In the mid-1970s, a couple of other financial advisers and I chartered a small plane and flew to Antwerp to explore a "special opportunity" we were offered to market investment-quality diamonds to our clients.
It proved a fascinating day, mostly spent deep underground in the diamond vaults below the city. We learnt how the dealers bought packets of diamonds, unseen, from De Beers. The buyers would then sort the contents of their packets into the different quality stones for cutting into gems.
I also learned about the famous 4Cs that determine a diamond’s value: cut, carat, colour and clarity. At one point I was able to hold in my hand a private collection worth more than £5m, the equivalent of almost £50m today.
Did I then go on to become the UK’s diamond king? The simple answer is no, and there were three reasons for my declining this particular opportunity.
Firstly, I did not like the idea of advising clients to invest in something that would simply be moved between vaults, without ever being examined for its intrinsic value. Secondly, the proposed sales commission of about 10 per cent, while minuscule by retail standards, felt wrong because the only place it could come from was my clients’ pockets. Lastly, the reality is that the value of a diamond is entirely subjective, based on one expert taking the same view of a stone’s 4Cs as another.
I never regretted my decision. Now, some 40 years later, I feel exactly the same way about bitcoin. We are told that people are making fortunes from creating, buying and, presumably, selling bitcoin.
We have also seen the price halve in since December. It seems to me that bitcoin has all the disadvantages of diamonds multiplied by a factor of 10. You cannot see, hold or touch a bitcoin, you just have to hope it actually shows up somewhere in someone else’s ethereal ledger. My advice to anyone wanting to invest in bitcoin is: do not.
In years to come I might be seen to have been just an old-fashioned stick-in-the-mud. However, my firm advice is that if an investment has no intrinsic value and/or you do not fully understand it, stay well clear, both personally and for your clients.
Ken Davy is group chairman of SimplyBiz
