Lab-Grown Diamond Demand On The Rise

been around this block a couple of times. I thought I kind of knew everything that's kind of worth knowing. But I learned something new today that you can grow a diamond in a lab. Did you know that? Oh? Yes, I had no idea where. Ye man, it's just amazing. Fortunately, we've got a great guest to talk to us about this growing business. A Miss Shaw, president of a l TR created Diamonds, joins us on the phone. I Miss again, I learned something new today. Tell me how you grow

a diamond in a lab. A diamonds grown in a high tech labar tree in an enclosed chamber, and it starts from a diamond. If you think of a thin slice of a diamonds thes a hair um that is placed in a chamber that is pressurized with temperatures in the range of about degrees center centigrade about two thousand degrees fahrenheit, and a combination of propriety gases that contained pure carbon are being exposed. Carbon bonds with the slice, which is a lattice of carbon on the diamond, growing

the diamond into a larger crystal. In about six hundred hours, you have a type two way which is among the two percent of the world's pure as diamonds born in this chamber. So how expensive is it to do that then, compared to, you know, just mining a diamond. I think from the perspective of technology worsus mining um. The first round of technology is very expensive, just like every other

industry was. Over a period of time. The economy of volume and improved technology gives consumer almost a fifty better value and that's where we have already achieved. All right, So the technology is there, are you selling any of these times? Do we have a market price? Talk to us about that the commercials. Yeah, absolutely, So we entered the marketplace in two thousand sixteen. Our first retail fit out was that one of Berkshire had to store in Omaha.

I mean the last five years, the overall category has grown to almost two billion dollars UM. The simplest weight to the comprices is if an Earth's Mind diamond was five thousand dollars for a one carrot, but the same prize, you would almost get a fifty larger diamond at one point five carrot. And how difficult is it to tell the difference? I mean, can you know the experts in I don't know where they are Antwerp or Street or whatever.

Can they Can they look at one of these diamonds and an earth Mind diamond and tell the difference instantly? Actually not, because a diamond is a diamond irrespective of how it's grown. You would need is meter to tell the difference between these two diamonds. Alright, So I think about a big retail chain like Pandora. Are they selling your diamonds or are they selling diamonds that are lab grown diamonds? I guess uh. Pandora has just recently entered

into the lab grown diamond category. UM labgown diamond category is expanding. The very high pace is the growthy year over a year is in triple digit and because of the value it's offering the consumer briant from accessory to find. Jewelry are starting to enter the category, but your products are I'm thinking of your products on a higher price level than a Pandora, than the average take the price

at Pandora. Yes, we currently operate in the larger from a one character four character price point, so we would be almost a few times of the Pandora price point. Okay, So I go into a diamond store. I feel like this isn't widely lone or maybe it's just me. I'm not haven't been in the diamond market. Dude, did you not see blood diamonds? I did not, Leonardo DiCaprio, it was awesome, and like, so here's the deal. The kids

are unhappy, a justifiably so. I mean, you know, there's a lot of ethical and moral concerns with earth mind diamonds. That's why this is such a great solution, is um. And I just wonder how much of the market are you going to take with with lab grown diamonds As more and more people say, look, it's just as good

or maybe better, and bigger is always better. So um, I'd rather have this than a diamond that I'm not really sure about the origin of Yeah, if you think about it today, if you and it's an environmentally and a socially conscious product, the product that's made above the ground in sophisticated labs. And the important part is it's actually a finer quality diamond. And then when you look from the prize val, it's like you're getting something better for less. In terms of how much market place this

will cover over the next decade. From two billion dollars, we're looking at about fifteen billion dollars in the next ten years. What is also more interesting is the overall diamond in diamonds come to the market each here is about twenty billion dollars, so you can see that the consumption is going to grow. Also, it opens a much more bigger market space. I think that's the bigger part, aspirations are not going to be achievable because people can

afford more diamonds. What is the diamond industry? What's been a response from the mind years. I think, like every industry, and I think yours you must have seen this more than meat. The manhoods always take it with hard feelings. Nobody likes their customers to change their taste or choice and nobody likes the midstream to change what is happening forever. It happened with cars, it happened with every consumer product. But at the end of the day, the consumer makes

