What to do with Bernie Madoff’s Jewelry?

Bernard Madoff’s jewelry has turned out to be a star player in the unfolding drama of his giant Ponzi scheme.  First, prosecutors moved to freeze his assets in January 2009, since he and his wife shipped more than a $1 million dollars worth of jewelry and watches to friends and relatives (I think there were 16 watches, 4 brooches, an emerald ring and a couple of cuff link sets).  Now prosecutors are pursuing more than $2.6 million in Ruth Madoff’s jewelry and 35 watches and cuff links that belong to Bernard.  The sad fact is that this dollar figure is so paltry compared to the $170 billion they are seeking in forfeiture, it’s almost irrelevant.  Plus, I would bet that the $2.6 mil figure is replacement cost on appraisals, so there is NO WAY they are going to recover that amount in the secondary jewelry market.  This situation shows how jewelry has historically been a way to hold (or hide) wealth: it is small and extremely valuable, so you can easily transport (or UPS), and it always has some intrinsic value.

Speaking of the Madoffs and jewelry, there is another part of the story unfolding behind the scenes.  Remember how I wrote about How to Sell Your Jewelry?  I mentioned a company called Circa, a NYC-based jewelry-buying company that has offices in several major cities.  Turns out business is brisk there, with their office in Palm Beach, FL sending up regular shipments of old family jewelry that Madoff’s victims are having to sell to cover ordinary expenses.  Circa CEO Chris Del Gatto says in a New Yorker article that his company has to become “the priest and the rabbi, the psychiatrist” helping people liquidate their collections.  

 

Circa Jewels Advertisement, Courtesy of Media Space Solutions

Which brings me back to my original question to NY prosecutors:  What are you planning to do with Ruth and Bernie’s jewelry?  There’s Circa or other private brokers.  Or how about an auction?  I can see the Sotherby’s or Christie’s catalog cover now: “Own a Piece of Ponzi History”, or “Captured Gems: Jewels from a Felon”.  It’s probably better stuff than the seized drug dealers loot the traveling auctions sell at convention centers (diamond-encrusted pit bull on a 2 inch diameter chain, anyone?).  Hey, if you can’t recover the millions in your portfolio, you can at least own his engraved Rolex and show it around at parties.

How Do I Sell My Jewelry?

I have been asked this question a number of times in my career, and it always makes my heart squeeze a little.  There are many different scenarios where people might need to sell jewelry.  Maybe the engagement or marriage didn’t work out, sometimes there are financial hardships, or maybe someone inherited Aunt Harriet’s ring and just won’t wear it. 

This scenario exposes a dirty little secret of the jewelry industry–there is no secondary market to speak of.  The jewelers who work so hard to sell you something in happy times aren’t really set up to help you if things don’t work out.  This makes a difficult situation even harder. 

The first thing you should know is that YOU WILL NOT GET BACK WHAT YOU PAID FOR YOUR JEWELRY.  There are a number of reasons for this.  If you sell it to someone in the industry, they can buy it wholesale and are in the business to make a profit.  Jewelers can carry large in-house inventories on memorandum, where they only pay the dealer for it if they sell it.  If they do buy something, they can get 30, 60, 90 day terms to pay for it.  Or they can make a cash purchase for a percentage off the wholesale price.  To buy it from an individual, they have to pay you outright, take a fair amount of risk that the item is what they think it is (mountings can hide a lot of flaws), and hope they can turn it in the future.  If you sell it yourself to an individual, you need to make the price compelling enough for someone to pay you cash instead of financing it through a jeweler.  Keep in mind, too, that you may need to unmount diamonds and gemstones and put them into simple settings that appeal to most people.

