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We would like to welcome everyone on Zoom. This is Navneet Agarwal from Navneet Gems and I am glad to start our second piece of webinar which will be about the very important topic in this month; Investment in Gemstones. So, So, So, I can see that people joining from all across the globe, thank you so much for coming and joining us today. We will be publish this video on NGM’s youtube channel and across our social networks, so if its too late or something – you can always come back and catch up with this webinar later. For those who are with us….Our speaker on this topic is, Mr. Jeffery Bergman – he needs no introduction. One of the finest precious gemstone dealer and gemmologist with 5 decades of experience in natural gemstones, diamonds and fine jewelry. He is the co-founder of the 8th Dimension Gems based in Bangkok.
For the complete webinar video please play the video here:
A little bit about the big three. Why are the three so important to investors, who understand [inaudible 00:00:05] who have joined us. Tell us about the big three gemstones.
Jeffery Bergman: Well, when you’re talking about ruby, emerald, and sapphire, the big three. First of all, you have to really, really comes into play, history. History and royalty, those are probably the two biggest influences. You look at the crown jewels of Europe, you’re talking about a history that goes back thousands of years where mankind has appreciated and adorned themselves with rubies, emeralds and sapphires, and it was really the wealthy European royal families that greatly popularized them, putting them in the crowns and rings and tiaras, and etc.
Jeffery Bergman: So if you go to the major museums in Europe today, you’ll find this historic jewelry featuring rubies, emeralds, and sapphires. Those are the big three. So you have beauty, rarity, you have durability, the three primary components of what makes up a gemstone and then you add to that the desirability over hundreds of even thousands of years. That’s why ruby, sapphire, and emerald have maintained their preeminence in the colored stone arena to this day.
Interviewer: Indeed, indeed. So we would like to know a little bit about the constraints to investment in gemstones, in defined fine, superfine gemstones? What are the constraints?
Jeffery Bergman: Sure. Well, let’s start, first of all with consuming. I’m an advocate of consumers considering the money that they spend as not a traditional investment like gold, silver, platinum, or stocks and bonds which have liquidity, virtually instant liquidity, or real estate, you can get a mortgage and borrow money from the bank on your real estate investment. But they’re an investment in a gift of love, they’re an investment that you’re going to give to your loved ones that can possibly be passed down for generations. But for the average consumer, they should never think that they’re buying a piece of jewelry or gemstone with the thought that a few years down the road, they’re going to be able to resell it and make a profit. That should never be taken into consideration.
Jeffery Bergman: And it should never be a marketing pitch as far as I’m concerned.
Jeffery Bergman: But when you get into the high end where people have the capacity of paying half a million dollars to $5 million [inaudible 00:02:47] buying at Christies or Sotheby’s [inaudible 00:02:50] entirely. And I think that’s the area you want to focus on, is that correct?
Interviewer: Yes, that’s right. That’s right. So today’s webinar will be focusing more on the super fine gemstones for those super [inaudible 00:03:00] people.
Jeffery Bergman: Well, if you do a little homework on pricing history, you’ll find that there has been a steady increase in your peak auction prices of rubies, sapphires, emeralds, fancy colored diamonds for the last 20 years. They just continue going up. So certainly if you’re a multi-millionaire and you enjoy gems and jewelry, it’s certainly reasonable to allocate a portion of your portfolio to fine gems. But now the next trick is do you buy a branded item and pay the premium for that or do you try to get it at rock-bottom wholesale price. There’s pros and cons on both sides.
Jeffery Bergman: You buy a branded item like a Cartier, a Tiffany, a Van Cleef, something along that line, your resale value is very strong because these are the prominent pieces that come up for auction, that fetch the premium prices. You add to that provenance. If you can find a piece that has some important history, someone important, someone famous owned it in the past. You have a much stronger potential of realizing a profit by holding for a period of time than if you buy, let’s say you buy a fine Kashmir sapphire. But if you buy a fine Kashmir sapphire that’s in an old Van Cleef mounting, that adds to the desirability of it at auction. And if that old Kashmir sapphire in the Van Cleef mounting happens to have been owned by a famous actor or actress [inaudible 00:04:39] or royalty, or someone like that who’s well known from the past, it adds to it in an even greater extent.
Jeffery Bergman: So if you’re that level of investor then you either want to develop relationships with high-end wholesalers, go to the Hong Kong show, go to the Bangkok show, go to the Tucson show. Well, there’s no more Baselworld, but go to Gem Geneva and make relationships with the wholesalers, and you’ll be able to score something for essentially the same price that a high-end jeweler would pay for it.
Jeffery Bergman: Or you work the auctions and you work them diligently. Those are your two main options for buying at that level. I’m talking about buying for great value, for holding and hoping that you’re going to have an increase in value down the road. But having said that, there’s caveat emptor, buyer beware. There’s a percentage of every auction, Christie’s and Sotheby’s, there’s a percentage of merchandise that fails to sell. So there’s also other pieces that sell for two and three times what the pre-auction estimate is.