the decision. What's the marketing like now? I mean, I can imagine if I said diamonds are a girl's best friend. I think my wife might slap me. It just seems like a sexist thing to say. On the other hand, she loves diamonds, right, and I don't care about them, So what's the marketing play? The marketing play is a larger and more beautiful diamond for the same money. I'll

put it this way. If you had to get your wife a one carrot diamond, and you went to a store with her, and she would have a one carrot on a finger or a pendem internet and she would have a one point larger and you were paying the same amount of money. You would be happy. But think about how much more happier she's going to be well, And she would be happy about the social aspect of it as well, because I don't think she's comfortable with the you know, the possibility that the diamonds she wants

could have caused so many people, so much pain. It's such a fascinating story. Miss thanks so much for joining us and as Shaw there, President A. L. T R. Created diamonds. Let's talk taxation, global taxation and the corporate minimum attacks. To dive into that, we welcome Mimi's song, Chief Economists for Cross Border Solutions Me me, thanks so much for joining us here. Just give us a background here. Where are we? I know there's a lot of discussion here.

Where are we with a corporate minimum tax on a global basis? Well, we've we've already seen that the G seven has met to come to at least this consensus lot of framework of what that global minimum taxation would look like. And based on that, we've even had a hundred and thirty countries come to the table and agree that this makes sense and everybody is willing to negotiate, which is a huge step towards trying to get to this global minimum taxation. So is it a minimum uh

tax rate? Or I mean in the US, for example, um, the corporate tax rate is and a lot of companies end up not paying any taxes at all? Is that still going to happen when it drops to fifteen? So the the idea here, and the reason for these proposals is ultimately such that corporations can no longer take advantage of those tax arbitract situations and establish these elaborate schemes

where they don't pay any taxes at all. So this idea of you know, profit being untaxable, and so that this is what the the global community is coming together to try to mitigate. They want to they want to tax corporations. They want to make sure that corporations are paying their fair shared taxes in the right locations. And under the proposal there, it gets a little bit complicated,

but essentially there's two aspects of it. Number one, the aspect that companies need to you know, companies operating in this digital economy because of the antiquated tax rules, they're not being taxed because in in the right countries, because those countries don't have the taxing rights of the idea of taxation historically was based on brick and mortar structures, and now that's no longer the case. They're redefining what

that taxation right looks like. And then on top of that, they're going to be applying this concept of a minimum taxation where a company headquartered in a certain location. There is the global tax you know, the global effective tax rates should be at this minimum rate right where everybody has to taste the proposal somewhere around fifteen percent at this point, but of course all those details have yet to be finalized. God, this so complicated, man, it's I mean,

it's already complicated classes right. I love the There is a letter circulating Donald Rumsfeld's into the I R S where he said, like, I've looked at this, I've got a college degree, I've had accountants look at it, and even my wife looked it over, and we still have no idea if this is right. Um, I was going to say, the tax is like hundreds and hundreds of pages long, and it just create It's even more complicated because it's layers on layers on top of you know,

tax code. Right, it's just building upon something instead of building the house from scratch. I mean, is this just the way politicians like like it? Is this? You know how you know salaried professionals making a hundred seventies six thousand dollars a year end up being multi multi millionaires or is there any possibility of the tax code being simplified. You know, that's that's that's that's a difficult question to answer. I think everyone would love simplification of the tax code.

But I think it's nearly impossible to go back to that state, right, because like I said, it's it's it's actually of thousands of pages of tax code. I mean that that that just is so complicated that trying to start over from scratch is going to be nearly impossible. And so now it's just a matter of you know, it's trying to fix what what is some you know, you know it will be interesting, Mami. One of the reasons, right,

is that we try and incentivize behavior with UM tax deductions. Well, we no longer be able to do that if there's a minimum rate. Well, so this that's that's an interesting question because the minimum rate is one aspect of taxation, but that incentive there are other tax incentives, tax credits that will that will actually help to bolster and continue

to UM sort of bring in investment and innovation. Right, So R and D tax credits, which is another section of the tax code beyond this this just overall effective tax rate. And so the interplay between all of these different aspects of taxation. It's just really complicated, and no, it is really I was just thinking, Paul, we should do a podcast on taxation. It would be fun, it would be fun for us, and we'd have mania on. But I don't know if anybody would click on a

