Arizona Republic from Phoenix, Arizona • Page 3

BNAL The Arizona Republic Sunday, February 15, 1981 Diamonds investing popular, but a bit late Ijfall Today 1- Most appreciation already has Although they all do not endorse 0: By Susan Carey Republic Staff Investment-grade diamonds, popular for years with European and Far Eastern investors, appear to be making inroads in American portfolios and following the market progression begun 10 years ago by gold. A decade ago, gold prices were not quoted widely, and the metal sold in coin form for about $37 an ounce, says Jerome Kuplack, national sales manager of the Phoenix brokerage firm North American Diamond. What followed is widely known. The federal government lifted restrictions on private ownership of gold bullion. Prices skyrocketed, and investors clamored to buy the stuff.

Brokers' commissions became competitive, and prices are quoted daily in newspapers. "The diamond market is in the same stage of progression," says Kuplack. The progression is rooted in the stones' appreciation, he says. For instance, between 1970 to 1980, investment-quality diamonds increased in price an average of 21 percent annually, and one-carat, flawless diamonds appreciated at a compound annual rate of 46 percent. Prices for the highest-quality diamonds jumped as much as 240 percent between 1977 and 1980.

diamond investing, trust managers and financial advisers agree with. Kuplack that the uncertain economy is the motivation to the investors. "I think people are "Continuing to lose confidence in our economic system," says Stanley Rulapaugh, manager of Arizona Bank's trust-investment department. "They want something-to hide in the bottom of their toothpaste tube." People are looking for simple answers the complex problem called inflation, Rulapaugh says. But there are disadvantages to every investment vehicle preceived as a "hedge, against inflation." For instance, one cannot pay for groceries with a Krugerrand.

And one cannot expect that an investment in rare wines will not turn to vinegar some day, he says. Bernard Cirlin, publisher of PreciouStones Newsletter in Thousand Oaks, said investment diamonds came into vogue in 1974, after oil prices went up, the United States' balance of payments went askew and the dollar plunged in value internationally. "People began to look for other stores of wealth," he says, "namely small, portable wealth." However, Jack B. Backer, president of a New York diamond brokerage firm that bears his name, taken place- says that was the year prices began to surge. Actual investor interest did not peak until 1978, when people began to see inflation as a threat he says.

Backer says about 15 large, legitimate diamond brokerage firms have emerged in the United States) to meet the demand. Additionally, diamonds are being offered to investors through shares in gem trusts. 1. That trend got its start in Decern ber when the Securities Exchange Commission gave the go-ahead to the Thomson McKinnon Diamond Trust to offer stock in its $13 million worth of gems. Diamond investing has become a $600 million-a-year market, says Cirlin.

Kuplack says that very shortly, brokerage houses are going to be able to receive electronically daily wholesale price quotes on various weights and cuts of stones from the New York diamond market. "It should broaden and strengthen the market," he says, while protecting investors against big markups in price. I Although diamonds of good quality and cut have performed well considering inflation, Kuplack does not tout them as a panacea. "We recommend them for no mpre than 10 percent of the Diamonds, JC5 diamonds Crown -GirdleJ Pavilion Culet Wendy Govier Republic Only five cuts are recommended for investors marquise, pear, emerald and oval-The round-brilliant is the most desirable and accounts for 75 percent of the diamond-invest--ment market. An investor must know the peculiar facets of the diamond business.

Con artists still play games with unwary gem investors 4 Cs govern value of -Diameter-- Table Carat, color, clarity, cut are vital qualities Polished, unmounted, investment-grade diamonds are judged by four characteristics carat, color, clarity and cut in a system developed by the Gemo-logical Institute of America. Carat: The more carats a stone weighs, the more valuable it is. A carat is one-fifth of a gram, or 100 points. Diamonds of 0.5 carat or more are recommended for investments, i Diamonds range from absolutely colorless to yellow. For investment purposes, only stones ranging from to I on a scale of (colorless) to (yellow) are recommended.

Clarity: Clarity is the diamond's position on the flawless-to-imperfect scale, and depends on the number of inclusions (flaws) in the stone. For investment, only stones ranging from flawless to VS2 Arizona no longer is the gem-fraud capital it once was, according to law-enforcement officials. But investors shouldn't put their skepticism on the shelf just yet. Con artists still are deceiving would-be diamond investors, according to Detective Jim Kidd of the Phoenix Police Department's organized-crime bureau. Kidd says one scheme involves telling an investor that a $1,000 diamond is worth $7,000, then selling it to the investor at the "wholesale" price of $5,000.

