Money: Money in the Mail

How would you like an investment which shows a steady growth in real value, requires almost no upkeep, can be easily transported and sold anywhere in the Western World, and is largely invisible to the government? This paragon of investment virtue is none other than that friend of our childhood, the postage stamp.

When Ian Fleming's villainous Dr. No wished to spirit his ill-gotten gains from New York City to his guano factory retreat in the Caribbean he chose not cash, bullion, or precious stones, but a small envelope full of rare postage stamps. In these days when you have trouble getting on an airplane with so much as a suspicious-looking fountain pen, you can appreciate the problems of trying to go somewhere with your hoard of silver bars. Stamps, on the other hand, weigh essentially nothing, will not trip a metal detector, and if carried properly will do little to call unwanted attention to themselves. They have the added virtue of being unregistered and largely untraceable (this is, of course, a disadvantage if they are stolen). And as with almost all antiques, their nature makes them effectively immune to price controls.

The price action of better quality collectors' stamps (particularly the pre-World War II issues of the U.S., Canada, Northern Europe and the British Empire) has been quite satisfactory, generally keeping well ahead of inflation and providing an acceptable (sometimes very acceptable) real rate of return. While the reasons for this are many, they include the familiar one of a fixed supply of material being bid up by an increasing number of collectors. The supply, in fact, actually declines due to accidental loss and acquisition by permanent institutional collections.

The price of certain issues is also inflated by another familiar factor, our old friend the evil speculator. The virtues of stamps as a vehicle of investment have not gone unnoticed by noncollectors and we have consequently seen rashes of speculation on various issues, sometimes reminiscent of the Tulipmania. The best advice for the investor would likely be to avoid like the plague any issue which seems to have been the subject of speculation, since the support for a stamp's price is ultimately the collector and if the collector is priced out of the market the speculators are left trying to sell to each other. One dealer remarked that the stamps of Israel and the Vatican have recently been good examples of these speculators' bubbles.

Speculators aside, the field is studded with snares for the unwary. Foremost of these are the plethora of modern issues which are sold by unscrupulous government postal administrations with no other purpose than bilking collectors.

Investment by noncollectors is made difficult by the fact that stamps are described and traded in a highly specialized vocabulary and minor variations in paper, coloration or engraving may have a significant effect on the price of a stamp.

Investment in stamps is made even more difficult by the problem of obtaining current price information. While an average collectible grade of a particular stamp may sell at a fixed percent of its SCOTTS CATALOGUE price, a fine, well-centered specimen may sell at a premium over the catalog price. As one dealer commented, "On good quality material, it's whatever the market will bear; it's a seller's market."

This "seller's market" relates to another problem for the investor, the difficulty in finding enough choice material to buy. While your stockbroker can soak up $20,000 in the twinkling of an eye, it's darn hard to spend that on stamps and still know what you are buying. You cannot, for example, decide that the King George V £1 Postal Union, which catalogues at about $200, is a good investment and go buy $20,000 worth of them: you just can't find that many being offered. With the exception of a handful of individual "classics," to spend that much for stamps you will have to buy collections which will contain a great deal of material that you will know little about insofar as its investment potential is concerned.

While stamps may be inflation-resistant, they are not necessarily depression-proof. Based on past experience, the intermediate and lesser range material (at a guess, individual stamps worth less than $500 apiece) may, in a depression, be dropped on the market by investors and collectors who need cash, while the more expensive items may be in firmer hands. To the extent that some of these costlier items are held by investment syndicates (and perhaps even leveraged) then they too would be imperiled by a major depression.

There is another snare for the investor, perhaps more treacherous than any of the others. It is standard investment advice not to "get married" to your investment. Be heartless when you look at your portfolio and do not form emotional attachments to your shares. But stamps, alas, are very pretty things, particularly the older "classics," and so often it will happen that a person first drawn into stamps as an investor (yea, even as a speculator) has felt the appeal of these pretty little pieces of paper and gone from a cold-blooded capitalist to an emotionally-involved, enthusiastic collector who would no sooner sell a beloved stamp than he would sell one of his own children. Caveat emptor.

Davis Keeler's Money column alternates monthly in REASON with John J. Pierce's Science Fiction column.