taxation podcast any case. Mimi, thanks very much for joining us. Great to have you. Mimi Song, chief economists at Cross Border Solutions. Let's bring in now Steve Wyatt, his chief investment strategist at b Okay Financial. They have ninety two billion dollars in assets under management, and Steve, maybe you can help shut us, help us shed some light on what's going on in treasuries right now. We're looking at a yield of only one thirty sixty two and the

real yield is below one full percent. Why our investors buying bonds after the fed's hawk ish turn and amidst taper talk. Yeah, so, good morning, Matthew. Thank you for the opportunity to be here, and I really appreciate you starting off with such an easy question like that. Uh. It's uh, it truly is something that has somebody that started their career in two under a Paul Boker Fed as in the bond market, you look at what's happening and it's a it's it's a bit of a head scratcher.

I think that in the end we can talk about the distortion of quantitative easing is is causing in today's you know, on the domestic market, uh, the impact of

what's happening from a global standpoint. But I think if you just have to look at the shape of the yield curve and what's happened since the Fed came out and gave some indication that there was some disagreement on the f O m C about when the interest rates may need to rise, and the response to that, This flattening of the yield curve, to me, is a pretty strong cautionary statement on the part of the bond market that the Fed, as much as we want them to

be able to get back to a normal monetary policy, we want our economy to be able to operate without the level of extraordinary monetary accommodation that we have today. I think the bond markets send in a signal to the Fed that they better be very careful about how they do that and how how important their communication process between now and then is going to be Steve. A big part of the inflation discussion is obviously wages, and we got some the Jolts data this morning. Still a

lot of job openings out there. We had a pretty good jobs number last week, but still, um, it's tough to make a call for inflation if there's still uh, you know, a lot of folks that are not employed. Yeah, and look, I think it's going to be important one of the uh you know, one of the important topics that we're looking at, kind of the trends that we're looking at between now and the end of the year

as we think about our outlook for the economy. How the labor force unfolds from its current position is going to be a key metric. It's so important as we think about how we move from a stimulus based recovery to a more private sector driven expansion that can last for a longer period of time. What did we have a hard John say that we're now up to nine point to one million job openings, were still seven million something jobs short of where we were in the economy

before we went into the pandemic. So there's clearly this huge gap. It's not like there's a I think for job seekers. It's not like there's a fear of missing out. There's a lot of jobs out there. I think the reasons why the labor market has been slow to respond or complex, but we anticipate that is going to change over time that we think that there is going to

we're gonna see steady improvement. I would not be surprised to see non farm payroll gains of over a million UH in a couple of months as we moved between now and the end of the year. And there other reason that's so important is that's going to play such a big part and how the FED approaches their monetary policy because they keyed in on the labor market right or wrong, agree or disagree whether or not monetary policy is the right tool to help solve the labor markets problems.

That what the FED has focused on, and that's what we think is going to drive monetary policy from a longer term perspective. In terms of investments, Steve Um Bloomberg's Danni Burger put a chart out this morning that I thought was interesting showing that the US Economic Surprise Index. You know many banks have these, but Bloomberg has its own U s ECO Surprise Index fell to the lowest level since June of not still positive, but it's not

it's just barely positive. And I wonder if that means, you know, most of the recovery, most of the growth ahead of us is already priced in. Well, there's part of that, and I think the other part of that is whether or not we're at this peak growth. And

it's like the second derivative problem. It's still positive, but not as positive as it was correct and so we kind of think we're right at that peak stimulus, the impact of monetary policy easing, the fiscal stimulus that occurred, which was material and really frankly puts US in a different position than we've been in past periods. We I think, for all of us in this business, we have to be humble enough to say that as we look forward,

there's a lot we just don't know. If we think about where we were twelve months ago and the conversations that we're having today versus then uh, it's a lot better. The risk that I think we're facing today are more manageable than they would have been had we not taken

some of those steps. But our thought as we look forward is what's next is somewhat less monetary accommodation, somewhat less fiscal accommodation, somewhat slower economic growth, still positive, but we're not going to do what's the Atlanta FA GDP now and X ten ten eleven for the second quarter.