Jeffery Bergman: So just because you have all the magic there, it’s not a guarantee that you’re going to sell it five or 10 years down the road for a premium. What there is, is that there’s a general trend that has been documented over the last 20 years. So we can rely on the trend, but also we have to say, times are crazy right now. We’re entering into uncharted territories when it comes to doing investment. Two years ago, I would have said, oh, absolutely, this is a great time to buy natural, vivid pink diamonds, vivid blue diamonds, top rubies, emeralds, and sapphires. Today I’d say, I’d be a little bit more hesitant to put big investments in those types of things.
Jeffery Bergman: But then again, look at the stock market. I’m not sure that people are confident in the stock market today. Gold, it’s been up and down. It hasn’t really performed fabulously in the last five years, but it’s generally portable, and it’s instantly liquid. Gold has its advantages. The whole concept of investment with the thought of a return, it’s hopeful in all of those investments. Again, the main different between your precious metals, stocks, bonds and real estate is your liquidity issue.
Interviewer: We’ll talk about that more, later. So this actually does bring me to the next question, which is about investing is a little bit about buying at the right price. So when there’s a low, that is the right time to invest. Is this COVID-19 the best time, or a better time, let’s put it that way, to buy super fine, untraded gemstones considering that the real estate and most businesses are [inaudible 00:07:50] or perhaps not doing so well?
Jeffery Bergman: I would say, at the moment, I don’t think we’ve reached a bottom yet. If you have the availability and you find something you like, certainly, go for it. But as far as bargains go, I think we’re still a good six months before we see how this whole economic situation is going to shake out. In the colored stone arena, top rubies, emeralds, and sapphires, I haven’t heard yet of a single dealer willing to discount 10, 20, 30% off of what their expected wholesale prices are.
Jeffery Bergman: Now on the mid-range to low range, different story. Right now in the mid-range to low range, you can make fabulous bargains, but then what do you do with it? Who’s going to buy it? Your average consumer right now isn’t thinking about gems and jewelry, they’re thinking about food, paying the rent, their jobs, what’s going to happen in the next six months. We’re in uncharted territory. I’m hesitant to make any predictions at this point.
Jeffery Bergman: The one thing I’m confident in, though, is that if you’re very, very wealthy and you buy an exceptional gem that you really fall in love with, then you’ve got something that you can pass on to your children or your grandchildren. It’s always going to hold value and be greatly appreciated. And it’s portable, too. You can put it in your pocket, too, and fly anywhere with it.
Interviewer: Well, that’s what a lot of the Chinese buyers are doing for this reason. They’re buying these super, super expensive fancy diamonds and some other colored stones. [inaudible 00:09:39] or untreated rubies and sapphires for the same reason, I believe.
Interviewer: So for some of the people here, we would like to know, to invest into extra fine gemstones, which type of strategy should we follow? Should we follow a Warren Buffet sort of a strategy where we are having a longterm growth, or are we supposed to follow a Peter Lynch, which is a growth and recovery, or is it supposed to be a Benjamin Graham, which is a value-based proposition? What is your take?
Jeffery Bergman: Well, I think that if you’re a business person, it’s a different dynamic. If you’re in the gem business, we have to buy stones and hold them because we have to have merchandise to sell. So that’s one side of the equation. But if you’re not in the gem trade and you’re wealthy and you want to buy gems and you have a hope that your gems are going to increase in value and that you’re going to be able to sell them some time in the future for more than what you paid for them, then certainly, you have to stick with the best quality merchandise with proper lab reports and it’s definitely a buy and hold strategy, because you don’t have the liquidity. You have to wait, you have to put it on a consignment with a wholesale dealer or maybe a retail jeweler or consign it to an auction house, and they’ve got their commissions involved, so it’s not a straightforward process when it comes to liquidating very expensive rubies, emeralds, sapphires, fancy colored diamonds, etc.
Jeffery Bergman: So I would say definitely, if you’re not a trader, if you’re not doing this professionally as your business, then you have to take the hold model. And as a trader, I have to say, boy I wish I’d held some of the things that passed through my hands 20 years ago. I remember, I used to sell top red two to three carat Burmese spinels, clean, clean stones. I used to buy them by the dozen for $250 a carat and I had a Japanese client that flew in once a month and bought everything I had for $400 a carat. Today the same goods I have a hard time finding for $4,000 a carat. If I had just had the presence of mind to just take the top 5% and just slide them off into my safe at that time, I’d have millions and millions of dollars worth of spinels in my inventory today. But, you know, you’re in the middle of it, you’re turning over, you’re making a good profit, you’re not thinking, oh, someday these will become really scarce and really valuable.
Interviewer: Yeah, that’s right. That’s right. So when you talk about rubies, sapphires, and emeralds, those are also in terms of a trader. Are those also a good investment for a long-term, or does the strategy change for someone who’s a trader, a gemstone trader? How does it work?
