The recent sale of a 1 cent Ben Franklin stamp for $4.4 million, the most expensive U.S. stamp ever sold, again raises for consideration the question, “Are postage stamps good investments?” Certainly Bill Gross, the seller of this stamp thinks so. So too does the buyer of this item, whoever that may be. Both are people of means, a measure that doesn’t suffer fools.
As a matter of record, there are many, many stamps that have sold for prices in the 6 and 7 digit range with one, the British Guiana selling for some $7 million and then being syndicated by Stanley Gibbons for about $10 million in $100 participations. So, what is going on here? Clearly these are not the machinations of philatelist collectors. One needs to look at the world of investments on a global scale to find an answer. More to the point, to find whether there is opportunity here for those of us with smaller means.
As someone who made a living giving investment advice while also being a lifetime stamp collector, I sensed that postage stamps had a measurable investment potential. We need to identify what attributes separate out those stamps with such potential. The key to that process is to recognize that it is not just rarity that creates high value, it is what we call provenance.
By provenance I mean not just the attributes of individual rare stamps with a notable ownership history but also, the other attributes make lesser stamps also of interest. Take the most expensive single stamp, the British Guiana penny red. The stamp is a poorly made stamp, unattractive in appearance from an insignificant country which no longer even exists by that name. It was, however, recognized as unique with an interesting history of its creation and ownership. Through astute marketing, which included publishing a small book on its history and ownership, the stamp attained a level of provenance unrivaled in the stamp world. In short, good marketing created a demand from people who were either fanatical philatelists or had such depth of wealth that diversifying their investments was a primary goal.
Today, investment grade stamps have come about due to having achieved spectacular value appreciation over a history going back over 180 years. Sound familiar? Don’t a large segment of valuable physical objects consist of items going back from decades to thousands of years? The growth of world population and accumulated wealth creates value for historical items which only royalty could afford or have been made scarce by the ravages of time. The result has been that more and more unlikely items have achieved stature as a collectible asset. I need point no further than sports trading cards with barely 100 year history going for 7 figure prices.
A less frequently cited reason for the rising demand for physical objects as a means of preserving wealth is portability. The world has always been a dangerous place not just because of war, but more often because of despotic governments. Both these problems still exist today. More to the point, there is little a person of means can do about it other than to acquire something valuable which is also portable. The explosive growth of digital currency is testimony that portability and secrecy has a high demand. Rare postage stamps have both these attributes with the added feature that they can be physically hidden and if found, are not readily recognized. In short, they can be hidden in plain sight.
Investing in stamps is not difficult but, like all collectibles, it has rules for valuation and item specifics that you must understand when acquiring an item. You can get clues from this series of articles as to what to buy, where to buy it, what resources you need to become familiar with and how to avoid the numerous caveats in item selection and seller selection as well. With time you will get comfortable with buying stamps for investment and you may even find it an investment with addictive qualities. More to the point, you don’t have to be rich to engage in investing in this most interesting of investment assets.
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