Sparkling Investments June 14, 2011 – Posted in: Press
by Lewis Braham
Published June 14, 2011
Bloomberg Markets Magazine
Elizabeth Taylor shows off the 33-carat Krupp Diamond ring that was given to her by Richard Burton in 1968.
Nothing better captures the craze for very pricey jewelry than Christie’s International’s upcoming auction of the estate of Elizabeth Taylor. Investors are especially interested in the late movie star’s famed 33-carat Krupp Diamond ring, which then-husband Richard Burton Gave her as a gift in 1968.
“That will become the most famous diamond of the first part of the 21st century if it comes up for sale,” says Malcolm Logan, a partner at Nelson Rarities Inc., an estate jeweler in Portland, Maine. “The price will go through the stratosphere.”
The Krupp, which Logan estimates could sell for as much as $20 million, would take jewelry investing to new heights following the doldrums of 2009. Christie’s, the market leader, hit a record of $426 million in jewelry-auction sales last year, and auctioneers say the boom hasn’t lost steam in 2011. Investors who are worried about inflation and the continued decline of the dollar view jewelry like gold – as a hard asset that’s more likely to retain its value. On May 2, gold reached a high of $1,557.57 an ounce.
Some pieces are easier to value than others. Putting a price on a diamond bracelet or gold pendant begins with calculating the worth of their raw materials – a value that roughly tracks the broader diamond and gold markets. Gary Schuler, director of jewelry at Sotheby’s in New York, estimates the Krupp ring’s stones and metal to be worth as much $6.5 million. For investors, the tough part is calculating the added value based on the piece’s design or provenance, which is mostly a matter of opinion. The fact that Elizabeth Taylor owned and even flaunted the Krupp may up its value by perhaps $13.5 million, but no one really knows.
Signed pieces may also better hold their value when the precious metals markets drop, says Rahul Kadakia, head of Christie’s jewelry department in New York. “Jewelry at that level of design doesn’t follow the markets,” he says. “It has to do with purchasing art. You will always have gold, but you will not always have an art deco bracelet by Cartier.”
You can find better deals by avoiding the auction houses, which charge commissions of 12 to 25 percent, and buying from estate jewelers. They act as wholesalers for used pieces, and because their rich clientele want to keep the deals discreet, estate jewelers often don’t have a storefront. Nelson Rarities operates from the seventh floor of an office building. Markiewicz’s jeweler, House of Kahn Estate Jewelers, is an exception, with stores in Chicago and Palm Beach, Florida. “Our customers sell to us when someone needs their college tuition,” says Tobina Kahn, the jeweler’s vice president. Kahn bought and sold pieces from Bernard L. Madoff’s fraud victims at the Palm Beach store.
Even if you get a good price on a necklace, don’t expect to trade it quickly for a profit. The jewelry market can be highly illiquid. “To buy it for a straight return on your money, you have to be very sophisticated,” Imberman says. “The people I know investing in it are buying big diamond pieces or big signed pieces and are content to put them away in their safe and just wait.”
The biggest gamble for investors might be buying at inflated prices jewelry that had been owed by marquee names. As Logan discovered, fame can be fleeting. At an estate sale many years ago, he bought several pieces owned by late screen legend Myrna Loy. “I was thrilled to buy her jewelry, and it was really nice, but when I went to sell it, hardly anyone knew who Myrna Loy was,” he says. While Logan still made a profit, the provenance didn’t boost the sales price. Even Elizabeth Taylor’s fame may one day fade, making the Krupp a tantalizing and dangerous bet for investors.
