future. Cyprus: The country’s financial policies early last year sent scared investors into digital currency, making many take notice of Bitcoin for the first time. Its bank issued a statement on bitcoins in December, stating that “it considers the use of any kind of virtual money as particularly dangerous, given that it is not under any regulatory system and its operation is unchecked.” Cypriots can use it safely by getting a university education with it. Denmark: No love for bitcoin. “Denmark’s Finanstilsynet (Financial Supervisory Authority) has issued a statement rejecting the bitcoin as a currency and stating that it will not regulate bitcoin use.” Estonia: No official stance, but “because of its growing popularity and increasing use by the country’s population, the Bank of Estonia (the nation’s central bank) monitors financial arrangements that use Bitcoin. According to Google’s search statistics, Estonia is the country with the second largest number of Internet searches for the term “Bitcoin”; Russia has the most such searches.” Its central bank recently warned that Bitcoin might be a Ponzi scheme. European Union: Issued a warning about virtual currencies in December. The European Banking Authority “pointed out that since the bitcoin is not regulated, consumers are not protected and are at risk of losing their money and that consumers may still be liable for taxes when using virtual currencies.” Finland: The Finnish Tax Authority is on it. Capital gains tax applies when bitcoin is converted to another currency. Using it to buy things should be treated as a trade, while any increase in its value over the price at which it was obtained should be taxed. However, bitcoin losses cannot be deducted. France: No love for bitcoin. “There are no specific laws or regulations regarding the Bitcoin system in France,” but the central
World News | HARD ASSETS UPDATES
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bank has criticized it as speculative and warned about its use for nefarious dealings. Germany: Of course it has rules for Bitcoin, treating it like a foreign currency. Greece: There are a few businesses there taking bitcoin, but the government is ignoring it for now. Hong Kong: Nothing official, though the treasury secretary there said existing laws forbid its use for fraud or money laundering. Iceland: Icy toward Bitcoin. “The Central Bank of Iceland reportedly stated that engaging in foreign exchange trading with bitcoins is prohibited, based on the country’s Foreign Exchange Act.” India: Nothing explicit in the law yet, though its banks have warned the public about the “risks of cybersecurity attacks and money laundering” related to Bitcoin, and cautioned investors in December. “India’s largest Bitcoin trading platform BuySellBitCo. in, suspended its operations, citing the RBI’s notice. Also, two days after the advisory, India’s Enforcement Directorate raided the premises of the person in Ahmedabad who had hosted the Bitcoin trading platform, BuySellBitCo.in. According to news reports, the raid occurred because of alleged violations of India’s Foreign Exchange Management Act rules. Recent news reports cite the resumption of operations of some Bitcoin operators and the emergence of new players in the market.” Indonesia: Sounds ambivalent. A spokesman for Bank Indonesia reportedly issued a statement on Bitcoin in December 2013, saying that “[b]itcoin is a potential payment method, but it’s different than ordinary currency. . . . It is not regulated by the central bank so there are risks. . . . At the moment, we’re studying bitcoin and we have no plan to issue a regulation on it.” Ireland: No official statement, though they’re reportedly thinking about how to tax it. Israel: Same as Ireland. They are starting to see cybercrime around Bitcoin though: “An incident of an alleged attempted extortion involving a request for payment in bitcoins was reported on December 19, 2013. At least three Israeli banks have received emails from an unknown individual threatening to release the personal details of millions of their customers unless the payment was made.” Italy: Looks to the EU for guidance. “The use of electronic currency is restricted to banks and electronic money institutions— that is, private legal entities duly authorized and registered by the Central Bank of Italy. Aside from these developments, Italy does not regulate bitcoin use by private individuals.” Japan: Despite being the home for years to the long-time monster exchange of Bitcoin, Mt. Gox, Japan is silent on the issue. Malaysia: Nada. Malta: Nothing official, even as businesses develop there. “In October 2012, a Maltese company launched the first bitcoin hedge fund.” Netherlands: Doesn’t see virtual currency as being an electronic money, so Bitcoin isn’t covered by existing regulation, but it does recognize something from its past in Bitcoin’s rise. “The Dutch Central Bank (De Nederlandsche Bank, DNB) recently called attention to the risks posed by the purchase of virtual currencies, including bitcoins and litecoins, and warned consumers