Because it's recommended that diamonds be held for three to five years, the investor may not realize the mistake until it is too late, Kidd says. "The system is set up so they won't know they're being defrauded," he says. Ditto for what Kidd calls the "advance fee" scheme, in which the con artist solicits gems from the investor who wants to sell them. The con artist charges a $50 fee for taking the stones on consignment and takes possession of the stones. In many cases, the con artist gets both the fee and either the stones or the proceeds from the sale.

Diamond investing is a tricky business for the uninitiated, Kidd says. "There is. no way investors can check ahead of time to know if they're being taken," he said. Gem certification doesn't necessarily guarantee quality, he said, because many people don't know how to read the certificate or an inferior stone is substituted for the one bearing the certificate. Matthew Zale, director of the Arizona Corporation Commission's securities division, said law-enforcement-agencies have brought the diamond swindling problem "somewhat under control" recently with several civil actions and criminal indict- Investors, C5 oldest cities by using existing Lower Girdle Facets Lower Main Facets (Very Small Inclusion 2) are recommended.

Cut: Investment diamonds contain 58 facets cut to precise calculations. Experts rank cut according to symmetry, depth, (girdle thickness and cutlet size. Adequate oil forecast An energy expert claims that the industrialized world will not face oil shortages in the 1980s because rising prices will reduce fuel consumption. "Oil supplies in the 1980s will be adequate, given total requirements," said William Brown, director of energy economics for Chase Econometrics. Brown predicted the leading industrial nations will be able to cut oil imports and use during the decade and shift to other fuels "thanks mainly to the substitution and conservation pressures caused by rapid oil price rises through the 1980s." Soybean estimate drops The Agriculture Department has reduced its estimate of average soybean prices for this season to $7.75 a bushel, reflecting a 10 percent decline over the past two months.

Savoy cuts size Like a financially strapped member of the English gentry, London's elegant Savoy hotel is cutting back. But only in size, the hotel says, not in the style of living it has offered to the wealthy and the famous for nearly a century. Coffee Industry lax The U.S. coffee industry has not effectively countered declining coffee consumption with public relations and advertising, according to the general manager of the Federation of Coffee Growers, who said that U.S. roasters primarily are failing to attract the youth segment, and that roasters have put themselves on the defensive in efforts to promote coffee consumption.

He also faulted producing nations for not taking a strong stand to hike consumption. Cut-rate tours offered The vacation-cruise industry in Miami, suffering as tourists avoid south Florida because of tighter budgets and the area's booming crime rate, is offering discounted Caribbean cruises a rare bargain in the middle of the usually expensive, winter season. Application withdrawn Alla-Ohio Valley Coals an Indiana-based coal-export company, has withdrawn its application to build a $125 million coke plant in Monongalia County, W. Va. The company decided to scrap plans for the plant after the state Air Pollution Control Commission threatened to deny a construction-permit application.

Heating-oil supply dips The nation's heating oil stocks dropped by only 4.3 million barrels last week despite the coid winter weather, and analysts said the recent runup in' prices had constrained consumer demand. Beauty faces need for oil Shell Oil of Britain has applied for permit to drill for oil in southern England's New Forest, one of England's most famous beauty spots. Oil Inflation varies OPEC crude 011 prices have jumped 24 percent since January 1980, but after adjustment for inflation in industrial countries the increase comes to only 12 percent, according to Petroleum Intelligence Weekly. Moreover, the authoritative oil journal said the impact of the crude price hikes varies from country to country due to currency fluctuations, with France and West Germany suffering badly due to the shifting exchange rates and Japan benefiting from them. USDA doubts Soviet goal The Agriculture Department says the odds are against the Soviet Union reaching its grain-production goal of 236 million (metric) tons, this year.

Inside: RANGE CLEANERS There are 235 goats munching the chaparral near Payson to increase grazing land and water runoff and reduce fuel for forest fires. C3. MONEY'S WORTH An financial expert contends that buyers of money-market certificates are shortchanging themselves. C4. MOVING COMPARISONS Competitors in the moving industry are promising they will work harder as the hold of the Interstate Commerce Commission is loosened.