We're not going to see earning's growth at the same level that we've seen, but still going to be positive and uh, and that's still going to be an environment where we can look for the economy to expand and job growth to remain positive. All right, Steve, great to get your thoughts. Really appreciate you dropping by with some insight.

Steve Wyatt, I said, is chief investment strategist to be okay financially about ninety two billion dollars of assets under management, and UM, you know, I think, if anything, this is the time when you really need expert advice. I mean, this is a very sensitive market. Is it priced to perfection? Are there still opportunities out there? Um? I don't know about you, but I need some guidance. And that's why we talked to experts like Steve. This is Bloomberg bringing

Naomi Nick. She's a corporate influence reporter for Bloomberg News. She joins us on the phone from Washington, d C. Naomi. Uh, your story here about Amazon's really interesting. Here, just refresh our memory here kind of how did this play out?

I guess it was a couple of years ago when this big contract was being awarded, a Jedi contract, Jedi contract, Yes, potentially you know out UM awarded the Jedi contract, which is a which was a contract that would have given the winner ten billion dollars up to ten billion dollars over a decade to be the Pentagon's sort of big

cloud services provider. That project got a lot of pushback from industry in Cooling Oracle, Microsoft, and IBM, who all thought the deal was tailor made for Amazon because it has already won a similar deal from the CIA. Uh. Fast forward a couple of years and the Pentagon gives it to Microsoft Amazon who saying the reason Microsoft got it is because of President Donald Trump. Uh and um.

And then you know, now depending on saying okay, we're going to just abandon the project altogether because Trumps is the idea, right, Yeah. Essentially that that that Trump hatd Bezos because you know, if you in the Washington Posts, and Trump was making a lot of that publicly at the time, questioning the fairness of the project, which was unusual for a sitting president to do in a procament like this. I have to say, the story is amazing.

I mean I woke up at three o'clock in the morning, checked my Bloomberg and read this story and was like, oh my god, it's there's so much drama. Um. So the Jedi contract one of the things I found interesting. It was going to be what a tenuere deal? Right, but they said three and a half years later, all that technology is basically obsolete Naomi, So now they're gonna do what is it a five year deal? Um? And I guess we're expecting it to just become obsolete near

the end of the contract. Why don't they just do these every year? You know? Eventually I guess there will be a tiny little clouds um everywhere and it will be on the blockchain. But what what's the idea? So the new contract, um, one of the biggest changes is the Pentagon is saying we're going to give this contract to multiple company these, which is what industry has been planning for all along. And yet the main cont industry outside of Microsoft, right, um. And so yeah, it's gonna

be over the course of five years. We're expecting it to be in the billions UM and there right now are saying, we know that Amazon and Microsoft are eligible for this. We're planning to talk to some of the other tech companies like IBM, an Oracle, and Google to see if they're also eligible for this UM and if

they are, they can submit a proposal. But this is expected to be like a bridge contract, and the depending on is saying, you know, we're transitioning to the cloud, and another five years they'll have maybe an even more robust contract UH to award to some of the players. What has been the response for Microsoft Microsoft was, I mean, look,

Microsoft was in a tough position. Amazon had actually filed a lawsuit right that was against uh Microsoft win of the contract, and so that the Microsoft was facing the prospect that Amazon was going to drag this thing out in court. Meanwhile, Microsoft at the time had to stop doing any work with the Pentagon. So in some ways, this this deal provides some resolution to Microsoft to actually

get started on doing some of the work. But obviously it's what's the baby, and so they're getting less money. So they offered somewhat optimistic comments public comments, which I expected. Yeah, they're supportive as long as they keep getting paid. One of the my takeaways was, how does the Pentagon not have its own cloud? Shouldn't like DARPA have invented the sweetest cloud for the Pentagon to have, And especially as

we were seeing like Cozy Bear. If a hacker group called cozy Bear can get into your databases, um, how are you gonna guard more confidence in Amazon and Microsoft than I do the US government? Yeah? But if it's not, it's not just Amazon, it's gonna be Microsoft and Amazon and maybe Oracle and IBM and a longer change, it's gonna have a weak link. Like I just I just think it's such an amazing story. Naomi, thanks so much for joining us on this. It'll be one we continue

to cover for sure. Naomi Mix and Matt Day wrote the most recent story. Check it out on the Amazon ticker. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller three on false Sweeney, I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio