Cringeworthy Question: "Which Stamps Are Best Investment?"

Pardon the philosophical stream-of-consciousness ramble...

Every time I read someone asking "What stamps should I invest in?" or "Which stamps are the best investment?" I always cringe.

It's usually asked by someone who knows NOTHING about stamp collecting and is looking either for a place to park some money or a quick profit.

In my opinion, as a general rule, stamps are a HORRIBLE investment if you are approaching them as such. On the other hand, they are a great hobby.

While it is true that you can't go wrong buying quality, the biggest profits are reserved for those buying 6- and 7-figure rarities, usually those with pedigrees. The everyman investor putting a few hundred or a few thousand dollars into stamps is not going to be buying pieces of that quality, scarcity, or notoriety.

Stamps are not a commodity. They do not have an inherent value (unless you are talking face value for mint postage, but that inherent value does not increase over time; it only DECREASES as the individual face values become increasingly less connected to the current 1st class postage rate). An "investment portfolio of collectible stamps" has no underlying value.

There were many so-called "stamp investment clubs" back in the '70s through '90s, virtually all of which made money only for the people selling to those in the club. The actual investors just got sold overpriced and/or overgraded merchandise (for a modern incarnation, see Stanley Gibbons).

That isn't to say one can't make money in the long-term buying stamps. However, the good "investments" in stamps are obtained not based on any market index (DJIA, NASDAQ, S&P etc.), but rather through knowledge, experience, and at times, luck on the part of the buyer. Having the knowledge to be able to "cherrypick" a high-value stamp or variety at a bargain price, thus creating a good investment, requires the buyer to have investment in the hobby as well. Someone with no knowledge of the hobby is going to have almost no chance of making successful investments in stamps, no matter how deep their pockets.

What you buy and when you buy it is also a major factor. For as many red-hot countries/eras there are in the stamp market, there are ones that are ice cold and have been for decades. We are not at a high point in the historical stamp market. That was 1980-1982. Sets of U.S. C13-15 now trade at 15-25% of what they did in the early 1980s. Anyone who bought a set back then is still buried in them to this day, 35 years later.

An incident that brought this home to me and prompted this post:

I recently purchased a stockbook of classic Sweden for the purposes of cancel hunting. It had been put away in 1982, and had the original inventory and valuation computer printout, dot-matrix print on tractor-feed paper.

The 1982 Scott catalog value for the stockbook was approximately $12,700.

For comparison purposes, I calculated the 2015 Scott value of the book: just over $17,000.

Hey, not bad, right? That's an increase of $4,300!... yeah, but over 33 years. That's an annual rate of return of only 1%. Less than inflation.

That's only part of the picture. It gets even worse when you look at the results granularly, as in which stamps went up vs. down. The early classic material, i.e., that most likely to be purchased as collectibles, decreased in value immensely between 1982 and 2015, some to the tune of 50-60%. The overall increase in value of the stockbook is skewed by larger quantities of lower-value material from the 1930s-1950s that had large increases. In other words, a $150 stamp might have dropped to $80, but you have 65 examples of a stamp that went from $1.25 to $2.00. The problem is that anything under about $10 in catalog value is virtually impossible to sell as a single/set.

So even the apparent increase in value over 33 years is misleading... an illusion. Lots of cheap stamps gained value. Expensive stamps lost value.

Granted, that's only one example, and may not representative of other countries, but it illustrates what CAN happen.

So "investing in stamps" is, in my opinion, a fool's errand. Learn the hobby, invest in the hobby, enjoy the hobby, and possibly down the line you may create some opportunities to make some money along the way, but treating it SOLELY as an investment that you can put money into blindly and expect a return at the end of the line is as productive as burning $100 bills.

Investing in Dennison hinges has been far better than investing in most stamps (4000% increase since 1968).
Don

Well said. I'd also add that the average collector builds his collection in bits and pieces, a set here, a stamp or two there, and he pays the going retail rate for those stamps at the point of purchase. When it comes time to sell, most people seek to sell the entire collection at once, or at least in large chunks. Selling a collection in bulk further reduces the price realized on a per-stamp basis. Unless said collector sells his collection the way he bought it - as individual stamps and sets - even coming close to breaking even is a near impossibility. I'm just guessing here, but I'd guess most collectors would be lucky to get 50% back against what they paid. In other words, if one spent $20K over a lifetime building their collection, they'd probably be doing pretty well if they got $10K back, even years later. I'd guess that most collections probably bring even less than that. However, that's a MUCH better rate of financial return than most other hobbies, e.g. golf, fly fishing, or skydiving for which the financial rate of return is negative 100%.