Jeffery Bergman: Well it depends on what your market is. You have, certainly, a better profit margin with, I hate to use the word semiprecious, but everyone understands what I’m talking about. You have a higher profit margin with semiprecious. But certainly for long-term market demand, if you’re buying nice quality rubies, sapphires, and emeralds, these are the mainstay of the trade. This is the backbone of the trade. They probably make up, I’m just guessing, but I would say rubies and emeralds and sapphires probably make up at least 60-70% of the [inaudible 00:13:25] business around the world. So I don’t think you can go wrong focusing on those three.
Jeffery Bergman: But then there are some people who are very, very successful, look at some of the Brazilian companies that don’t touch emeralds at all. They’re topaz, aquamarine, tourmaline, these are their mainstays and they do very, very well. So a lot of it has to depend where you’re located, what your budget is, how big you want to get. I did big before. I had an office in the US, office in Hong Kong, office in Bangkok, staff of 12. I was doing two Hong Kong shows, two Bangkok shows, and a Tucson show every year and I sold everything from cheap garnets to really expensive rubies. Irradiated blue topaz, tourmaline, emeralds, all of it. Spinels, everything.
Jeffery Bergman: And it’s a lot of work. You look at companies like STS, they’ve got a big name in Tanzanite, but they also do all sorts of other colored stone. You’ve got big overhead, you’ve got a lot of staff, you’ve got a lot of logistics, a lot of bookkeeping. That’s one business model that somebody or some people are very, very successful at. I chose in the mid-’90s to back away from that and get out of the volume business and focus strictly on quality. And it’s greatly simplified my life, it’s simplified my business. I make far fewer sales, but my average sale is much much much higher than most typical gem traders.
Jeffery Bergman: For me, a cheap ruby is $50,000.
Interviewer: Right, right. Got you, got you. So some people want to know about real estate and compare the value of a super fine gemstone in relative terms of the real estate. How do we look at that?
Jeffery Bergman: It’s interesting you bring that point up, because one of the famous stones that passed through my hands, I named the Crimson Prince ruby. That was a 3.32 carat [inaudible 00:15:40] gem, I mean, near loupe clean, [inaudible 00:15:43] pigeon’s blood red. Did I lose you there?
Interviewer: Yeah, I’m here, I’m here.
Jeffery Bergman: Oh okay, okay. I sold it to one of the top companies in Place Vendôme in Paris and it’s literally the value of a high-end Bangkok condominium that I can put in my pocket. So my wife calls them portable real estate. The different mainly is that you can’t get a mortgage on a gemstone, but a condo you can’t put in your pocket and fly to another country again. If you’re fleeing a conflict situation, your real estate has no value. If you’re fleeing a conflict situation, you sew your gems into your clothes and you go to another country. You can re-establish yourself.
Jeffery Bergman: [inaudible 00:16:39] during the big depression in the US. If you took the price of a gem quality ruby, the drop in price was equal to the drop in residential real estate, so top quality gems held their value in comparison to real estate. So if you’re holding real estate or you’re holding rubies, you didn’t lose any money relatively, you see what I’m saying? But those who held stocks got wiped out. Absolutely devastated. But if you had a house that you owned or you had gemstones that you owned, their relative value maintained an equilibrium. So there is something to be said for holding fine gems in a crisis situation. But let’s face it, we’re talking about what, the top few percent of people on planet earth that have the luxury of being able to [inaudible 00:17:45] invest serious amounts of money into gems that if they reached a crisis situation, they can sew in their clothes and move to another country.
Jeffery Bergman: Before World War II, there were a lot of Jews that fled Europe with diamonds and jewelry and fine gems who, okay, let’s say, let’s call them relatively millionaires when they were at home. They were relatively poor when they arrived, but they had enough money from the gems that they sold to start new businesses, to buy a small apartment, to get themselves established, and to start life over again. Which is a lot better situation than when you look at the refugees fleeing Syria today. They’re coming out with the clothes on their back and nothing. So there is something to be said, if you’re fortunate enough to be in that stratosphere of wealth, then yeah, certainly fine quality gems can be an important part of your investment portfolio.
Interviewer: And I think, Jeffery, the reality is that we’re seeing the same situation where things are just going completely bizarre in the US, and we can relate to it, we can relate to the situation where you were saying that you can just put a couple of gems in your pockets and go out of the country if you wish. And compared to, let’s say, the other assets that you have, maybe not as liquidable, maybe not as portable like you said.
Jeffery Bergman: Yeah try carrying $100,000 worth of gold. You’re not going to get very far. And the other thing is, if you carry gold or cash through the airport, you get flagged. You carry a gem through the airport, nobody cares.
Interviewer: True that, true that, true that. So most investors put a percentage of their income into gold. Most of the bigger investors. Now, gold, as we all know, is a safe haven in the time of crisis for the government and the people, and according to the World Gold Council in 2018, the central banks bought the second highest amount annually of total gold on record. And the reasons were [inaudible 00:20:04]. So let’s take the time to compare gold versus a very fine, precious gemstone. So here I have the gold price chart, which I’m just going to share my screen with, so we can all see.
