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Berkshire Hathaway Inc. Message Board

    • There is something that concerns me about diamond
      investments, especially on a large scale. Several years ago,
      one of the news magazine shows (60 Minutes, I
      believe) had a story about the ex-soviet union. Seems
      Russia has in their vaults, billions of dollars worth of
      diamonds that they are hoarding in reserves (for what
      reasons, who knows).

      My concern has been if you
      held diamonds (or De Beeers stock) and this flood of
      diamonds was released into the market, prices of stones
      and stock would have to plummet. Knowing the
      financial problems of Russia, some of the stones may have
      been sold, and I don't know how to tell if they still
      have room fulls of them.

      For that reason, I
      have always been cautious of diamonds/stocks.
      may be waiting for the market to get right in South
      Africa to release some of their reserves. I am sure WB
      is aware of such reserves. I hope so, anyway.

      • 2 Replies to Mktwatcher
      • I saw the same show on Russian stockpiles of about "hard" currency waiting to be unleashed.
        Second concern is specific to De Beers involvement in
        South Africa. It won't take Mandela and his crowd too
        long to turn that country into junk. I assume De Beers
        saw this coming decades ago and is prepared.

      • The concern you mentioned is what chased me out
        of Debeers years ago. I noticed the increasing
        diamond inventory Debeers carried on its books. They even
        were borrowing to support their purchases. The supply
        of diamonds continues to grow with new mines coming
        in all the time, not only in Africa, but Australia
        as well. And there may be huge amounts of diamonds
        in Canada. Diamonds are not the rarest of stones.
        Rubies for instance are more rare than Diamonds. From
        what little I have followed Debeers over the last ten
        years, its hold on the diamond market seems to gradually
        slip. The percentage of world wide diamond production
        that is not from a Debeers owned mines is constantly
        increasing. They have had an especially hard time with
        Russia. Russia is more difficult to deal with, not less
        difficult since the break-up. It is the wild West over
        there. I know that the marketing agreements with Russia
        have been allowing Russia to make more direct sales of
        finished diamonds than in the past, thereby bypassing
        Debeers eintirely. There is a trend here I did not like
        ten years ago. I really do not know what is going on
        today. Even though Debeers has substantial non-diamond
        investments and is a huge store of value, I am still
        surprised to hear of Buffett buying into it If indeed he

        For anyone interested, it is propbably the most
        difficult company to understand I have ever seen. Not only
        must you understand Debeers ( and it is a paired stock
        to boot ), but you must understand its sister
        company, Anglo-American Company of South Africa, which is
        also an impossibly complicated company. They have
        substantial cross holdings and therefore in effect control
        each other. And they contol a large portfolio of other
        South African and international corportations. Add to
        all of this, a lot of the diamond marketing
        operations are carried on by private companies in which
        Debeers has a partial interest. Those operations
        therefore have no public disclosure. And if in an off
        chance, after years and years of diligent research, you
        think you finally have it figured out, they shuffle all
        of the subsidiaries, create a few new holding
        companies, merge far flung companies into a new
        international company that does whatever, put all the gold
        mining companies into this one and take all of the
        platinum mining companies out of that one and......

        If Buffett wants to understand a company before he
        buys it, Debeers will be a real challenge. I never
        could do it.

    • Hey Elias:
      Just drove from Omaha to OKC today! Good to be home - if even temporarily.

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