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to be wary…. The former President of the DNB, Nout Wellink, has called dealings in bitcoins a bubble that is “pure speculation” and “hype” and “worse than the tulip mania” of the seventeenth century because “at least then you got a tulip [at the end], now you get nothing.” New Zealand: Kiwis are all good with Bitcoin as long as it is not turned into a physical note or coin. Nicaragua: The government is not doing anything about Bitcoin but it is in use there. “The Nicaraguan daily El Nuevo Diario reported on January 13, 2014, that an American banker, Greg Simon, recently bought a 1,200-square-meter plot of land in San Juán del Sur, one of the most important tourist areas in Nicaragua, for 80 bitcoins, currently the equivalent of about US$72,000.” Poland: Is looking to the EU, with the Polish minister of finance warning that the country needs to figure out how to tax it. Portugal: Doesn’t think it’s a “safe currency” but says “users can both buy and sell virtual currency with legal tender and can purchase goods and services in both the real and virtual worlds.” It looks like trading and use is low there. Russia: Don’t plan to buy your Olympics swag with Bitcoin. “There are at present no legal acts that specifically regulate the use of bitcoins in the Russian Federation,” but a Russian law firm thinks that using it to buy things there could be illegal given that the Russian ruble is the exclusive means of payment in the Russian Federation per the law. Singapore: Has warned investors against Bitcoin, but has not forbidden people from using it not businesses from taking it. The country’s tax authority says whether it should be taxed depends on how it’s being used. Slovenia: It’s not sure what to do about Bitcoin yet, but is sure it should be taxed. Spain: Nothing official, but people using it should be paying taxes per bartering rules. Notably, the U.S. is not the only government with a Bitcoin wallet. “Spain was the second country in the world to seize bitcoins during an investigation of fraudulent transactions conducted with bitcoins, according to a November 2013 report by El Mundo.” South Korea: Nothing yet. Taiwan: Has cautioned investors and businesses away from Bitcoin. Thailand: Bitcoin is in a grey zone as existing laws do not apply. Turkey: Its banking regulator says existing law does not apply and warned people against using it. Turkish financial experts compare Bitcoin to “to Tulip mania in Holland, the Mississippi balloon in France, or the Enron or mortgage balloons in the United States, because the bitcoin ‘has no use value, but only exchange value.’” (Kudos to the Turkish commentators for digging further into history than tulip beds.) Turkish people evidently don’t care about the warnings. “Nevertheless, bitcoin use is apparently flourishing in Turkey. There is a Turkish Lira-Bitcoin exchange, called BTCTurk, and leftover foreign currency can be exchanged at the Istanbul Ataturk Airport for bitcoins through a Traveler’s BOX, a machine like an ATM.” United Kingdom: It’s snubbing Bitcoin. “In the latest quarterly reports from the Bank, Bitcoin is expressly excluded.”
www.ahametals.com American Hard Assets | 11
S P E C I A L F E A T U R E S | Record Breaking Diamonds
Diamonds Record-Breaking
2013 SAW MANY RECORDS FALL
O
ne of the most fascinating trends to have developed over the latter half of the twentieth century is the sale of significant and momentous diamonds and gemstones at auction. Since the seventeenth century and possibly even earlier, the trade and sale of fine works of art at auction has been a prevalent and accepted practice, and the introduction of fine jewels was a logical expansion of such. While previously throughout history the world’s most glorious gems were restricted to the world’s royal families and most elite financiers, the advent of sales of noteworthy precious gems through public auction over the latter half of the twentieth century has significantly broadened the scope of availability of these jewels to a broader and more diverse audience of buyers.
By Judith Rosby
Through their ability to generate publicity, Sotheby’s, Christie’s and other major auction houses are viewed among the highest-profile sellers of important diamonds, including both colorless and fancy color. Other high-profile diamond sellers include private diamond companies such as Graff Diamonds and Leibish & Co. The year 2013 saw an incredible realization of this trend as the year that broke the record of the most new diamond auction records set! This can only mean for diamond investors and collectors the world over that the value and popularity of investing in diamonds is dramatically on the rise, with no indications of dissipating in the foreseeable future.
