The Most Stable Investment

What do Federal Reserve Chairwoman, Janet Yellen, a green jacket wearing Masters Champion, Bill Gross, the Billionaire founder of PIMCO, the $270- billion- dollar bond fund and a winner of the French Open have in common?

If you guessed money, you would be on the right track, but a long way from a touchdown.

They all invest in rare stamps.

Say what?

That’s right. While the subject of stamp collectors may bring to mind the image of a nerdy 6^th grader pouring over a stamp book or a retired pensioner examining a stamp with a magnifying glass, I have news for you, investing in rare stamps is one of the most stable and rewarding income producing assets on the planet.

It is driven by 60 million dedicated investors planet wide, some 20 million of whom are in mainland China. And the Chinese investors are making up for lost time. Mao had outlawed stamp collecting giving it the kiss of death by calling it a bourgeois activity. Today it is back in China with a roar.

“…some important Mainland Chinese collectors are today ‘repatriating’ stamps, in the same way that others are bringing back Chinese artworks.

“I would say presently that half of my buyers are from Mainland China and half are from outside China,” said Louis Mangin, owner of the auction house Zurich Asia. ‘Many Westerners also buy Chinese stamps. It is seen as a diversification and investment into China.’”

http://www.nytimes.com/2010/11/19/fashion/19iht-acagstamp.html

But it’s not just China.

Before detailing this investment strategy, let me point out an important difference here: there are two related but divergent paths when it comes to stamps. One is stamp collecting. It is here that one encounters the nerdy 6^th grader or gramps with his magnifying glass. This activity is done for fun, as a hobby.

Those investing in rare stamps are a different breed entirely.  In fact, Billionaire Bill Gross has said that investingin rare stamps is “…better than the stock market.”   He should know, having 4xed the value of one of his collections.

http://www.marketwatch.com/story/why-stamps-are-bond-king-bill-grosss-favorite-investment-2014-06-19

Investing in rare stamps is a $10 billion a year market.

Not chicken feed.
What is attracting Gross, Yellen and the other 59,998,000 investors?

Take a look.

INVESTMENT RETURN

First of all, the returns are stably double digit. Take a look at these statistics.

There are two rare stamp indexes: one tracks the 30 rarest stamps. The other is broader, covering 250 investment grade stamps – rather like the Dow Jones Industrial Average of 30 stocks and the S&P index of 500 stocks.

During the 2008-2009 financial crisis, while equities and real estate markets fell like rocks off a tall building, the two investment stamp indexes both rose in excess of 30%: the GB30 Rarities index rose 38.6%. The GB 250 Stamp index increased 32%.

Like I said, not chicken feed.

This was no anomaly. The compound annual growth rate of the GB30, which measures the 30 rarest British stamps over the last 60+ years, is 9.3%. And get this: the GB30 has never fallen in value over the past 60 years.

Here’s a graph of the performance of the GB30 for the last 22 years with a comparison to gold, UK property (which has been one of the hottest real estate market in recent years) and the FTSE (the Financial Times Stock Index of 100 companies on the London Stock Exchange with the highest market capitalization).

http://www.stanleygibbons.com/investment/gb30-rarities-index/

The GB250 Stamp index was founded in 1991. This index has generated an average annual compound return of 13.4% and, like the GB30, has not dipped in that time.

http://www.stanleygibbons.com/investment/gb250-stamp-index/

These graphs courtesy of Stanley Gibbons, the world’s leading dealer in rare stamps.
https://www.stanleygibbons.com

Ninety-nine percent of stamps are not investment grade. That is the collector’s playground. It is the remaining 1% that is of interest to investors.

Here’s a look of a top performing stamp.

http://www.stanleygibbons.com/investment/gb250-stamp-index/

A record for the most expensive stamp was set on June 17th of 2014 when the sole remaining 1856 British Guiana 1- cent Black on magenta sold at auction of $9.48 million, slamming the prior record of $2.2 million set in 1996.