Jeffery Bergman: I’m familiar with gold’s fluctuations and I have to say from an appreciation value, rubies, top quality rubies, sapphires, emeralds, and fancy colored diamonds have absolutely killed gold over the last 20 years. But you don’t have instant liquidity. That’s the huge difference, and your liquidity with gold is worldwide, and you’re talking about a few percent from spot price you can liquidate at. But if you have, for example, you’ve got a three carat gem, near loupe clean, unoiled Colombian emerald, that’s theoretically worth $100,000. If you’re in a desperation situation, maybe you can only get $10,000 for it. But you can carry that where you can’t carry that volume of gold. It just becomes impractical.
Interviewer: Right, right, right. So I’ve actually created three scenarios here where we have three people. The first person is X Person. He invests $100,000 US dollars in gold in roughly 1990. We’re looking at it here. Can you see my mouse?
Jeffery Bergman: Yep, yep. I see it.
Interviewer: Roughly at $380 per ounce. That’s around 263 ounces.
Jeffery Bergman: Right.
Interviewer: So the average ROI is 5.15% with a total of $453,000, approximately figured in today’s terms. And then the second thing we have is that Person Y invests $100,000 in gold in 2000, so we’re looking at roughly here where the prices went down a little bit. That’s around roughly $250 an ounce, and that’s 400 ounces, so the average return on investment for that person in today’s terms was roughly 10%. The third person, he invests $100,000 in gold in 2010, so that is around this point, roughly. That’s around 100 ounces. Average ROI, 5.57%, total value, $172,000. So, with the person X and zed, X and Z, in the long run, on average, 5.36% ROI. I say long-run because person X had it for 30 years and Z had it for 10 years. So they were able to achieve such returns on investment.
Interviewer: You have been a trader for very fine precious gemstones for five decades now. What sort of size and color would tell an investor, not from [inaudible 00:23:04] of course, of the highest profile to invest in for this long-term, Warren Buffet strategy that you have agreed about? And what sort of ROI do you think a small investor can achieve?
Jeffery Bergman: Well, if we go just by the performance of, let’s take ruby for example. In 1988, the world auction record for ruby was for a four carat stone that was about $100,000 a carat. Today, the auction record for ruby is about $1.2 million per carat. And now we’re up over 10 carat size. So you calculate the ROI on that, it’s going to be huge, huge numbers. But if you bring a piece like that to auction, you have to pay commission. The buyer pays a commission, so you take a serious chunk out of that $1.2 million per carat, bringing it down to [crosstalk 00:24:07]
Interviewer: And roughly what [crosstalk 00:24:11] commission, do you have an idea?
Jeffery Bergman: The [crosstalk 00:24:13] They charge 10% to the buyer and the seller side can go anywhere from, say, 25% down to a few percent depending on who you are and how eager the auction house is to have your particular item in their auction. But you could figure at least an average of 20%. Roughly 20%.
Interviewer: Okay, commission.
Jeffery Bergman: Right. And there’s always the issue of, there’s not a guarantee that it’s going to sell. I would say sapphires over the last 20 years, maybe 30% of the sapphires that came to auction at Christie’s and Sotheby’s failed to sell. The bids weren’t high enough. Some of them went for two and three times the pre-auction estimate. So, again, the liquidity is the major issue if you’re comparing gold to precious gems. But certainly, if you’re playing in that upper stratosphere, I would say minimum of three carat for ruby, minimum of five carat for sapphire and emerald. For emerald, you want a no-oil stone, or maybe an insignificant. And the lab reports that are most respected at Sotheby’s and Christie’s would be AGL, Gübelin and SSEF for Kashmir sapphires, Burma sapphires, Colombian emeralds, Burma rubies, etc. Those are your most important lab reports.
Jeffery Bergman: Now, if you add, again, if you add upon that that if you buy a top ruby, emerald, or sapphire at auction and you buy it in a vintage mounting from Van Cleef or from Cartier or from Tiffany, then you add to the desirability of it when you bring it back for resale. So where you buy will have an effect on your re salability.
Interviewer: So when you say that it’s better to invest in a no oil or a minor and untreated ruby and sapphire, why do we go in that direction where it’s always untreated, unheated. Why can it not be the heat treatment or any sort of treated rubies and sapphires? Is it just the rarity, or is it also the supply?
Jeffery Bergman: Rarity and demand. It’s rarity and demand. If you go to your top luxury brands, they’re not going to be featuring heat treated Mozambique rubies or heat-treated Madagascar sapphires. It’s all going to be unheated and when it comes to emeralds, the vast majority of them are going to be insignificant or no oil if possible. Minor at the very, very worst and then we’re talking [inaudible 00:27:13] strict criteria for your clarity enhancement grading by AGL Gübelin and SSEF, which their standards are very, very strict. There’s other labs, I won’t mention their names, but you got Gübelin, SSEF, and AGL, their grading standards are like this. Other labs are kind of out here. And some are going to accordion, it depends on who brings the stone, depends on how the lab director’s feeling that day. Whether you get pigeon’s blood or not. Whether you get no oil or not, whether you get Kashmir or not. But that’s a different story.