IF one started collecting 60 years ago, and IF one actually knew what they were doing and only bought scarce quality material, and IF one collected a currently popular area, and IF a quality auction catalog can be produced for it, THAN a collector can make money out of it.
But the reality is that the only people who "invest" in stamps and make money are knowledgeable dealers and auction houses.

Ah, forensics. Watch 'Bones' much?

I agree with everything you've said, but would like to clarify something.

Most people do not properly (or even seriously) evaluate most of their investments, most of the time. Partly that's because it would involve seeing the future, which is a tall order. And that's partly because, for example, in the case of common stocks, that would involve understanding way too much of the subject company's business (and competitors, and cost drivers, and labor relations, and markets, and processes).

... and none of that information is readily available for stamps. The size of the market, who's buying, who's selling, none of it. Should newcomers enter the market, what will they buy? How many collections are out there, in attics, waiting for the children of the original collector to pass, so that the grandchildren can do what? Sell? Collect? Move the album to another attic?

While gold has a small intrinsic industrial value, stores well (famously inert) and is, at any moment, in a fixed supply, that is not true of the gold market. On any given day, only a tiny bit of the world's gold supply is 'on the market'. Cultural norms in India & China have resulted an enormous number of small holdings, and in quantities that dwarf the daily physical trading volume. Let incomes rise in those countries, and demand will be strong. Let those cultural norms change (and cultural norms do change), and the spot market will drown. Claiming that you have invested in gold bullion means that you have an informed judgement of which of these two things is going to happen, or neither, or both. That's just silly.

Test question: if there is widespread flooding (or drought) in India or China, will starving people be selling their gold, will frightened people be buying more gold, neither, or both?

In the case of the future of the stamp market - particularly if one is trying to pick winners & losers - you would have to have a good sense of what is in, and coming out of, those attics. That would require a lot of hours up-front, and a lot of hours every month to track & spot trends. If you are already in the business full-time, buying & selling tens of fresh-to-the-market collections every year, you might think that you have enough information to make those sorts of judgments, and you might be right. But everybody else is just running on sentiment.

https://goscf.com/t/38527 ... another math lesson on stamps-as-an-investment

Cheers,

/s/ ikeyPikey

I suspect that there is a group of "1 percenters" among us who the deep pockets to go after those "rare" stamps or philatelic material that do earn positive, and even significant returns over time. They are the buyers, I imagine, that can shell out the huge sums that Linn's gawks over every week when the prestigious auction houses report auction results. So I don't think it is only dealers and auction houses.

But for the rest of us, the "99 percent," everything being said is most likely true. Repeating what TheArtfulHinger said, but differently, if a collection recoups anything, it is yielding a better return than a lot of hobbies. I hope to leave my heirs with some clear idea of the worth of my collection, so they can get the most out of it (and not have to come online here and ask "what is the value of this?"). Under the best of circumstances, it will not be what I paid for it all. But as I've acquired a lot of items of modestly significant value, it will be worth something. And I will have had an immensely enjoyable time acquiring it, which is really all that matters.

Basil

How much is this situation is due to the silly catalog pricing? This certainly isn't helping anyone. Some folks use these unrealistic catalog values to communicate value when in reality using what they have invested in their stamps is a better indicator of value. If my collection has a catalog value of $85k but I have actually spent about $25k building it, what do I tell my family as to its value? Obviously if they sell it off they would be luckily to get $7k – $8K if they try to unload it as a collection.

So why do catalog publishers continue to play this game? Would not a catalog publisher stand out among the others if they broke from tradition and started publishing pricing the more accurately reflected true market value? While I understand that catalogs provide more information than just pricing; many folks use them to understand the value of their stamps. But we end up requiring special knowledge to figure out true value (xx percent of XX catalog).

Given the importance of condition, rarity, desirability, demand, and the impact of the internet, catalog pricing is just about useless. In some cases I think it actually hurts our hobby, new hobbyists join thinking they are spending their money smartly by buying under catalog pricing but then eventually find out they will do well to get 10% - 15% of their money back at the end of the day.
Don

Just something from the 'way-back' machine: a couple of decades ago I was at the service counter of a local Post Office when a customer bought a package of current commemoratives. ( The package cost $2,500 & was paid for with a company check) I queried the clerk and found that he was a collector (investor) who would routinely purchase an unbroken package (cellophane intact) for his collection. Not withstanding because he used a company check a nice expense write-off.