The Twelve Record Breakers of 2013 34.65 carat Fancy Intense Pink cushion cut ‘Princie’ diamond On April 16, the 34.65 carat ‘Princie’ pink diamond that was sold at Christie’s in New York broke records for the highest price ever paid for a diamond in the United States. It also broke the record for the highest price ever paid for a diamond from the Golconda mine of South Central India. Expected to achieve between $20 million to $30 million, the 34.65 ct Type IIA Fancy Intense Pink cushion cut ‘Princie’ diamond sold for $39.3 million, or $1.135 million per carat.
Records Broken: The most valuable Golconda diamond ever sold at auction, the most valuable diamond ever sold in the US, and the most valuable diamond sold at Christie’s (previous house record of $24.3 Million set in December 2008 for the sale of the Wittelsbach Diamond).
12 | American Hard Assets www.ahametals.com
Record Breaking Diamonds | S P E C I A L F E A T U R E S
The Bvlgari 5.3 carat Deep Blue cushion shaped diamond ‘Trombino’ ring The following week in April, Bonham’s of London sold the a Bvlgari 5.3 carat Deep Blue cushion shaped diamond ring at the record breaking price per carat for a blue diamond. It sold to Laurence Graff for $9.3 Million, or $1.8 Million per carat. Estimated to fetch up to $2.4 Million, the Bvlgari “Trombino” ring realized more than four times its estimate.
Record Broken: The highest price paid per carat for a blue diamond (previous top price was $1.68 Million per carat)
101.73 carat D Color Flawless Pear shaped ‘Winston Legacy’ diamond On May 15 at Christie’s Geneva, a 101.73 carat pear-shaped diamond broke records for the largest D Color Flawless Type IIA ever to be offered at auction. It was bought by Harry Winston for $26.37 Million, or $254,400 per carat. This gesture was partially to act as a statement of the financial power of the Swatch Group, the new owners of Harry Winston and a newcomer to the world of important diamonds, and they renamed the diamond the ‘Winston Legacy’.
Record Broken: The largest flawless Type IIA diamond ever to come to auction.
1.92 carat Fancy Red VS2 rectangular diamond ring
At the same auction, a 1.92 carat Fancy Red VS2 rectangular diamond, set in a ring with half-moon diamond shoulders and a pave-set platinum diamond band, was auctioned off to a member of the U.S. trade. The ring sold for $3.25 Million, or $1.63 Million per carat, setting a world auction price for a red diamond, and achieving a price well above its $1.9 million to $3 million estimate.
Record Broken: The highest price paid for a red diamond.
www.ahametals.com American Hard Assets | 13
S P E C I A L F E A T U R E S | Record Breaking Diamonds
75.36 carat D Color Type IIA briolette cut ‘Star of China’ diamond In June, a 75.36 carat D Color Type IIA briolette cut diamond was auctioned at Christie’s Hong Kong, and was touted as the world’s largest and most perfect briolette. It sold for $11.15 Million or $148,000 per carat, the highest price ever paid for a briolette shaped diamond. It was renamed the ‘Star of China’ by new owner Ms. Tiffany Chen in honor of her company China Star Entertainment Ltd.
Record Broken: Highest price paid for a briolette diamond, and the world’s largest and most perfect Briolette
118.28 carat Oval Flawless diamond
D
Color
On October 7, two phone bidders at Sotheby’s Hong Kong heatedly competed for a 118.28 carat D Color Flawless oval shaped Type IIA diamond from Africa in six tense minutes. The total price came to $30.6 million, or $259,322 per carat, paid by a buyer who was identified as ‘Asian Private’. The October sale broke the record for the highest price ever paid for a colorless diamond at auction that was set in May 2013 with Harry Winston’s recordbreaking purchase. It also earned the tribute of being the largest diamond ever to be auctioned. There are very few stones of this size, color and purity, and extremely rare gems like this appeal to the hearts and wallets of diamond lovers and investors alike.
