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Capitalize on Creativity to Find the Ultimate Solution

A grandfather and his small grandson took a trip into town. The grandfather started off by letting his grandson ride the donkey while he walked alongside. Suddenly somebody came along and said, "Look at this selfish little boy making the old man walk.”

The grandfather heard it, took his grandson down, and got on the donkey, letting his grandson walk alongside.

In a few minutes somebody came along and said, "Look at this selfish man making the little boy walk, while he rides."

Hearing that, the grandfather picked up the boy and put him on the donkey. Then they were both riding.

But another few minutes passed and somebody came by and said, "How cruel of the two of you to put such heavy load on that little donkey."

By the time they got to town, the grandfather and grandson were carrying the donkey.

Well, it seems like no matter what you do, you are never going to please everyone. But in some situations, there is a way to divide (or think differently about) the heavy load, and devise a win-win solution.

Progress

Since January of this year, the rough secondary market showed strong demand for boxes, yet the prices increased only moderately. This created stability, as there was potential for manufacturers to sell, profit and continue purchasing, pushing aside the speculators.

Some say that if this continues, and the assortment improves while polished market prices simultaneously decrease moderately, a healthier, more stable market will result.

In March- April Sight 3, prices increased by approximately 2%. Most boxes were sold in cash, and when the cash flow slowed, sales slowed as well. The general feeling was that the illusion was fading away and there wasn't any profit in selling.

Illision vs. Fact

Reality, however, proved that this was not an illusion issue at all. The lack of cash flow in the market simply created a traffic jam, delaying payments up to 60 days. Given the cash flow shortage, decreasing box size might help small manufacturers purchase successfully, ultimately releasing the traffic jam.

That same adjustment could potentially redistribute the current burden on major companies (now forced into late payments) to a larger number of manufacturers, enhancing cash flow and stability.

Sight 3 showed strong demand in pre-sale while manufacturers were trying to secure the quantity they needed. They were afraid that the sight would be small, and since other markets showed rising prices and a shortage of rough, they paid in cash. But once the sight was distributed, prices stabilized and the sales were in credit.

Trends

Sights 5-6-7 June - August saw the most traffic as at this time of year, stocks are prepared for the upcoming September/October season.

The tradable goods with high premiums are small Sawables, Indian goods, and average to cheap goods. The Crystals prices were almost comparable to the Fine box prices. Given the similarity in price and the decrease in the princess cut market, some say the Crystals production designation has changed to cushion brilliant, and therefore reduced demand. The Commercial boxes and Select boxes are very tight in profit as well as any Expensive goods.

Additional Factors Facing the Market

Some say that one of the difficulties encountered today is the length of time it takes to issue a GIA certificate. Some manufacturers may be concerned about significant market fluctuations between the sight and the final sale.

Deferrals are an additional market influence to consider. The juggling between the boxes that are being deferred is a custom in every sight, particularly next to the end of every half cycle where it could be deferred again at the beginning of the new one.

Fall Updates

After heavy speculation that the rough market is facing falling prices, what a great surprise it was when the October Sight showed the opposite! Although some say that assortment improvements may have been responsible for the increase, many Sight holders testify that the change in assortments went unnoticed.

The November Sight was similar. Considering the severe replays from the previous Sight, coupled with the rumors of multiple defers, the prices remained high. The Crystals, Spotted, and Commercial boxes in sizes 2.5-4 were unprofitable, whereas the 5-15 were on the edge.

Blacks were sold for 8-10 % just a few month ago, and now are selling for 2%. Some say, however, that ODC showed moderation in prices for these same items.

Isn't it about time that the client determines the value of the goods?

Given the speculation abound in rough pricing, and the reality which doesn’t always reflect the predictions, it seems our market is due for some creative solutions.

And we come full circle with creative solutions.

Legend tells of two fathers, each of whom required an orange to save his son's life. Since this is a legend in the genre of drama, I will add that there was only one orange left in the village. Each of the boys needed a whole orange to heal, and their fathers could not decide who would take the one remaining orange.

Of course, the first thought is to cut the orange in half, but this idea was dismissed because it would cause the death of both boys. They decided to approach the old man in the village for advice. The old man asked each of the fathers: "Why do you need the orange?”

One of the fathers replied that from the peel, he would prepare a medicine for his sick son, and the other explained that orange juice is a life-saving drink able to cure his son.

Both fathers suddenly realized that neither one required the whole orange; it was simply a means to an end. Once they viewed the problem from another perspective, they realized that each father could get what he needed from the same orange. A win-win solution was created not by additional resources, but rather by thinking creatively.


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