More recently there was a bulk purchaser (collector-investor, not person noted) who sued the USPS for non-acceptance for return of a significantly large accumulation of intact (not damaged) sheets of modern (but not current rate) US postage. His intent was to sell back to the USPS to regain his cost in purchase of the stock he could not sell.

The USPS policy was to replace damaged stock but not take back undamaged units as they were still valid for postage. Now I am a little unclear as to the outcome of the legal determination. I think there was an accommodation by the USPS that current rate postage was exchanged but no cash exchanged.

The name of the party suing escapes me but I did notice in the current Linn's News advertising section that there is a large 'going-out of business' sale in progress. Could this be the same person attempting to get some ready cash?

More to topic there are (were) entities that purchased large quantities of USPS issues for investment by selling later to collectors (for what they hoped was a good profit). What they failed to understand, as it has been put many times, stamps are for collecting. (Does anyone remember the case mentioned or might be able to correct or add to ??)

I think dealers would cry foul or push back hard if catalogs were to stop publishing a "catalog value." There is a vicious circle at work here. Catalogs will claim to get their values from dealer list prices, auction results, etc., but then dealers and auction houses will use the catalog value listings to justify retail prices or auction estimated values.

Probably not because collectors are so used to buying at a discount off of catalog prices. You'd have to re-train collectors to expect to pay full catalog, or close to it.

While catalog values aren't generally realistic, I wouldn't say they're worthless. If there's a stamp I'm not familiar with, catalog pricing provides a good guideline as to what it's going to cost me. It's not perfect, of course, but if a stamp is listed with a CV of $100 I know it's going to cost me a lot more than one with a CV of $1. Without published catalog prices, I'd have no clue. However, your larger point about catalog pricing in general might have some merit as I really don't know if cat prices in 1982 were more or less realistic than today. If they were more inflated then than they are now, that COULD account for some of the small increase in value.

Catalog values have always been, and always will be, "silly". It's just a matter of degrees and perspective.

If you're talking about dealer prices at stamp shows, catalog values are (generally) far more accurate than when talking about buying/selling on ebay. Without context, any price can be inaccurate.

At least catalogs give a baseline against which one can measure and assess.

Also, catalogs are more accurate in certain areas than in others, as well as different catalog publishers. For all the complaints about Scott, in my opinion Michel and to a greater extent Stanley Gibbons, are FAR less accurate. The latter is so inflated as to be laughable. That's why you see so many sellers using Stanley Gibbons prices, converting the pound sterling result to U.S. dollars, and using that number. It creates the artificial appearance of much higher value.

There may be areas of collecting as well as countries in which SG is used where the catalog values are actually accurate, but certainly haven't found them. There's another board where SG prices are used, converted to another currency, and then selling prices at 30-50% of that number are touted as "bargains" when in fact they are STILL heavily overpriced.

Pricing always has been, and always will be, a game. Buyer vs. seller. That's true in all hobbies/markets, not just stamps.


Revision after reading subsequent responses:

The entire notion of "if someone were to publish a catalog that actually reflected market value" is a snipe hunt. By definition there can be no such animal unless you publish different versions with different pricing for different venues.

The prices for selling on ebay is different from a local bourse, which is different from a national show, which is different from specialized dealers, which is different from prices in other geographic regions.

ebay prices realized are accurate... for sales on ebay. That's it. You cannot say that ebay prices are "real world prices" thus implying that show pricing is not, and vice versa.

If someone wants to publish an " ebay stamp pricing guide", then by all means do, but it's only going to be accurate for ebay sales.

The hunt for a single accurate catalog value for a stamp is an exercise in futility.

"The prices for selling on ebay is different from a local bourse, which is different from a national show, which is different from specialized dealers, which is different from prices in other geographic regions."

I would also add in the other common venue - auction houses.

These differences in buying and selling prices at different venues can be used to make a profit if you have the experience and willing to take the risk. Sometimes it also requires being there at the right time and place when an opportunity presents itself.

I am not so sure I buy into the 'it can't be done' argument. Yes, it is complex with many variables to be considered. But this is no different than many industries which have accomplished the same thing.

For example, I can use my phone to determine the prices paid for a car in my area; I can see those who paid higher than the rest and those who paid lower than the rest. I can quickly change my zip code and see what others paid in a different location.