C7. STOCKS FALL Stock prices fell in one of the slowest weeks of the year. Some analysts say the market is in a downturn, but others expect a major upsurge. CO. BQATS BREEZING Dealers, lenders and manufacturers say sales and consumer interest in buying Jboats is relativelyWong.

C12. i Kit 5. Cross-country legal connection could portend new trend tor budding and veteran attorneys uOld Chicago law firm merges with young Phoenix practice Winston Strawh, one of Chicago's employees. He said, for Washington office, where former Federal have had mutual clients and both practice corporate law and civil litigation. The Phoenix firm was founded in July.

1978 by Stephen Craig, Arthur Greenfield and EL Neil Irwin. W. Charles Thomson and John' A. LaSota a former Arizona attorney general, have become partners. The firm will have.

13 attorneys as of March, the spokesman said. As a result of the merger, Craig, Greenfield, Irwin, Thomson and LaSota have become partners in Winston Strewn. Susan Carey and largest law firms, has merged with Craig, Greenfield Irwin, a 2-year-old Phoenix law firm. According to a partner in the Phoenix firm, the Friday merger could mark the beginning of the development of a national law firm. Mergers such as this are not widespread, said the spokesman.

"There's more talk about it all the time," he said. The partner said it is more commonplace for law firms to expand their practices into other instance, that law firms from Minneapolis and Cleveland have offices in Phoenix. The marriage between Winston Strewn and Craig, Greenfield Irwin is effective immediately. The practice in Phoenix will be conducted under the name Winston Strewn and will continue to have its offices in the First National Bank Plaza. Winston Strewn, founded in 1853, employs more than 150 lawyers in Chicago and 17 in Washington.

Former Vice President Walter Mondale is counsel to the firm in its Trade Commissioner John Reilly is a senior member. Illinois Gov. James Thompson was a member of Winston Strewn before he became governor. Among the firm's clients are Beatrice Foods Co. and the Greyhound Corp.

Winston Strawh also has an international practice and a working relationship with a large firm in Paris, the spokesman said. The merger was the result of the firms' similar and compatible practices, he said. They mall displays Arizona ties during opening it lit I if Las Vegas DiamAds' new Fashion Show Mall lilil the first appearance in Lais Vegas for Goldwaters, but Diamonds already has two stores in operation here and a fourth is a possibility, according, to James Baumann, Diamonds presl' dent Officials of both Goldwaters and Diamonds said they made very few changes in marketing or merchandising as they designed and purchased stock for their Strip stores. "This store is very much like our others, except for some difference in the merchandising concepts," said Pamela Grant, president of Goldwaters. "We want to take advantage of, the millions of tourists who come to Las Vegas each year." Although the Las Vegas store is designed to appeal to slightly different customers, it will depend pjj quality rather than "flash" to bring, in-those customers, Miss Grant Even though some of the departt ments were designed with out-of-town visitors in mind, Miss Granf said, the store expects to attract its share of local customers, too.

She explained that the store was. designed so a person entering, the: store from the mall can see virtually every department on that lever, creating a feeling of openness. 3 theme for the Goldwaters By Naaman Nickell Assistant Economic News Editor LAS VEGAS, Nev. Fashion Show Mall opened its doors Saturday on Las Vegas' famed Strip with the help of top-name fashion designers, politicians, artists and even a 200-egg omelet There also were pickets carrying signs protesting "out-of-state, nonunion labor." The picketing ended in less than two hours. 1 The $74 million mall was developed by the Summa Corp.

of Las Vegas and Ernest Hahn of El Segundo, Calif. Two Phoenix-based stores, Diamonds and Goldwaters, are among the five major retailers that are anchor stores in the mall. The other three are Neiman-Marcus, Saks Fifth Avenue and Bullocks. The mall was built on more than 30 acres of prime Las Vegas land, an area that was covered with sagebrush, just a couple of years ago, just south of the Frontier Hotel Summa which owned the land the mail was built on, is reported to be planning a hotel just across the street. If the hotel is built, the mall and the Frontier will be competed by walkways.

TEe opening of the mall marked lllll ft jaifc 15, Tim oof 8 Republic well ahead of schedule. storen Las Vegas was ready to open In i OtO.