The Investment Meme Must Die

THE INVESTMENT MEME MUST DIE

I'm fond of John Apfelbaum's blog. It offers a pleasant collection of homey anecdotes, and the occasional bit of useful history or advice. If I ever did any business with his firm, it was as a teenager in the 60s. I've got nothing for or against the man, or his dad, or his granddad.

Although there are phrases in the blog that sound like they came straight from a life of selling stamps, for the most part the blog is so evenly written & polished that I suspect the assistance of a mar-com aide-de-camp. There's nothing wrong with that; it is, after all, a dealer's promotional effort, not a private letter to his kids. And if he can write that well, more power to him.

But I was astonished to read a post - with what I took to be a Financial Success punchline ('made a bit of money') - that developed along these lines:

" ... began collecting stamps in 1940 at the age of 11 ... By 1950, [] was 21 and his collecting had progressed in scope, even though ... left little money for advance philately ... By 1960 ... married and had three kids ... interest had changed ... limited amount of time ... limited financial resources ... still pursued philately.

"... by 1980 [] was very ready to begin serious collecting. He was 51 ... and he had the means and the determination to make a fine stamp collection ... For the next thirty years [] collected carefully and diligently, spending on average about $10,000 per year.

" ... bought from reputable dealers ... passed away last year ... His collection was sold for $510,000- some 40% more than his very careful inventory had said he spent."

THAT IS NOT A FINANCIAL SUCCESS STORY.

If $510k was a 40% gain, the total investment (cash paid in) was $364k.

You get from $364k (paid in 30 annual increments of $10k each) to $510k by earning ~3.3% on your money.

For the 30-year period in question:

- that is less than you would have earned with an FDIC-insured passbook savings account;

- that is less than you would have earned with taxable high-grade corporate bonds;

- that is less than you would have earned with triple-tax-free high-grade municipal bonds;

- that is way-the-hell-less than you would have earned with stock index funds, a varied portfolio of blue chip stocks, buying a pointlessly larger house and riding the equity boom, buying rental property (ditto), etc.

If y'all wanna make the case that the money doesn't really matter, that's fine with me.

If y'all wanna make the case that the hobby value makes the monetary loss acceptable, I'm with you.

And, to be fair to Mr Apfelbaum, he was not writing abou financial gain (except perhaps to the dealers on the receiving end of that $364k), but about a pleasant life made more pleasant by philately; he never uses the word 'investment' in his post ...

http://johnapfelbaum.blogspot.com/2...-cycles.html

... but since the same $364k (paid in 30 annual increments of $10k each) would have hit $682k at 5%, or $975k at 7%, or perhaps $2,000,000 at the Dow Jones Industrial average, he dare not.

Cheers,

/s/ ikeyPikey

Good point. He also would have been far better to invest in real Dennison hinges which have gone up well over 4000% since the late 1950s. Dennison hinges have far outperformed most stamps as an investment but they aren't much fun to collect!
Don

I suppose this puts my collection of Yemen miniature sheets into good perpective. Do I care how much I spent? Not really. Do I expect to make a return on it? No - it's a fun hobby not an investment.

There's been several collections of stamps on sale recently through Spink in London. They come from the estate of Lord Vestey. All tax-dodging investments, and I'll bet he sure as anything didn't give a hoot about collecting stamps. I hope he enjoyed "collecting" them.

Then the real return on that collection was essentially zero. From 1980 to 2010, the compound annual rate of inflation (CPI) was 3.3 percent. So getting a 3.3 percent annual return from selling the collection merely returned what was originally invested, when inflation is taken into account.

One normally wants to do better than inflation when making investments.

Stamp collections do well to keep pace with inflation. I bet most don't.

I agree, unless one is one is purchasing very desirable, and scarce, stamps (or other philatelic items) at serious auction houses (not ebay), no one should think that it will be a sound investment.

That said, if put a lot of money into a collection over the years, and then pass the collection along to your heirs, and if they can get back what you spent in real terms (not all that easy to do), then what you have is an enjoyable hobby that in the end didn't cost anything, in estate terms. Of course, your heirs might wish you had put the money into CD's, but where's the fun in that?

I believe the challenge lies in being an investor or being a collector.