I can determine what others are paying for motel rooms; the cost if I walk into the lobby and get a room, the cost if I book through a travel agent, the cost if I book it myself online. This seems to me to be not much different then various stamp buying venues.

So in my mind it is not a question of 'if it can be done' but more 'is it feasible'. The obvious challenges include;

Bad data – Especially online, the listing are full of misidentified material. Some if this could be offset with the use of a standardize data submission form. If your data set is large enough and the bad data percentage small enough this becomes a minor issue.

Incentives – Obviously something has to be in place to incentivize people to submit data. This might be in the form of a direct payment (per stamp, annually) or indirect value (advertising value, web traffic, etc.).

Technology exists which can harvest this data now (with much of it automated). It is simply a question of implementation costs and motivation. We might not see this any time soon (next 3-5 years) but at some point I truly believe that this will happen.
Don

I don't.

The comparison to hotel rooms and/or car sales is a poor one, as those have industry standard parameters relatively easy to identify and restrict. More importantly, the sellers are standardized. It's not Bob in the basement taking cellphone pics selling the item in question.

It's far more complicated than just "Scott # XX"

Think about all the aspects of a philatelic item that go into determining the price on ebay, not all of which relate to the item itself.

1. Centering
2. Impression and/or ink color
3. Cancel strike
4. Type of cancel
5. Multiple (pair, block, plate block)
6. Hinged vs. lightly hinged vs. never hinged vs. regummed vs. no gum
7. Various and sundry faults
8. Plate variety of some sort
9. EFO of some sort
10. On cover
11. What kind of cover
12. Date of use
13. Region of use
14. Combination or solo use?
15. Domestic or international?
16. Advertising cover?
17. Patriotic cover?
18. Used illegally as revenue on document?
19. When?
20. Where?
21. Aesthetics of document?
22. With or without cert?
23. Which expertizing body?
24. Seller with established track record?
25. Seller with favorable payment and return terms?
26. Image quality
27. Thoroughness of description

The list goes on and on. There are so many factors that can turn a $2 item into a $2,000 item and vice verse that trying to compile meaningful, clean data without human examination is going to be impossible.

Never say "never"

"I am tired of this sort of thing called science. We have spent millions in that sort of thing for the last few years, and it is time it should be stopped," proclaimed Pennsylvania Sen. Simon Cameron in 1861 as he tried to kill funding for the Smithsonian Institution.

"Nonsense, man! They couldn't hit an elephant at this dist--" The last words of U.S. Gen. John B. Sedgewick as he sized up the Battle of Spotsylvania in 1864.

"Musically, we are more talented than any Bob Dylan. Musically, we are more talented than Paul McCartney," said Rob Pilatus of Milli Vanilli.

"No woman in my time will be prime minister," said Margaret Thatcher in 1969

"No matter what happens, the U.S. Navy is not going to be caught napping," Secretary of the Navy Frank Knox said three days before the Japanese surprise attack on Pearl Harbor.

"We don't like their sound, and guitar music is on the way out," explained Decco Recording Co. in 1962. They rejected signing a little-known group called the Beatles.

April 30, 1789. George Washington arrived at that Inaugural shadowed by doubts. "My movements to the chair of government will be accompanied by feelings not unlike those of a culprit, who is going to the place of his execution,"

"The concept is interesting and well-formed, but in order to earn better than a "C," the idea must be feasible." A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. Smith went on to found Federal Express Corp.


"Heavier-than-air flying machines are impossible." Lord Kelvin, president, Royal Society, 1895.

"So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So then we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.'" Apple Computer Inc. founder Steve Jobs on attempts to get Atari and H-P interested in his and Steve Wozniak's personal computer.

"The bomb will never go off. I speak as an expert in explosives." Admiral William Leahy, US Atomic Bomb Project.

"This fellow Charles Lindbergh will never make it. He's doomed." Harry Guggenheim, millionaire aviation enthusiast.

"Man will never reach the moon regardless of all future scientific advances." Dr. Lee De Forest, inventor of the vacuum tube and father of television.

"Stocks have reached what looks like a permanently high plateau." Irving Fisher, Professor of Economics, Yale University, 1929.

"I think there's a world market for about five computers." Thomas J Watson, Chairman of the Board, IBM.

"Who the hell wants to hear actors talk?" H.M. Warner, Warner Brothers, 1927.

This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union internal memo, 1876.
Don

It's a few years old now, but this Linn's Stamp News article from 2011 addresses the subject quite well:

http://www.linns.com/howto/refreshe...rcourse.aspx