Interviewer: And there’s a lot of Bangkok blood in them, probably.
Jeffery Bergman: Yes, yes, yes.
Interviewer: So tell us a little bit about Shakiso emeralds that you have been involved in.
Jeffery Bergman: Sure. Emeralds have not been a major part of my business. I got involved with the Colombians who first came to Bangkok back in the early ’90s, and I was very helpful. [inaudible 00:28:21] bags and bags of beautiful cabs and I took them in my office, and I know what Bangkok manufacturing jewelers need. They need layouts. If you walk into a manufacturing jeweler with a big bag of cabs, they’re going to look at them, and they’re going to hand them back to you and say, I can’t do anything with this. So I bought stuff, lovely layouts. Necklace layout, earrings, ring, etc. and I sold close to $100,000 of their cabs within a few weeks, paid them their cash, made my nice commission. They were very happy. They came back in a few months. But they had seen what I did, they didn’t need me anymore. So they went off, did their own thing, and I continued selling Colombian emeralds and brokering them and featuring a few in my inventory.
Jeffery Bergman: So they were a part, they were probably, maybe 10% or less of my gem business. And then it was October 2018, was it 2018? Yeah, October, 2018, I was in Paris and I got an email followed up by a phone call and said, hello Mr. Jeffery, we’re Ethiopians, we want to meet you. We’re in Bangkok and we’re associated with the owners of this new emerald mine. So I thought, well, I’m sorry, I’m in Europe at the moment, but I’m happy to meet with you anytime. So they changed their flights and they waited for me and I came back to Bangkok and it was one of the tribal elders from the Shakiso area. The group is called the Bu’a Obsa Association and it’s about 300 locals that have a little mining cooperative doing mostly gold and tantalum on their own property. And they, just by good fortune, discovered emeralds there. And their deposit was producing the best quality material. So I made an agreement with them that was kind of the reverse of the Gem Fields model. I was giving them 75% of the proceeds and keeping 25% on the manufacturing and marketing side.
Jeffery Bergman: It worked out really well for the first nine months and then they had a lag in production and without informing us, the big boss brought seven kilos of rough on the open market and it was all, it had been oiled, which a lot of rough is, and he didn’t tell us and we cut it up and it was much lower quality. We had a lot of problems with oil deep in the cracks and then we eventually found out that he had bought it on the open market. So that kind of spoiled our mine to market responsible sourcing, traceable sales pitch and the partnership fell apart at that point. I still sell very fine Ethiopian emeralds but my ace in the hole is there’s a lot of Jaipur dealers that bought big quantities of rough and they’re having a hard time marketing it because of the strength of Colombian and Zambian in the market. Ethiopian is still the baby newcomer and there isn’t strong demand for it yet, but I have serious clients that love Ethiopian because they compare the color with fine Colombian, which Gübelin said as well. The color compared with fine Colombian emeralds.
Jeffery Bergman: So if you put them side-by-side and you don’t tell a customer which one is Colombian and which one is Ethiopian and you say, this one is $10,000 but this one is $7,000, they’ll look at the two of them and say, well, I’m buying the $7,000 one, why is it less? And then you tell them, $10,000 for Colombian, $7,000 for Ethiopian. More than 50% of the buyers say, I don’t care, I’ll take the better price. Maybe 30-40%, well, tradition says I should buy the Colombian. A lot of Chinese buyers will not buy Ethiopian, but there’s some big players that are sharp enough to know that there’s a future for Ethiopian because of that price differential.
Jeffery Bergman: So when you have a consumer that comes in and they look at a piece of jewelry in the window and see this 30, sometimes as much as 50% price differential, many consumers are going to say, hey, look, this is a gift for my wife or my daughter or whatever, once they’re wearing it, nobody’s going to know whether it’s Colombian or Ethiopian. I’m going to save myself the money and buy the newcomer that doesn’t have the big name yet.
Jeffery Bergman: [inaudible 00:33:18] a big future potential for Ethiopia. Sadly, its a country filled with strife and conflict, tribal violence, a lot of factionalization, Christian versus Muslim. So I think it’s going to be decades before they can stabilize and become a reliable supplier for emeralds, but I’ve had a great experience, no regrets. And if the same guys came to me tomorrow, I’d do it all over again. It was worth the effort. Could have been a lot better than it was, but it turned out the way it did, and like I said, no regrets.
Interviewer: I do agree about Ethiopia itself. I think it’s a really brilliant place, and Africa itself has been amazing, especially even for the sapphires that we work with. So I believe if it wasn’t for Africa, I think by now we’d be out of business because there’s literally not enough sapphires from Burma and Sri Lanka to survive and to supply the world, especially China, this giant market that has come up in the past couple of years.
