Sala Kannan discusses the politicizing of diamonds, De Beers, and several small-cap companies riding on the demand De Beers has created that may be worth looking into if you want to Invest in Diamonds.

I saw hip-hop artist Kanye West for the first time on TV yesterday. His music video “Diamonds From Sierra Leone” was on. I know nothing about his music, although my husband has been trying to educate me, in vain, about the pleasures of rap and hip-hop music.

Whether I understand it or not, West’s music video was quite interesting. It portrayed diamond politics — a rare thing in a world where oil seems to be the only “politicized” commodity. The song starts with a haunting echo — “Diamonds are forever…forever…”

You see black and white images of African children. Then you see a woman admiring her new engagement ring. She’s clearly in love. All of sudden the diamond bleeds, dark blood creeps up, invading the frantic woman’s arm.

What I like about this song is the fact that the much clichéd, much overused phrase “diamonds are forever” was used not in the usual romantic sort of way. In this song the phrase transforms into a ghostly, almost wild creepiness.

Finally somebody has spoken the truth about diamonds. Now, I won’t go into detail about blood diamonds or conflict diamonds — stones that rebels sell to fund arms purchases.

I’m going to tell you about a different sort of politics and market manipulation that is going on in the diamond industry. And you can actually profit from it — very legally.

Let me explain…

Invest in Diamonds: Diamonds are Forever

The phrase “a diamond is forever” isn’t some age-old adage that has been used for centuries. In fact, it was invented in the 1950s by De Beers, the world’s largest supplier of diamonds. De Beers, through a brilliant marketing campaign, created a market for its own product.

De Beers took a piece of carbon and turned it into the ultimate symbol of love, romance and commitment. This is an example of how one company can change mindsets and create a craze for a simple piece of carbon. Here’s how…

In 1938, soon after the Great Depression, diamond prices plummeted. And believe it or not, people didn’t give diamond engagement rings back then. Diamonds were a luxury reserved for aristocrats.

At this point, De Beers wanted to enter the American market. The company enlisted the services of advertising agency N.W. Ayer & Son. Despite a 50% decline in diamond purchases and a struggling economy, Ayer came up with a brilliant strategy. To change “social attitudes of the public at large and thereby channel American spending toward larger and more expensive diamonds instead of ‘competitive luxuries.’”

According to author Edward Jay Epstein, “Specifically, the Ayer study stressed the need to strengthen the association in the public’s mind of diamonds with romance. Since ‘young men buy over 90% of all engagement rings,’ it would be crucial to inculcate in them the idea that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship.”

N.W. Ayer and De Beers went on an elaborate publicity stunt. De Beers invited Queen Elizabeth to South Africa and presented her with a diamond. They even went as far as visiting schools to preach to young girls about the value and romance of a diamond ring.

The marketing tactic targeting mass psychology was working. Between 1938 and 1941, diamond sales soared 55%. With the advent of television, the advertising agency arranged to constantly show celebrities wearing diamonds on camera. And in the 1950s, N.W. Ayer coined the slogan, “A Diamond Is Forever.”

By 1979, De Beers’ diamond sales had increased a hundredfold.

Having conquered the American market with its massive psychological and emotional campaign, De Beers then moved on to Japan and other international markets. Prior to the 1970s, fewer than 5% of Japanese women received diamond engagement rings. Today nearly 65% of Japanese men present their brides-to-be with diamond engagement rings. Thanks to De Beers’ advertising.

De Beers doesn’t just promote the engagement ring concept. Today, it is also pushing to consumers the “non-occasion” diamond. De Beers now sells diamonds for 16th birthdays, graduations, etc. In fact, modern women don’t even need to get engaged to sport a diamond ring anymore, they can buy the new “right hand ring.”

This monopoly diamond supplier doesn’t stop there. De Beers now wants branded diamonds. The company is in partnership with Remy Martin to create a collectible cognac bottle embedded with a diamond. De Beers is also working with designer Louis Vuitton to create a diamond-studded leather jewelry range.

In fact, I was part of the very first public audience that saw De Beers’ latest advertisement. The company showed its advertisement video at a conference I was attending in Cape Town, South Africa.

The new product was called the journey diamond. Again, with a strong psychological theme — the advertisement video shows how love is a journey, but it only has a beginning.

The beginning, of course, is a big, fat De Beers diamond.

Invest in Diamonds: Piggybacking on De Beers

If you think it’s only De Beers that benefits from all this marketing, you’re wrong. While De Beers is still one of the world’s largest monopolies, its revenues have been waning. Smaller players have entered the market. And that’s where you have fabulous investment opportunities.

You see, the market mentality is already in place. De Beers, along with N.W. Ayer, did all the hard work for the past 65 years. They changed the way we see a diamond.

Now that De Beers has set the stage, smaller and newer companies can simply piggyback on De Beers. They don’t need to spend a whole load on advertising; they don’t need to create a market for their diamonds. They just need to figure out a way to sell their diamonds… cheaper.

I’ve found a diamond company that does just that. It is riding the huge demand wave that De Beers has created. And this company has come up with a revolutionary new way for you and I to buy diamonds easily and cheaply.

I can’t reveal this company and stock to you just yet. That’s because I’m featuring it in my next report for my subscribers to the Agora Financial Special Report Series. The report is almost done and will be published very soon. Its called “Africa: The Good News” and contains five stock picks. One of them is the diamond play I have told you about. And all the stocks I’m recommending will give you exposure to Africa’s never-before-seen growth in precious metals and commodities.

Watch this space, because I will be telling you very soon how you can get your hands on this exclusive report and find out what diamond company is benefiting by free-riding on De Beers’ mega marketing strategy.

Regards,

Sala Kannan
February 17, 2006

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