Gary Hofmeister: Conservative in more ways than one
November 9, 2008
For those of you too young to remember the stratospheric heights of the value of gold, silver and many precious stones including diamonds in 1980-81, you may want to stop reading now. Gold advanced to more than $850 per ounce, which translates into about $2,300 per ounce today, factoring in inflation. D-Flawless, Ideal Cut one-carat diamonds were selling for more than $80,000. It appeared commodities were king. Most shopping centers sported at least one store that quickly sprang up to buy people’s old silver, gold jewelry and even some precious stones. The lines often were four abreast, snaking halfway through the halls.
Some jewelers climbed aboard the bandwagon and made a lot of quick money – only to come down to earth in a crash-and-burn mode in a few months. Others were tempted to do so, but in the tradition of “if it sounds too good to be true, it probably is,” declined to join the party. My position.
One of my wealthy clients came to me and told me he no longer had much faith in the stock market and wanted to take out a significant chunk to invest in diamonds. I had only been in business for a few years at that point, and it could have been a nice boost. I patiently explained that even at that time, the diamond industry had been around for 100 years, and the stability of only gradually rising prices with no enormous variations one way or the other had benefitted buyers and sellers alike. I advised him against taking this step and sticking with the stocks and bonds he already owned.
As it happened, the rise continued for a while, at which time he unexpectedly died. As he and his wife were two of the finest people I ever had the pleasure of serving, I related to his widow about his offer to me, admitting I felt bad that they could have made a significant profit. She was most gracious and philosophical about it, declaring that he respected my judgment and no one had a good crystal ball. Furthermore, I still could be proven correct. Shortly thereafter, that’s precisely what transpired.
Morals of the story so relevant right now: Don’t believe the fundamentals of business and good sense have vanished. Get a little knowledge of history. And don’t panic!
Gary Hofmeister is the owner and operator of Hofmeister Personal Jewelers in downtown Steamboat, a company he founded in 1973. He is a director of the Conservative Leadership Council of Northwest Colorado and a former Republican nominee for Congress in the 10th District of Indiana. He made 18 trips to the former USSR to teach democratic-capitalism during the 1990s.
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