Investing in Beauty
Andrei Navrozov listens to Marwan Chatila
Somewhere in the depths of Burma, a crudely painted sign in municipal English sits fading in the merciless sun, a warning to the foreign adventurer passing through town. "If you are not truly knowledgeable about gem and jewelry," runs the forthright inscription, "to obtain them for the purposes of investment, speculation or reselling would be a sure way of losing your money. If you are not sure of any situation you are facing, please contact Local Police." But the local police are thousands of miles away. Foreign adventurers are not the intended audience of this article and the prudent solution is to stop off in London for a chat with a friend who knows a thing or two about both the disappointments and the rewards of investing in precious stones. The friend is Marwan Chatila, who was born in the Lebanon. Last month the exclusive Wealth Management Survey has called him "the gentleman among Bond Street jewellers."
After nearly a century and a half in the glamorous trade, the history of Chatila reads like an adventure novel, with all its reverses of fortune, its trepidations and triumphs, its sober routine and its vivid sparkle. But what sets Chatila apart today, against the mottled background of burgeoning international competition, is the fact that this major firm, with showrooms in Geneva and London as well as Beirut, has never traduced its venerable tradition, remaining the strictly family affair it has been from its founding in 1860. In the words of one American trade review, this stubborn refusal to compromise is precisely what enables Chatila Jewellers to provide an intimately personalised service "to an international clientele that includes royalty, celebrities and worlds leaders from all corners of the globe." Yet in the maddening, mercurial, mutable world of modern commerce the whole idea of a family business is something of an anachronism, like a New Yorker who would hold the door for a woman laden with packages even if she weren’t wearing a very short skirt.
Precisely the reason to ask Marwan Chatila, who oversees the family firm’s operations in London’s Old Bond Street, for some gentlemanly advice, though at first he may laugh at the questions. "If you want to invest in gems, you ought to get a doctorate in gemmology," he muses between Havana puffs. "Failing that, you ought to marry a jeweller." As one persists, however, the tone changes, the safe gets opened by Paul, and eventually another of his impeccably schooled assistants starts bringing out the velvet trays upon which the treasures of the Alhambra shed their light with a profligacy and an innocence that a writer associates with genius. Diamonds, rubies, sapphires, emeralds, the Big Four of the jewellery trade are objects capable of giving Marwan evident pleasure, commensurate with that of a crackly old recording of Asmahan, a famous Russian novel, or a vintage pre-Castro cigar.
"I’m not going to ply you with banalities like ‘Buy diamonds for love, not money,’ which is the headline I remember seeing in the International Herald Tribune. Because a couple of years later that same newspaper contradicted itself, calling ‘Jewels in the portfolio an investor’s best friend.’ Banalities are so easily reversible. Obviously, you should not buy into something you do not like having, but this is a rule that the wise man applies to the conduct of his whole life, whether it’s paintings, horses or women. The pain of parting with a beautiful stone, which even I, a professional in the trade, cannot help feeling on occasion, is the added value that accrues to every good investment in the fullness of time.
"I think that the people who poured their life savings into high-technology stocks ten years ago, and lost everything, were fools not because they had misjudged the market, but because few of them had had strong feelings about what they were buying. Had they bought pink diamonds instead, simply because they had fallen under the spell of these rare miracles of nature, they would have made money. But even if you take the last few years, their performance has been dramatic. In 2001, a rare 5-carat pink pear-shape diamond could sell for $500,000 at auction, whereas today that exact same stone would fetch $500,000 per carat! And the prices of white flawless diamonds, and even of the more ordinary commercial stones over 5 carats in weight, have doubled since 2003.
"In general, coloured diamonds, which is one of the things Chatila specialises in, are a universe unto themselves. Just the yellows and the browns, in an almost infinite variety of subtle shades, are absorbing enough for a lifetime of study. Then there are the blacks, the rare reds of an intense tint, the blues, the mysterious greens, and almost everything in between, from hyacinth and rose to peach blossom and lilac. Even knowledgeable investment in this kaleidoscopic universe does not come with the classic options of liquidity and objectivity, because every important stone is like a picture by a famous artist, whose auction value depends on a handful of collectors who may decide that their collections are incomplete without a particular lot. Yet just ask the people who bought Van Goghs and Picassos all those years ago, and they will tell you that their investment is plenty liquid, and as objective as any stock, and thank you very much for asking! Rarity, at least of the beautiful kind, always has a following.
