A mortgage is forever
Rob Peebles
Neither of us was up to speed on De Beers' latest marketing angle. That's partly because my spouse, the English teacher, refuses to be seen buying Vanity Fair, and instead scours the magazine racks for those literary journals that explain why James Joyce was a genius rather than the greatest practical joker in literary history. Cleverly, she has worked out a deal with a neighbor whereby she swaps her old New Yorker and Atlantic Monthly magazines for outdated issues of Vanity Fair, and, yes, even People. She calls this her neo-Faustian bargain since she hasn't really sold her soul, but feels as if a piece of it gets chipped away every time she reads about Wynona Ryder. When I question her about her secret addiction to fashion and gossip she reminds me that I regularly watch "Dog the Bounty Hunter."
Which is one reason I haven't seen the new De Beers ads on television. Besides, we fans of Dog are sophisticated enough to understand that happiness does not spring from the coattails of trinkets and baubles, but instead is cultivated through character and harvested by accomplishment - like when Dog captures a small-time bail jumper without so much as raising his voice. Even more impressive, he does it in shorts and a leather vest without looking a bit like a middle-aged Dad at Disneyland.
Nor are there De Beers ads on the History Channel, not even during an over-hyped series like "Instruments of torture," a hopelessly inadequate treatment of the subject, mentioning neither Roseanne Barr nor Eminem.
It's because we have fallen so sadly behind current popular culture trends that we didn’t learn of the latest De Beers marketing campaign until last week. It seems that De Beers has decided they've neglected a big chunk of the diamond market, that chunk being a woman's right hand.
According to the new campaign, it makes perfect sense for today's accomplished woman to reward herself by balancing the expensive piece of carbon on her left hand with an equally expensive one on her right.
The tag line for the ad is, "Women of the World, Raise Your Right Hand." The advertising copy encourages women to think of right hand rings as "expressions of personal style for their independent, worldly, assertive sides." De Beers has even concocted designs for right hand rings that are distinct from engagement rings. According to the De Beers Diamond Trading Company, "The designs should be oriented in a north-south direction and use a lot of open, or negative, space. Rings can contain a mix of round or fancy shapes and should include at least one diamond of 20 points or more," which sounds like a lot of stipulations for an independent-minded woman to embrace, if you ask me.
The right hand rings are the latest in a long line of innovative marketing campaigns from De Beers, including the "Deranged husband" bit. That's where the married couple strolls through a square in Venice and the husband suddenly suffers what appears to be a neurological attack, forcing him to scream, "I love this woman! I love her!" When the woman grabs the guy by the lapels to see if he might need the Heimlich Maneuver he hands her a three-diamond anniversary ring, which compels her to whisper, "I love this man, I love him."
The amazing thing about that ad is that it seems perfectly normal for a couple who has just opened their wallets for a sojourn to Europe, to spring for a second diamond ring as though it were a Naples-style pizza. But thanks to De Beers, spending thousands on a rock is not frivolous, or even extraordinary. It's merely a romantic gesture, like ordering flowers or turning the sound down a little during Monday night football.
Buying diamonds seems so normal because De Beers made it so. Prior to their 1939 advertising campaign with N.W. Ayer & Son, rubies, opals, sapphires and even turquoise were the traditional stones for engagement rings. But thanks to a De Beers marketing blitzkrieg, which included persuading movie studios to include some serious diamond fawning in their scripts, diamonds and romance soon became inseparable. What had been a slide in diamond sales, reversed by 1941, and according to diamond experts, jumped 55% over the next three years.
In 1947, a copywriter at Ayer came up with the slogan "A diamond is forever," a phrase that is not only used to this day, but also was crowned the most recognized phrase of the 20th Century by Advertising Age in 1999. That's astonishing, since for more than three decades Americans watched Mr. Whipple berate shoppers who couldn't control the urge to squeeze the Charmin.
The other seemingly amazing thing about the De Beers print ads is that they don't mention De Beers by name. Only diamonds in general are hawked. While this might seem to make about as much sense as Ford encouraging people to forgo the subway to buy a car, any car, the angle is really more like the Post Office suggesting that people run out and mail a letter. Not an overnight package, mind you, but a letter. That's because De Beers has dominated diamond mining and trading for most of the last 100 years. Once mined, the rough stones are shipped to a London clearing house where they are sorted and graded. And, as the Economist explained in a July issue a year ago, if anyone else happened to have rough diamonds to sell, De Beers bought them too. The company then sells the rough diamonds at non-negotiable prices to their clients, who cut and polish them for sale to retailers, where they find their way to the ring finger of a left hand, or to the burgeoning market on the right.
As recently as 1998, the company is said to have controlled 75% of the planet's supply of rough stones. Even today, with the advent of competitors mining outside of De Beers-controlled Africa, the company's share is put around 55%.
We Americans, of course, would never let one company so dominate a market that it set prices and business practices for an entire industry - unless that company could help us remodel our kitchens.
And that's why we love Fannie Mae. The company not only buys more than one out every four residential mortgages originated, its mortgage buying and re-packaging greases the cogs of mortgage finance, making the removal of equity from our homes as easy as turning off a PBS pledge drive featuring the Three Tenors singing polka tunes.
With help from Freddie Mac, the dynamic duo bought 45% of all mortgages written last year. And get this: that market share is down from almost 60% in 2003. Traditionally, neither homeowners nor Congressmen have been alarmed by Fannie's oversized presence in the mortgage business. That may be because Fannie has its own clever marketing slogan. Certainly the phrase, "We're in the American Dream business" makes them seem warm, and fuzzy and selfless - words seldom associated with the term "oligopoly."
Fannie and Freddie have lost market shares recently, in part, because the mortgage industry is jumping on sub-prime borrowers like a dog after a mishandled steak. Perhaps taking a cue from De Beers, who has been expanding its market via women's right hands, the mortgage industry has been expanding its market to include any borrower who has a right hand. According to SourceMedia, sub-prime originations jumped 56% to $607 billion last year, thereby tripling the sub-prime share of the overall mortgage market in just two years.
The only problem with sub-prime lending, of course, is that the borrowers are, well, sub-prime. By definition, these folks are the least able to overcome financial setbacks. Jack Harris, an economist with Texas A&M's Real Estate Center, told the San Antonio Express-News that the industry's zeal for shoe-horning increasingly marginal buyers into more and more homes is largely responsible for the jump in foreclosures in Texas. Last year, the Lone Star Lender boasted more foreclosures than any other state. Perhaps not coincidentally, Texas has a relatively high share of FHA loans, the riskiest of the bunch. Harris figures that the government's enthusiasm for an ever-expanding homeownership rate may have snared "a lot of people that probably aren't ready for homeownership."
But for now, Americans are pursuing the American Dream like a 16 year-old pursues the car keys. February housing starts came in at 2.2 million annualized, the highest level since February 1984. For the record, starts averaged a mere 1.4 million during the '90s and 1.7 million during the past five years. February Starts were up almost 16% from one year ago.
But with the mortgage cartel constrained by capital requirements, how long can the sub-prime market keep making American dreams come true?
The slogan "Diamonds are forever" may indeed last forever. It's yet to be determiend whether the American Dream marketing pitch will do the same, or go the way of New Coke. |