Record Broken: The largest diamond ever sold at auction, and the largest flawless Type IIa diamond to be sold at auction (formerly the ‘Winston Legacy’ at 101.73 carats)
7.59 carat Flawless Round Vivid Blue ‘The Premier Blue’ diamond The same auction at Sotheby’s Hong Kong did not share a similar fate for the Premier Blue. The 7.59 carat Fancy Vivid Blue round diamond failed to meet its reserve price, so it was not sold. Sotheby’s had expected it to fetch $19 million, but the highest bid was a mere $16.12 million. If it had it sold at the highest bid of $16.12 million, it would have anyway broken the previous per carat record of October 2011 by 25% for a Fancy Vivid Blue diamond. It also would have also broken the per carat record set by the Bvlgari ‘Trombino’ ring, the current highest price per carat paid for a fancy vivid blue diamond. The brilliant cut, internally flawless ‘Premier Blue’ is the largest round Fancy Vivid Blue diamond ever graded by the GIA.
Records Broken: The largest round Fancy Vivid Blue diamond ever graded by the GIA, and would have broken the per carat record set for a blue diamond (by the Bvlgari “Trombino” ring) if it had been sold at its lowest offer. 14 | American Hard Assets www.ahametals.com
Record Breaking Diamonds | S P E C I A L F E A T U R E S
1.56 carat Fancy Red Cushion shaped ‘Argyle Phoenix’ diamond In October’s famed Argyle Tender, a record price was achieved for an Argyle sourced diamond. The Argyle Phoenix, a 1.56 carat Fancy Red cushion shaped diamond, achieved the highest per carat price for a diamond ever produced from the Argyle mine, acheiving a price of over $2 Million from buyer John Glajz who expects to resell it at between $4 Million to $5 Million.
Record Broken: The highest price ever paid for an Argyle diamond.
2.51 carat fancy deep pink radiant cut ‘Argyle Dauphine’ diamond The Argyle Dauphin was the second record breaking diamond of the tender. A 2.51-carat fancy deep pink radiant cut diamond, it broke the record for the highest price paid for an Argyle diamond in overall value terms, and achieved the world record price for a Fancy Deep Pink diamond. Its exact price is undisclosed.
Record Broken: The largest flawless Type IIA diamond ever to come to auction.
14.82 carat Fancy Vivid Orange ‘The Orange’ Pear shaped diamond
First, November 12 saw the auction of ‘The Orange’, a 14.82 carat Fancy Vivid Orange pear shaped diamond that sold for $35.54 Million, or $2.398 Million per carat. That evening, it earned the titles of the largest and the most valuable Fancy Vivid orange diamond ever sold at auction, and the honor of the highest price paid per carat for a colored diamond. The GIA even claims that they have never before graded such a large, pure, vivid orange stone. Estimations for the stone’s value varied between $17.4 Million to $20.7 Million before the hammer came down at $35.54 Million at auction.
Records Broken: The highest price per carat paid for a colored diamond, the largest Fancy Vivid Orange ever sold at auction (previously was the 5.54 carat Known as “The Pumpkin Diamond”), and the most valuable Fancy Vivid Orange ever sold at auction.
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S P E C I A L F E A T U R E S | Record Breaking Diamonds
59.60 carat Type IIa Internally Flawless Fancy Vivid Pink oval shaped ‘Pink Dream’ diamond Second, November 13 hosted the Sotheby’s auction of the ‘Pink Star’, which was renamed the ‘Pink Dream’ by its buyer. The ‘Pink Dream’ is a 59.60-carat Internally Flawless Fancy Vivid Pink Type IIa oval shaped diamond, set as a platinum ring. It went down in history when it achieved the world record for the highest price paid for a diamond or jewel at auction at $83.187 Million, or $1.4 Million per carat. It was estimated before the auction to sell for $60 million dollars. Bought by the diamond-cutter Isaac Wolf of New York, it beat the previous worldrecord holder, the Graff Pink diamond, by more than $20 million. It was expected to be the highlight of the auction, since it is the largest internally flawless Fancy Vivid Pink diamond that the GIA has ever graded. The landmark price eclipsed the previous record at $46.2 million established three years ago by Sotheby’s Geneva for the magnificent 24.78 carat Fancy Intense Pink ‘Graff Pink’.
Record Broken: Highest price ever paid for a diamond, gemstone, or jewel (previously the Graff Pink, which sold for $46.2 Million in 2010), the largest internally flawless Fancy Vivid Pink diamond that the GIA has ever graded, and the largest fancy color diamond ever to be up for auction. 12.85 carat Orangy Pink Type Ia Diamond Ring At the same auction, a new, interesting record was squeezed in at the last minute when a beautiful 12.85 carat Orangy Pink Type Ia Diamond was sold for $4.95 Million, the highest amount ever paid for the gorgeous orangy pink color combination.
Record Broken: Highest price ever paid for an Orangy Pink diamond.
A Final Swing Sotheby’s and Christie’s, the two largest auction houses in the world, began to sell noteworthy diamond and gemstones in the 1970s, although other famous auction houses such as Bonham’s have since begun to do so as well. They have become a significant force in the establishment of price and demand throughout the world of art trade, while also generating interest in fancy color diamonds, former ownership (such as Collections like Elizabeth Taylor’s and the former Duchess of Windsor), and the geographic origin of notable gemstones (such as India, Africa, and Australia). An important innovation of the twenty first century has been the introduction of the option to bid for these world famous diamonds online! Of course, this is years behind leading color diamond companies such as Leibish & Co., who already offered the option to purchase the highest quality fancy color diamonds online over a decade ago! While annual auction sales have grown from less than $50 million to nearly $1 billion in the latter half of the twentieth century, the auction market has become an influential force in the jewelry world today and will remain a formidable influence in the value of diamond sales and diamond investment for centuries to come.
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Record Breaking Diamonds | S P E C I A L F E A T U R E S
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S P E C I A L F E A T U R E | Winning And Breeding
Winning And Breeding Investing In Horses BY Gabe Benson
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Winning And Breeding | S P E C I A L F E A T U R E
In a landslide victory, a gelding named Wise Dan won horse of the year sweeping all categories for the second year in a row. Wise Dan ran in seven total races and going 6-1-0 to win a grand total of $2,751,972 in 2013. To date Wise Dan has won $6,293,610 and has a career record on 19-2-0 from twenty-seven starts. Not bad for a horse that came from a modest pedigree. And as this article progresses you will see that pedigree is everything. It is that dream of finding a diamond in the rough, and almost literally riding that horse to riches, that has made investing in horses an interesting if risky proposition.
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S P E C I A L F E A T U R E | Winning And Breeding
While it is borderline impossible that you will ever own a major sports franchise, it is possible that you could own at least a piece of a Triple Crown Winner. And there is money to be made and lost on all levels of horse racing, from major stakes races to smaller local races.
But the costs of owning a horse can be astronomical and must be worked into any investment.
Perhaps the best way to look at horse racing is to look at your horse as technology start-up. They look good on paper, have a good pedigree, and should turn out to be a winner. But getting from concept to market is the tricky part, and turning a horse into a winner is just as tricky. And unlike your tech start-up, your horse has the potential for injury or sickness that can pretty much sink your investment.
Stabling: Costs can run up to and beyond $100 a day Shoes: Those metal shoes on the horses feet cost several hundred dollars a month. Vet Bills: And you think your children go to the doctor a lot. Vet bills often run several hundred dollars a month. Jockey and Trainers: Unless you know what you are doing, you need a team to get your horse ready to race. And of course, the quality of your staff will only increast the cost.
There are four basic ways to make money on a horse. These are breeding, flipping the horse for a higher price than you bought it, and of course prize money from racing.
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Costs that can be expected are:
And the of course there is food, insurance and a myriad of other fees involved in keeping your horse. The average yearly upkeep cost of a champion level horse is easily $60,000 a year.
