Sadly, in the real world sometimes the black swans come to roost, and what seemed solid gold instead succumbs to a reverse Midas touch.

The COVID-19 pandemic ruptured certain segments, such as office markets and business conferences and travel, in ways that may take generations to repair. In completely different investment spheres, it turns out that “real” diamonds today can be manufactured, undercutting the mined variety, while the works of some popular and fine artists, once hotly sought-after, are now all but forgotten. The nascent non-fungible token (NFT) market, always virtual, has in large part seemingly dissipated back into the ether from which it came.

And what will become of your father’s newspaper?

What follows are a series of cautionary tales that serve as reminders that even surefire bets made by shrewd investors can go sideways, en route to the alternatives boneyard.

DIAMONDS

Diamonds are still a girl’s best friend, but investors could be forgiven for drawing other conclusions. In part because less expensive but equal quality lab-grown diamonds today are sharply undercutting the trade.

Diamonds have always been a trickier bet than gold for a fundamental reason: An ounce of 18-carat gold is an ounce of 18-carat gold, recognized globally. But each diamond is unique, with color and clarity qualities, as well as the fashion of the cut on the particular gem.

In the 2000s, challenges to diamond values became multifaceted, including ever less expensive artificial diamonds. As of early 2023, a one-carat lab diamond sold for $761, versus $4,114 for a natural diamond. Back in 2016, the two types of stones were almost evenly priced, both valued at more than $5,000.

That’s a real problem for the natural stones, as lab-made diamonds are actually diamonds.

The crystal-like cubic zirconia gems of an earlier generation, also man made, had already challenged diamonds in retail markets, but those artificial stones were known for being a little softer than real diamonds, with correspondingly more rounded, less glittery facets.

Moreover, the outlook is for today’s perfect man-made diamonds to become even cheaper. As an emergent technology, the cost of diamond fabricating equipment and production are on the typical new industry downward slide. Low-cost manufacturing platforms in China and India account for three-quarters of artificial diamond production.

In early 2024, diamond-making machines could be purchased from Alibaba.com for $400,000, or less than half the price of a typical home in California.

But it isn’t only in recent years that diamonds have slogged through undulating values. Nearly forgotten today is the great spike in diamond prices in 1980 (when gold values also peaked). The “price of investment stones rose dramatically when diamonds became a fad like stamps, coins or paintings as a hedge against inflation. From 1979 to 1980, a one-carat D-flawless stone rose in price from $10,000 to $65,000,” reported The New York Times.

It is still true that diamonds are forever. And for some investors, diamond-related financial losses are eternal as well.

OFFICE PROPERTIES

In early 2024, a recurring meme in office-market circles was that there was 1 billion square feet of empty desk space in the United States, and that a large slug of those see-through floors were going to be in lender hands soon. At 150 square feet per worker, there is enough vacant office space in early 2024 to house 6.7 million desk jockeys. About one-fifth of all U.S. offices are gathering cobwebs, according to Moody’s Analytics, and that tally does not count much available sublease space.

Few property mavens need reminders of the recent history of business districts. The COVID-19 pandemic ushered in the work-from-home era, while other trends, such as outsourcing or using remote contractors and freelancers, continued unabated. The open-office or shared-office concept also fits more workers into the same square footage, thus reducing space needs by 40 percent or more.

The upshots are seen in the high office vacancy rates coast-to-coast, and innumerable towers that cannot handle the mortgage.

A billion empty square feet leads to $1 trillion in pending foreclosures, suggested Cantor Fitzgerald CEO Howard Lutnick, speaking to media early in 2024 at the big Davos pow-wow in Switzerland.

But the United States has seen property values decline before, and then recover. Why not again?

Forever is a long time, but U.S. office markets might take decades to regain even nominal values. In 2024, general office tower values are expected to take a 20 percent cut, and the grim trend could last into the 2040s, according a recent study issued by London-based Capital Economics, which largely cited hard fundamentals of supply and demand, but also possibly higher interest rates.

One possible parallel is seen in the market capitalization of Simon Property Group, the shopping mall colossus. Simon Property shares peaked at $223 in 2016, but recently commanded only $142 each more than eight years later, despite various and sometimes successful efforts to fill up space. If malls appreciate 5 percent a year, it could be another 14 years before malls return to glory days in terms of valuations. That would be 22 years to break even, for those who invested in 2016.

Breaking even is better than taking a 100 percent loss. But, of course, the green-eyeshade types will appropriately talk about the “present value of a dollar” and “lost opportunity costs,” let alone the ravages of inflation.

Unfortunately, office tower owners who nominally break even after 30 years will also be taking a permanent real loss.

Is there salvation in office-to-residential conversions? Not likely. Many office towers have huge floorplates, creating cavernous interiors considered unsuitable for housing.

Adding to woes, office conversions to housing are not cheap. At a minimum, developers might plan on spending $500 to $600 per square foot on an office-to-residential repurposing, recently said Richard Jantz of Cushman & Wakefield.

For now, the U.S. office market promises to unravel many an owner’s purse, and the upside beyond the typical investor’s time horizon.