Jeffery Bergman: If you just took out two countries, if you took out Mozambique and Madagascar, it would be a huge devastation to our trade. If we hasn’t had Mozambique and Madagascar in rubies and sapphires in the last couple of decades we would have a small fraction of the business that we have today. And in emeralds, of course, it would be Zambia. Zambia has provided a lower cost alternative to Colombian in huge volumes that has really kept the emerald market ticking along. Huge, I’m grateful to Africa, but one of the things that I really, one of my pet peeves, [inaudible 00:35:13] oh, this is an African emerald, or this is an African ruby? What? Nobody says, if you’ve got a Burmese ruby, nobody says, oh, this is an Asian ruby, right? Nobody says that. But as soon as it comes from Africa, there’s that, oh, it’s African. Come on. The best sapphires ever came out of southern Madagascar and lots of labs called top Kashmir before they figured out that they were actually Madagascar sapphires and they’re equal with the best Kashmirs you can ever find.
Jeffery Bergman: I will never turn my nose up to African gems. I put them on a very, very high pedestal.
Interviewer: I think it’s, when you say that, sometimes people can’t say which, and then they just say it’s an African sapphire or an African ruby, I think it’s also because they can’t really determine where it exactly came from because Africa is huge and there are new mines that are coming up. So people sometimes just can’t trace them.
Jeffery Bergman: Yeah, and it’s certainly, with a basaltic material it’s much more difficult to determine origin. You can have a Nigerian sapphire that looks like Burmese, you can have an Ethiopian sapphire that looks Burmese, but actually, the challenge to say for sure it’s Nigerian or for sure it’s Ethiopian, that’s very, very difficult.
Interviewer: Indeed, indeed, indeed. So moving back to the financial part of things, we have [inaudible 00:36:44] law. So can you explain that in detail about why it is important to acknowledge this for all people selling investment grade gemstones.
Jeffery Bergman: Well, with the advent of the smart phone as we call it, you have more and more unknowledgeable people that think they can get in the game and become brokers. So you have silly things like the world’s largest diamond, which is a 450 carat smoky quartz that’s available in Indonesia for $50 million. And the guy is absolutely convinced that he’s got a real diamond that’s worth $50 million. As smart phones proliferate around the world and get themselves into the hands of more and more unknowledgeable people, you have an exponential increase in idiot brokers selling highly important, highly valuable gems that are actually worthless pieces of junk. It’s just a matter of a little bit of knowledge can be dangerous and the smart phone, people think that they know what they’re talking about because they spent 10 minutes doing some research and they make fools of themselves.
Jeffery Bergman: Unfortunately, they give a bad name to our good trade because 95% of the dealers that I know are trying to pass on a good value to their clients. There’s this percentage on the fringe that think they can get into the gem business and make a lot of money quickly, but they don’t have any idea what they’re doing. They misrepresent things and they make the rest of us honest traders and dealers look bad. It makes the trade look bad in general. So I’m really, I’m obnoxiously outspoken on LinkedIn when I see these idiots pitching these.
Jeffery Bergman: And one of the worst ones is some of the [inaudible 00:38:40] diamond miners. And I look at it and I know damn well this is, it’s tumbled topaz with a polished surface and they’re trying to pass it off as natural diamond crystals, and some people get stuck. Some people, they buy into the greed and they think that they’re going to make a big score and they wind up paying thousands and thousands of dollars for a rough topaz. Buyer beware, again.
Interviewer: Well that’s how we have some of these nice groups that have [inaudible 00:39:13] on Facebook, there’s a group called Scamologists, I think, or Scamists, and I think it’s a pretty good group for [crosstalk 00:39:20] any sort of scams you’re seeing around, you can post it. I think there’s a lot of people who see this [inaudible 00:39:28] because there’s a lot of people doing it and one person gets a jackpot, they will keep trying the rest of their lives because they know that one jackpot can change their life. So thanks to some of these groups that we have, and a lot of information online that we can read reviews and feedback about companies before actually buying something from [inaudible 00:39:52].
Jeffery Bergman: Sure.
Interviewer: So something that we can also talk about, we mentioned that labs are very important for investment and grade of gemstones. I personally am a big fan of Lotus Gemology because of how they explain the-
Jeffery Bergman: Me too, me too.
Interviewer: Inclusion, I think a lot of us do, especially some people in Bangkok as we see, Richard and Billie [inaudible 00:40:14] and the passion they have towards creating such a better and a beautiful environment. So explain to us the importance of these certificates, and which are, again, repeating the answer you already answered but repeating the question again, which are the best three or two labs that somebody should and must [inaudible 00:40:39].