Winning And Breeding | S P E C I A L F E A T U R E
Perhaps the best way to look at horse racing is to look at your horse as technology startup. They look good on paper, have a good pedigree, and should turn out to be a winner. But while these costs can be backbreaking, the average investor doesn’t cover them alone. Most of the general public who invest in horses do so through a syndicate. And there are dozens of them. These syndicates basically sell stock in a horse, most of the time the average investor takes a stake between 2% and 10%. But unlike a stock, you have to pay a monthly fee in addition to your upfront investment. The fee goes to feeding, training, stables, and of course any fees associated with getting your horse into a race.
Most syndicates allow you to purchase a share in a small block of horses in order to spread your risk. These syndicates generally have multiple horses at multiple stages of their careers, and price ranges. Like most things, the blue chip investment, in this case an investment in a horse with a winning bloodline, is going to cost greater upfront dollars but carry less risk. The trick is always to balance your return, your investment and your expectations. But syndicates are a great way for someone with limited investment dollars to get into the game. Of course the other option is to purchase a horse outright. The upside of course is that you don’t have to share the winnings, but all the expenses are on you. Horses can be purchased at auctions, but another popular way to buy a horse is through a claiming race.
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S P E C I A L F E A T U R E | Winning And Breeding
Claiming races are bit of gamble. Basically any horse entered in the claiming race has the potential to be purchased at the end of the race. The competition in these races are often less than most other races, so crafty racing veterans sometimes try to sneak better horses into these races in order to win a big prize. Of course, the risk is that someone will see your horses potential and buy her out from under you. Breeding The idea behind breeding your horse for money can be traced back to the 1700s, when three stallions were brought to England from the Middle East. These stallions, known for their speed, were mated with English horses that were known for their stamina. The result was a thoroughbred. These horses ideally were smaller and lighter than other breads, though built with powerful legs. Years later, as thoroughbreds made their way to the Americas, there developed a genealogical line that to this day has value to horse breeders. All racehorses can find their ancestors on this line and the closer to a clean bloodline your horse possesses, the higher the price to purchase and to use as a breeding stud. And now it is often breeding your horse that actually leads to your investment paying off. Stud fees can range from a few thousand to hundreds of thousands of dollars, with males being the most desirable as they can have multiple offspring per year. If the stud horse’s offspring become successful, his stud fee can skyrocket.
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Stud fees can range from a few thousand to hundreds of thousands of dollars, with males being the most desirable as they can have multiple offspring per year. The historical example is that of legendary horse owner Samuel Doyle Riddle. Riddle paid about $5,000 for a horse named Man o’ War. The horse had a short but successful racing career, but that wasn’t what made owner Samuel Doyle Riddle a legend. It was the 61 stakes winners that came from Man o’ War. Riddle’s $5,000 investment was estimated to bring Doyle over $1,000,000 dollars over the course of the horse’s life. Today, the philosophy remains the same though the numbers have gotten astronomical. In 2000, a syndicate purchased retiring 2000 Kentucky Derby winner Fusaichi Pegasus for an unbelievable $60 million dollars. The horse, a very young three years old when purchased, and estimated to live to approximately 25 years of age is expected to sire hundreds of offspring - an estimated $200,000 a piece in stud fees. However, while estimates are hard to prove it is widely believed that the investment has not paid off as hoped. So the question in investing in horses can come down to – can you put a price on winning? Because winning a race is what separates horse racing from, say, investing in underwater mining. Both offer the potential for big rewards. Both offer equally high risks. But only horses can win the race and get you invited into the winner’s circle.
Story Name | S E C T I O N N A M E
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S P E C I A L F E A T U R E | Drugs and Money
Drugs MONEY AND
It’s what makes the world go round.
By Jeff Patton
S
carface. Contraband. Blow. Breaking Bad. Film and television are obsessed with the drug trafficking trade. Why? Because audiences eat it up. Although they usually end with the drug trafficker dying or learning a moral lesson, the audience is mesmerized by fast cars, piles of cash, and scantily clad women. Even the Oscar nominated The Wolf of Wall Street contained multiple scenes of drug deals and money laundering. The dark underworld of trafficking is exposed for the audience to peer into from the safety of a movie theater seat or their own comfy couch. The real world of drug trafficking and money laundering aren’t quite as glamorous as the movies depict. Child prostitution, human trafficking, and even terrorist groups are intertwined with the trafficking of narcotics
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