In general, there is a direct relationship between the amount of time you are willing to wait and the amount of money you will net for the jewelry.  The faster you want to liquidate, the less you will get for the item.  I have compiled a list of possible options and the impact this makes on how much you will get.  I have listed the following options in the approximate order of least amount of time and effort on the seller’s part to more time/effort, but possibly greater return:

$ Pawn Shop/Jewelry Liquidator:  In general, this is the option of last resort.  You will get–maybe–10 to 20 cents on the dollar for what you originally paid if the item has more value in the labor, such as a cluster ring with a lot of gold.  You may net more if the item has a solitaire diamond at least 1/3 to 1/2 carat.  The pawn shop or liquidator is going to turn it very quickly for a little more than they paid for it (way below market value), which is why the price is so low.  But it’s very fast–in the case of a pawn shop you will walk out with cash/check in hand.  In the case of an on-line liquidator, such as Thingswebuy.com, you contact them on-line, they Fed Ex you a box/package, and they will let you know as soon as they receive it what their offer is.  A company that I have heard of that might be good for more important jewelry items is Circa, they have offices in several major US cities.  Not sure how much they sell, but there is also an entertaining little site called exboyfriendjewelry.com to check out.  Note: I have not personally vetted this or any other on-line liquidator/buyer, so I cannot fully endorse.  Do your homework and proceed with caution.

$$  Consign through a physical jeweler:  This could be through the jeweler you originally purchased it from, or another store in the community.  There should be a written agreement about how long they will have it in the case, the price they will try and get for it, the amount you will net from the sale, and the appraised value if anything should happen to it while in their possession.  This option can take an extremely long time: how motivated is the jeweler to sell your item, versus their own inventory that represents a major capital investment?  But the amount that you net might be closer to what you paid for it, especially if you bought it from that jeweler and they are compassionate about the situation.   

$$$  Sell it yourself:  This option probably makes some people’s palms sweaty.  It is not for the faint of heart, but this is the way you can get closer to your purchase price. 

1. The first possible audience is someone you know who might be interested: friends, family, colleagues, etc.
2. I do not recommend a newspaper ad.  It is expensive, no one reads ads anymore, and it could attract the crazees. 
3. Craigslist.  This is a totally viable option, but probably only if you live somewhere there is an active local site.  Craigslist is easy, it’s free, and it’s local.  If you have paperwork, such as a diamond lab grading report or an appraisal, list as many details from it as you can.  Try to take a good photo, it’s easy to upload.  Price it well–you need to make it enticing to buy it from you versus a jeweler (jewelers offer less risk, return policies, financing, etc.).  If you paid $5,000, price it at $3500 or 4000–it will be a good deal for the buyer and that’s a pretty good price to get back out of it.  If you really want to sell it and be done with it, 1/2 of the price you paid (NOT a fictitious appraisal value) is very compelling.  If you find someone who is interested in seeing it, my recommendation would be to meet at a bank.  It’s a public place, security is all around, you can show the item to the potential buyer (hey, you could even pull it from the safety deposit boxes there if the bank has them, further reducing your security risk), and if the interested party decides to buy it, you can verify their certified check funds before they leave with the jewelry.
4. eBay:  This option is trickier (and worthy of its own blog).  Going through the listing process if you’ve never sold on eBay before is not trivial.  There are listing and selling fees that can add up.  You are also competing against semi-professional dealers with slick offerings.  But you can get your item in front of a large potential audience who is actively looking for jewelry.  There are 2 options for eBay, auctions and Buy It Now.  Auctions are still their bread and butter.  They recommend starting the bidding low with no reserve, but if you really can’t go below a certain price, you can set a reserve price (for instance, you paid $5000 for a solitaire diamond ring, you want to get at least $2500 for it, so you can start the auction at $1000 but set a reserve of $2500).  Definitely go for a longer auction, 7-10 days.  You can also set a Buy It Now price that represents a fair value.  There is a TON of fraud on eBay, so what I recommend is using an escrow service to hold the funds until the buyer has a chance to view the jewelry.  

$$$$ Trade It In:  If you can trade in your jewelry, you will probably get the most value possible for very little exertion on your part.  For instance, if you bought an engagement ring for $5000 and things didn’t work out, maybe you want a Rolex for yourself.  Or perhaps you could hold onto it until you decide to get engaged again, and trade it for a larger, finer diamond.  You might even get the full amount the jewelry is worth if the item you’re trading for is for more money.  Even if you didn’t buy the original item there, if it’s a salable piece, a jeweler has more incentive to do this than the consignment route.  Again, you’re taking some loss in that you are not getting full value back in hand, but that is the reality of the situation. 