NEWSPAPERS VIRTUALLY FADE AWAY

“As dead as yesterday’s newspaper,” was a dismissive declaration from the era when a major city might house multiple dailies, with afternoon and morning editions, each tussling for readers and stories. Soon, the phrase may define the entire industry.

In recent years, billionaires with brains and resources have tried to save the craft of the ink-stained wretches, with a notable lack of success.

Billionaire Patrick Soon-Shiong bought The Los Angeles Times in 2018 and is quoted in his own paper having put $1 billion into the hallowed enterprise, while also losing up to an additional $40 million a year. Soon-Shiong’s stewardship followed on the heels of the late billionaire property titan Sam Zell, who also tried his hand with the iconic Los Angeles news platform, with similar results. Zell purchased the Times and also the Chicago Tribune and some smaller papers, for an eye boggling $8.2 billion in 2007.

Soon-Shiong and Zell are hardly alone. Amazon founder Jeff Bezos is reported to have lost $100 million in 2023 on The Washington Post, despite a hefty digital circulation of about 2.5 million.

That which flummoxes billionaire paper-owners can be found in a recent report from Pew Research Center and is hardly news: Newspaper circulation nationwide is down by two-thirds since 1990, while ad revenues have collapsed by 80 percent. The internet has followed radio and TV in eviscerating newspapers.

Many industry observers expect the daily newspaper to be extinct by the end of the 2020s, as predicted recently by Peter Vandermeersch, chief executive of Dublin-based publisher Mediahuis Ireland.

“The news industry is shifting from print to digital,” but readers won’t pay as much for a digital product and advertisers won’t either, he said.

Many news industry denizens have pondered: Once a city newspaper is only a website in the infinite vastness of cyberspace, what happens to its presence and viability?

In the United States, newspaper industry success stories are rare and include The New York Times, which has carved out an online niche as a national and even global news platform, with a digital circulation topping 9 million. The Wall Street Journal also gets a nod.

But as Soon-Shiong of The Los Angeles Times may find out, the upside for regional and local papers has likely been erased by the internet juggernaut, and the industry’s best days left behind with fax machines and vinyl records.

NFTs

It seems like only yesterday, or 2021, when cryptocurrency guru Sina Estavi unloaded $3 million for an NFT of the first-ever tweet from Jack Dorsey, former Twitter/X CEO.

Not to be outdone, U.S. First Lady Melanie Trump launched an NFT collection featuring digital renditions of her eyes.

For the uninitiated, or merely level-headed, a collectible NFT, or nonfungible token, is a blockchain-based certificate of ownership of a digital image that is entirely indistinguishable from all like images of the same thing.

In the NFT heyday, the digital artwork Everydays: The First 5000 Days by Mike Winkelmann (professionally known as Beeple) sold for $69.3 million at a Christie’s auction, which, appropriately, was held online.

Today, many NFTs are worthless. The amount of NFTs traded in a month fell to below $600 million worldwide in late 2023, down from more than $5 billion traded in August 2021.

Will NFTs make a comeback? It is hard to see why. Like other collectibles, NFTs do not throw off income, but unlike other collectibles, they are not tangible. You don’t get to drive around in a classic car or impress guests with a Picasso.

And while the blockchain-based certificate of ownership that an NFT represents may be unique or limited, exact copies of the digital artwork can be had for downloading. That is different from unique art or heirlooms from antiquity.

Then again, investment fads can go and go, and maybe NFTs will make a comeback. But as of 2024, the outlook is for most NFTs is to become, well, virtually worthless.

WHAT IS ART?

The work of 19th century French painter William-Adolphe Bouguereau was the most highly sought after in the world during his lifetime. Today, only art historians likely remember the name, and some associate his output with treacle.

As Wikipedia bluntly puts it, Adolphe Bouguereau was “the quintessential salon painter of his generation, and he was reviled by the Impressionist avant-garde.”

Impressionism came to rule the roost of cafe society in the 20th century, and Adolphe Bouguereau’s paintings were largely forgotten, and many simply lost. One prominent critic said Bouguereau’s work was defined by a “feeble mawkishness.”

In recent decades attempts have been made to rediscover or rehabilitate Adolphe Bouguereau, possibly by art dealers who first assembled a portfolio. But compared with the impressionists or high-profile pop artists, his works sell for a penny on the dollar.

Beauty, as they say, is in the eye of the beholder, and that can make returns on art investing very ugly.

THE FUNDAMENTALS

There are risks in any investment, but if there is a common theme among eviscerated alternative investments, it is either faddishness or an almost entirely unforeseeable change in fundamentals.

What makes diamonds or art or NFTs valuable is not income flow, but fickle consumer tastes.

For newspapers and office markets, there were fundamental changes that were largely unpredictable, such as the relatively sudden yet ubiquitous rise of the internet or the ravages and consequences of COVID-19.

If there are lessons from reviewing investment funerals, it may be the axiom that diversifying the portfolio is the best insurance in the real and unpredictable world.

Benjamin Cole (7continents7@gmail.com) is a freelance writer based in Thailand.