Jeffery Bergman: Well, it depends on what you’re… if you’re dealing with just gems in general, Lotus is wonderful and they’re growing in the southeast Asian market, growing in respect and appreciation. Of course, in the US market, because Richard Hughes is a famous gemologist from the US, Lotus reports are well respected there. But for my European clients, most of them want Gübelin and SSEF. High end in the US, it’s also AGL and to a lesser extent, GIA.
Jeffery Bergman: In China, there’s growing demand for Gübelin and SSEF because they’re starting to realize the wider standards of other labs and when they bought a fabulous, unheated, royal blue sapphire and they try to resell it and they find out that Gübelin and SSEF do not call it royal blue, they lose a lot of money. So there’s a narrowing of the respect and appreciation for lab reports in the upper end of the Chinese market to Gübelin and SSEF.
Jeffery Bergman: AIGS is growing in respect and appreciation and China. Guild Laboratory has done great in southern China, especially with emeralds. That’s about it. I mean, there’s a lot of other labs around the world, but the strongest ones for the high end would be AGL in the US, and in Europe and Asian, Gübelin and SSEF.
Interviewer: Perfect. Perfect. So we’ve had a couple of questions and we must address them because they’ve been really wanting to get answered. So the first question is from Francisco Villama, I’m sorry if I say that wrong. But which platform or which place is suitable to resell these high-end precious gemstones in order to take a profit?
Jeffery Bergman: Which platform? Well, you’re asking the wrong guy because I have no online sales presence whatsoever.
Interviewer: Or offline as well.
Jeffery Bergman: Offline, your trade shows, having a presence at the trade shows, because you have the buyers from Europe, you have the buyers from mainland China, you have the buyers from South America, from Africa, from the US that come and visit the trade shows. But they’re quite expensive. Online, I’ve seen people that have done quite well with Etsy, with Gem Rock Auction. It used to be that Ebay was a great platform, but the competition now is so fierce. You do a search on ruby cabochons and you get 45,000 things offered, so it’s become an impractical, an overweight platform with the volume of things available for sale. So whatever I gave you would be an opinion based on no personal experience.
Jeffery Bergman: My business model is completely different. My business model is based on reputation and relationships. I stopped doing trade shows decades ago and now I supply dealers who do trade shows and that’s where I’ve chosen to stay, but certainly there’s some very, very successful online retailers. I know that if you put together a good website with a good B to B or/and B to C platform, that there are people who do very well with it. I have a Pakistani friend of mine, who, he’s not a rich guy and he runs a few online sales with Gem Rock Auction and Etsy and some of the other ones, and he was doing business through COVID. He was continuing to sell on a weekly basis, covering all of his expenses, and here I am twiddling my thumbs. Haven’t written an invoice since Tucson, waiting to do some.
Jeffery Bergman: Okay, certainly, I can write one invoice that’ll be his whole year of business, but he’s feeding his family on his online presence, whereas, I’m just spending savings. So hat’s off to the people that have found a successful niche there, but I’m not the guy to give you advice in that department, sorry.
Interviewer: All right, so we’ll move on to the next question, thanks for answering that. From Loretta Castoral. The person asks, do price graphs exist for ruby, emerald, and sapphire? Do we have any price guide or price graph that she can look at?
Jeffery Bergman: Yeah, there’s a few, there’s the guide, Richard Rucker out of the US, but it’s a paid gem guide, it’s a paid subscription, I think it’s about $300 a year. It’s a good tool. There’s also another one on the International Gem Society, there’s another one, what is it, Gem [inaudible 00:46:23] or something like that. There’s a few out there, but remember they are just guidelines and there’s no substitute for holding a gem in your hand in front of you and making a judgment based on seeing it. You can also look at the auction records and see how the prices have gone for the top end for sapphires, rubies and emeralds over the last two decades.
Jeffery Bergman: But at the end of the day, whatever guide you have, it’s just going to be, it’s going to give you some parameters but when it comes down to having a stone in your hand that you’re considering buying, now it’s down to your experience, your relationship with the seller, how good a negotiator you are, what kind of volume you’re going to purchase, what kind of terms you’re expecting. And probably one of the best places to score deals is the last day at gem shows, the last day at the Tucson show. You find someone that hasn’t had that great a show and you find that perfect three carat emerald that you’ve had your eyes on and you offer them half of what they were willing to sell it for. There’s a good chance some of them are going to say yes. Because they’re packing up, they didn’t cover their expenses and are thinking, well, it’s better to go home with some cash in my pocket than not.
Jeffery Bergman: So there’s my guide for you.
Interviewer: Perfect, thank you.
Interviewer: So a couple of more questions actually, we’re getting quite a lot of questions now, so hopefully it’s not too late?
Jeffery Bergman: No, no, no, I got [crosstalk 00:48:04].
Interviewer: From Mariana Musad, she says, Jeffery do you think that gemstones will increase their value in the future?