Jewelry DOES have lasting value, it can always be reduced to its precious materials and the value measured out.  The unique thing about jewelry is that the emotional significance behind it is harder to calculate.  Only you know what your jewelry is really worth. 

Have you ever had to sell a piece of jewelry?  What was your experience?  Please comment and share your story!

Cellini Asscher Cut Diamond Ring

Santa, I think you forgot this…

Regards,

platinumgirl

PS: I have been VERY good this year

Updated 4/9/2009:  Considering how much traffic this page gets (a LOT), I thought I should get some more information about these rings. 

I spoke to Danielle at the Cellini store in the Hotel Waldorf-Astoria in NYC (Cellini also has a store at 509 Madison Ave).  She said that the images of the rings are representative of what they can do with a diamond from their inventory or your own diamond.  OK, maybe not just ANY stone, the mountings work best with the shapes shown, a square Emerald cut or Oval.  Also, the center stone should be at least 3 carats, in order for the mounting to be proportionate.  It might just be too much metal with a stone smaller than 3 carats (see my post about Asscher cut diamonds here, there are some nice pave settings for diamonds smaller than 3 carats).  The retail for the setting is around $9500 in platinum.  A 3 carat Asscher or Oval shape around G color, VS2 clarity (my choice for best quality combination) will run around $35,000.  Cellini would be happy to help you find the right diamond, of course.  For what it’s worth, Danielle said that as beautiful as the photo is, the rings are really much prettier in person, she recommends trying one on if you’re ever in NYC.  

If you like this style, but you’re interested in a different shape of center diamond, you can check out their Spring 2008 catalog, there is another version on the cover of this catalog that could work for a Cushion or other shape center.  Click here to download.

Here’s a link to Cellini’s website, or call the very lovely Danielle at 212-751-9824.

Markets Down…Diamonds Glitter

With the economic crises at hand, I figured this would be a timely place to start with my blog.  I’m taking a break from burying cash in my back yard in coffee cans (just kidding, I don’t have coffee cans) and daydreaming about taking cash and buying precious metals or stones. 

I read yesterday that DeBeers is touting diamonds as an investment strategy, you can see the video here.  DeBeers is urging retailers and manufacturers to communicate the ideas of “things that last, which are not disposable and which hold their value” directly to consumers.  This sounds good, since investors are obviously fleeing the stock market and real estate, and looking for something safe to put their money into.  Historically, jewels are one way that people all over the globe have passed down and transported their wealth.  They are small and portable, and retain some intrinsic value as something rare that comes from the ground.  I am currently trying to tell my husband that it makes sense to go ahead and buy that big diamond ring he’s been promising (so honey, please don’t read the next paragraph).

But there are issues with this reasoning, namely that jewelry in it’s finished form is not so liquid.  While there are many ways to buy it new, there are fewer options for selling second-hand.  There are auctions (on- and off-line), estate sales, pawn shops and other avenues, but most of those require quite a bit of effort for the seller, and net them less than the purchase price.  Also, the value usually rests more in the intrinsics of the piece (how much gold or platinum, the quality of the gems) versus the labor to create it, so you may not recoup much of the workmanship costs. 

Still, I think that there is something comforting about putting some wealth into jewelry.  Buy it like you would art or wine: buy what you love, and get the highest quality you can afford.  You will enjoy looking at it for a lifetime, it will probably hold it’s value, and someone will inherit it someday.