A guy could buy himself a Beverly Hills Mansion for that kind of bread. But no, he buys a 1-cent British Guiana stamp issued in 1856. (The purchaser, Stuart Weitzman, is a shoe designer…who just happens to make the most expensive shoes in the world).

http://www.stuartweitzman.com/home/

(I’d appreciate it if no one forwards this newsletter to my wife)

STABILITY

Most of us have experienced an instance of market volatility with some investment or another over the years – stocks, bonds, real estate, precious metals…

The investment stamp market is not correlated to other volatile investment markets – equities, real estate or even precious metals. It operates on supply and demand. You can’t “short sell” (flood the market with) rare stamps nor are they bought and sold in milliseconds by algorithms created by MIT degreed cyber investors working out of Goldman Sachs.

Rare stamps are bought the old fashion way, by highly trained professionals that examine the stamps in excruciating detail.

They assess:

1. Rarity. How rare or unique is the stamp?
2. Condition. Factors influencing condition include: the gum on the back, the vibrancy or freshness of the color, the margins around the stamp (early stamps were cut by postmasters and had no perforations).
3. Provenance. The authenticity of the stamp, tracing its documented history.
4. Liquidity. How many collectors are there of the issue? How easy or difficult would it be to sell the stamp?
5. Price. This is done by assessing the market professionally to determine prior sales and prices.

DIVERSIFICATION

A third reason is an important one: diversification. An investment in rare stamps spreads the risk of your assets. I would recommend 10% + of one’s investment assets to be placed in this category.

HISTORY

And for some, there is the quiet thrill, romance even, of owning in a piece of history.

For example, a series of pictorial stamps were issued in 1869 one of which commemorated the signing of the Declaration of Independence.

“This stamp commemorating the historic proclamation of the United States independence is one of the finest examples of the 1869 pictorial issue. On July 4th, 1776, thirteen American colonies that were involved in a bloody war with Great Britain proclaimed themselves independent states and refused to recognize the rule of the British Empire. Numerous nations all over the world followed the example of the U.S. by creating their own independence declarations, which laid the foundations of global democracy and fair international relationship.

“Like other stamps of the issue, the Declaration of Independence is printed in two colors, green and violet, and can be rightfully called a miniature masterpiece. Artist John Smillie made an exquisite and highly precise copy of the similarly named painting by John Trumbull, having engraved 42 persons with six principal figures recognizable only through a magnifying glass…

An unused sample with an inverted center is currently valued at $275,000.

(In Philately – stamp collecting – an invert error occurs when part of a postage stamp is printed upside-down. Inverts are perhaps the most spectacular of postage stamp errors, not only because of their striking visual appearance, but because some are quite rare, and highly valued by stamp collectors.)

https://en.wikipedia.org/wiki/Invert_error

 HOW TO INVEST

Unless this is an investment area of deep understanding on your part, you can avail yourself of the world’s leading professionals at Stanley Gibbons. They are the world’s oldest rare stamp merchant, having been established in 1856.

This is a track record that pre-dates the American Civil War.

You can invest with Stanley Gibbons, the UK firm that has been in business since 1856 and provides a lifetime guarantee on the authenticity of the stamps. They are the world leader and experts in stamps and they will procure and manage your portfolio for you or you can participate in the selection if you care to do so.

They have been “stamp picking” for clients for more than 150 years.
You can start a portfolio with Stanley Gibbons for as little as£10,000 about $ 12,500 as I write this in late March, 2017.

They will store and insure your collection for free in climate controlled vaults in either the Channel Islands or Hong Kong. Or you can take possession of your portfolio.

They take no buy commission, charge nothing for the insurance or the storage. They take either 20% or 30% of the profit when you sell, depending on which investment plan you chose.

An important point to keep in mind is that this is not a “day trading” kind of investment activity, it is a steady medium to long-term investment strategy. One should approach a rare stamp investment with a five year or more term in mind.

Investment grade stamps don’t get the airplay of the stock market, the real estate market, or the precious metals market, but they are an investment asset that is not subject to the volatile fluctuations of those markets, demonstrating rare stability. I feel they should represent 10% or so of one’s investments assets.

Meanwhile, keep your powder dry.

John Truman Wolfe
Last week of March, 2017