Jeffery Bergman: Well, four months ago, I would have said with certainty. What’s happening with COVID now has turned everything upside down. I think if we return to a relatively stable world situation where the economy picks up again and starts grinding along, China wakes up, India wakes up. With China and India in the game, and even moreso with India because most of the Chinese, for the last two generations, they have [inaudible 00:48:49] exposure to gems. They know gold, they know diamonds, they know jade, they know amber because these are historic within their culture but rubies, emeralds, sapphires and the rest of the stones are fairly new to them. Not so with India. India has a huge, thousands a year tradition of gemstones being an important part of religion and culture. So as the middle class, as the consumer spender in India expands, as India becomes more and more wealthy the demand for colored stones there is going to continue to increase.
Jeffery Bergman: We have dwindling supplies, we’re in a situation right now where we need rubies so badly, they’re digging under the ice in Greenland in order to mine rubies because we’re eventually going to run out of… Thailand and Cambodia used to be the major suppliers of rubies in the world, there’s none today. There is no mining producing Cambodian and Thai rubies anymore. Kanchanaburi used to be a major source of dark blue, nice, commercial dark blue sapphires. Kanchanaburi is finished. Australia used to be a huge producer. Australia is finished. So mining is a limited resource. There is no such thing as sustainable mining. As soon as you attach the word sustainable to mining, it’s excuse me, it’s bullshit. There is no such thing as sustainable mining. Every mine has a limit, it will run out. It will become exhausted.
Jeffery Bergman: More population, more people that want to buy gems, less and less supply, so the long term for gems is definitely increasing demand and increasing values.
Interviewer: In fact, this morning, this afternoon I got a certificate from Lotus Gemology and I just want to read it, quote, what it says. But it came out to be a Thailand stone and it said [inaudible 00:50:43]. It says for nearly 100 years, this is in the certificate itself, the sapphire mines of Kanchanaburi were major producers. The deposits are now largely depleted, thus making such stones increasingly rare.
Jeffery Bergman: Yes. Exactly.
Interviewer: Indeed. Indeed. [crosstalk 00:51:00]
Jeffery Bergman: I have clients that ask me specifically for Thai rubies and they are unavailable. Unless you go to people that have old stock that they’re willing to sell, they’re just plain unavailable.
Interviewer: So we have a lot of questions coming up, so I will ask the question from Mr. [inaudible 00:51:21]. He asks, hello, I am relatively new in the gem trade and I also am looking, I am a gem cutter, so what is the best way to start trading with gemstones? And he’s from Macedonia, so he says, he also asks, what do you think of rubies from Macedonia [inaudible 00:51:38]. Do you have any [crosstalk 00:51:40].
Jeffery Bergman: Okay, let’s start with your first question, that’s how I started in the trade, as a gem cutter. It’s a great place to start because you learn the material better than anyone else. You’re going to have an edge on knowledge that no one else in the trade is going to have. I understand rough and I understand the finished product because I started off as a cutter. So you’re already ahead of the game, and if you can use your own labor on material that you buy, then you’re ahead of the game even more. The biggest piece of advice is the trend is toward finer and finer quality cutting. So if you do a great job on your cutting from the start, you’re going to have a greater demand for your product.
Jeffery Bergman: Macedonia ruby, beautiful. Mostly pinkish cabochon quality, it’s fairly rare and obscure, but I’ve seen beautiful material that would make great cabs and beads, but I’ve never seen anything that you would consider a nice facet grade. But it’s mother earth, you never know what could wind up coming out of there. And certainly, if you have an exotic source like that and you produce beautiful quality cabs, calibrated cabs, you’re going to find a demand for them. Especially in Europe because Europeans more so know of Macedonian ruby whereas most of the rest of the world has never even heard of it. They’ve never even heard of Macedonia, let alone Macedonian ruby, sorry.
Interviewer: How is that different from Greenland ruby, I have a question.
Jeffery Bergman: Sure. Greenland ruby, for the most part, the best quality is very small sizes and the majority of it needs heat treating with flux and I think their strongest point is their hot pinks. They produce some beautiful hot pink cabs and you can get them calibrated in volume. If you need a thousand matching eight by six hot pink heated cabs, you’re going to pay a premium because they’ve got the mine to market traceability, ethical, save the polar bear marketing pitch. You’re going to pay a premium for them, but you have a unique product that’s difficult to order in quantity from other suppliers.
Interviewer: I hope that answers his question, seems very relevant to the information you have provided. So we have a question from Gemologist’s Council. With regards to ruby, do you think the status of ruby from Burma can be replaced with any other source if all the other factors are the same?
Jeffery Bergman: You can’t have all the other factors the same because of history. It’s impossible to erase.
Interviewer: Right, right.
Jeffery Bergman: So if you’re dealing with equal quality, side-by-side, certainly Madagascar kills Burma as far as supply, as far as price per carat. But you still have this historic demand for Burma. The name pigeon blood came from Burma and you cannot erase history from the equation. Personally, if I’m just a mid-range investor, not at the top, top, top, I would put my money in fine, unheated. The best quality unheated Mozambique rubies I could buy. Clean, bright, unheated, three carat and up, a great place to tuck some money away.