"Besides, gemstones offer advantages no other possession does, such as concentration, portability and anonymity. I was in Beirut when the war started, but I can tell you that one appreciates these advantages just as much living in Los Angeles, Rome or Paris. A little ring with a pink diamond of less than one carat looks like the engagement ring of Cinderella before the fairy godmother has had her say, but in 1987 just such a stone, a .95-carat fancy purplish red, was sold by Christie’s for $926,315, a fortune even by today’s standards, yet it’s unlikely that anybody on the Underground would look twice at the woman wearing it. Similarly, I can provide a man with a pair of elegant and unobtrusive cufflinks that he could one day resell at auction for the price of a castle in Tuscany or a freehold in Mayfair.
"Apart from diamonds, and coloured diamonds in particular, there is the inexhaustible domain of the other coloured stones, especially of the ruby and the sapphire. Of the rubies mined in the famed Mogok Stone Tract, in the Katha district of Burma, Jean-Baptiste Tavernier, the French explorer who was in some ways the first modern jeweller, recorded that ‘when a ruby exceeds six carats and is perfect, it is sold for whatever is asked for it.’ The same is true today, even in the case of considerably smaller stones, so long as they are perfect. A perfect ruby, flaming red without any shades of brown, blue or orange, is something you can look at all day long without getting tired. We’ve had one at Chatila called ‘The Rangoon Splendour,’ certified by Gubelin as the most exceptional ruby in the laboratory’s history, and I tell you it was hard to see it go. I’ve spent more hours with that stone than I’ve spent in nightclubs.
"In 1989 a well-known Burmese ruby, a cushion weighing 32 carats, achieved an auction price of $4.6 million, and of course ‘The Rangoon Splendour’ went for a lot more than that, but the fact is that prices for truly rare and exceptionally important stones have not stopped growing since Tavernier’s day. Whatever the fluctuations of the stock market, whatever happens to the price of crude oil, and whether or not Putin holds a big military parade in Red Square, there are only a few of these geological marvels around and a lot of people who want them, whether because they love them as I do or because they want to put money into something tangible yet portable.
"The sapphires from the original Kashmir mine, on the southwest slopes of the Zanskar Range in the Paddar district, were only produced, for instance, between 1880, when a landslip uncovered the mine, and 1887, when it was exhausted. Yet the world still treasures that mine’s yield of ‘cornflower’ sapphires, wonderful blue stones without overtones of green, grey or purple, for none have been found since to rival those first great harvests of more than a century ago. Connoisseurs have had to content themselves with ‘royal blue’ Burmese sapphires from the Mogok -- a ruby and a sapphire, incidentally, are one and the same from the gemmologist’s point of view, and Burma is rich in both varieties -- which can also be quite breathtaking when they are perfect. But whether your ‘sugarloaf’ cabochon sapphire is from Kashmir or merely a superb exemplar from Ceylon, whether your ‘pigeon blood’ Burmese ruby is a little larger or a little smaller, or whether your ‘gota de aceite’ Colombian emerald was a good bargain, all these stones, provided they are of certifiable quality, are fine investments for people who can afford to diversify their portfolio. My own view, however, is that if you can’t afford to diversify your portfolio, it’s best to invest in nothing at all.
"Investment advisors may balk at this, just as financial journalists like to point out, when you speak of white diamonds, that ‘it’s a controlled market,’ and that if ‘De Beers or the Russian government’ were to dump their reserves on the market ‘tomorrow,’ we could buy flawless stones ‘for a dollar a carat.’ But is investment advice, I ask you, a really free and uncontrolled sphere of human activity? Is financial journalism? If everybody and his uncle could become a financial analyst at Morgan Stanley tomorrow, and a journalist on the Financial Times the day after, there would be neither financial analysts nor journalists. Same with white diamonds, which, although arguably more integral a cog in the world’s economic mechanism than coloured stones, are certain keep their value in the long term.
"Significantly, it was in the wake of all the newspaper articles against diamonds in the 1990s that there has come the present explosion of demand, as well as a very noticeable dearth of supply. What journalist then writing could foretell the rise of the newly rich Russians as a factor in the diamond market, or the emergence of Indian or Chinese buyers, all of which may well be just the tip of the iceberg as far as the future of our trade is concerned? We are fortunate to be dealing in miracles of nature, whose number is finite. If you wish to collect really important, historically rare stones, all you need to know is that neither De Beers nor President Putin can make another Kohinor rise, like Botticelli’s Venus, from a sea of diamond pavé."
It remains to thank the gentleman jeweller for his forthrightness, comparable in some way to that of the Burmese police. In London’s Bond Street, however, the price of such plain speaking is beyond rubies.