I have a lifelong friend who has a knack for making money. He also has a knack for knowing what "collectibles" will be worth something one day. He doesn't give a rats bottom about comic books, or coins, or little red wagons. What he cares about is how much can be buy them for and, one day, what can he sell them for.

He's not a collector. He's an investor and that's how he looks at these pieces of paper we love so much. When he'd leaf through my collection, his only 2 questions were "how much did you pay for that," and "how much do you think you can get for it."

His mindset is very different and I think an investor in stamps with that mindset can generate a return.

I think that the original investment or money spent on a collection, either or, can be said to be spent wisely, no matter the return made or expected.

The skills learned in the whole process of accumulating, collecting, sorting, investing, supplies, tools, people met, sales made or sales bought is a vast reservoir or experience well learned in life.

Much can be done with such an investment in one's self.

The appreciation of beauty that can be learned or even kind of tripped over by collecting stamps, and whether or not investing or just practicing your skills acquire along the way, is, in my opinion now, after years of collecting and ups and downs, a wise choice.

Not only can I look back with pride at what I've accomplished over the years, as well can Apfelbaum, but I can show to myself and others, my skills at various and sundry life efforts accomplished also, with collecting in the foremost of my mind.

Lesser and greater men and women have enjoyed the collecting hobby, whether stamps or other items, over the years, and given their efforts and time and skill to others and to themselves mainly, ending up with a very satisfying life indeed.

So, collect stamps and don't worry about all the details right now. They will all make sense as you move along through life.

Puzzler that whole reply was beautiful.

Indeed. This can apply to anything bought and sold for money, stamps included. I would think investing in stamps for purely monetary reasons would be a tougher and riskier investment than most. For that reason, I wouldn't do it myself. Not to mention that, for me anyway, I would think it would be a distraction from the enjoyment I get out of building my collection.

I may have missed it, but I don't see any comments about the cost of philatelic supplies, expertising, insurance, etc. Depending on your preferences, philatelic supplies can add up to a considerable about of $$!

I find my specializing as a kind of scientific detective work that is trying to further uncover, research and support with philatelic evidence the existence of something that has been alluded by other stamp specialists before but that has not been fully brought to light yet.

I wonder how many people invest in stamps strictly from a purely financial/speculative perspective. I would think that a large majority of stamp investors are also collectors at some level - collectors who have some financial resources, knowledge and risk tolerance, and say to themselves "what the heck, I'll see if I can make some money at this". Or are we also talking about Mrs. Smith who puts a sheet away once in awhile thinking they might be worth something someday? The former probably know what they're doing and can afford to take a loss if it happens. The latter is a different story.

Surely, not nearly as many people are stocking away mint US postage as there were 50-60 years ago, are there? I would sure hope not, since current US mint postage as an investment is as close to a guaranteed loser as one is likely to find.

I think that the vast majority of stamp 'investors' are collectors who have bought into a self-serving excuse to buy more stamps.

Ages ago, The New Yorker ran a cartoon of a unkempt guy - dangling cigarette, dangling belly, a week of beard, etc - standing in front of an easel, painting, and saying "These will be worth a fortune when I'm dead, Madge." We know she believed him, because she was standing behind him with a gun.

Investors looking for investments have vastly better choices.




With the advent of 'forever' stamps, and the cost of a labor-intensive service rising at the rate of inflation, and the enabling legislation in place to let it continue to do so ... a modest pile of forever stamps offers a nominal rate of return above that of other common investments, provided you will actually be sending mail.

Pawing thru Face Value Postage at the recent ASDA/NY and NOJEX, I found plenty of recent commemorative sheets of self-adhesive stamps, many in their lovely USPS philatelic packaging (sealed plastic wrapper over stamps & cardboard stiffener).

When you consider that a 42c-denominated stamp is not that hard to use on your mail - if you ever send any mail - their presence suggests that people are still buying mint sheets & holding them.

Moreover, the mint sheet stashers of the past were often collectors, so their stuff will show-up at stamp shows. Mint sheet stashers today are likely to be buying onesy-twosy topicals (Harry Potter, anybody?), so they're stuff will show-up on ebay, not bourse tables.

Cheers,

/s/ ikeyPikey