If you participated in the US housing market boom which occurred between 2001 and 2005, you might have an idea of just how much money can be made when speculative fever sweeps through a particular market sector.
But what you may not know is that the same sort of speculation, during the 1970s, surged through the market for collectible stamps, and from the beginning to the end of the decade prices for some US postage stamps increased 1000%. That sort of appreciation dwarfed anything seen in the recent real estate bubble, and it was not uncommon for stamp dealers to be offering double the current catalogue rate for stamps in good condition, simply because they knew they could sell them for a profit as soon as they put them back on the market.
When a collector was able to purchase particularly sought-after stamps, he or she would often simply put them away, reducing the market supply and causing a further increase in their value. And all of this stamp speculation was happening against a background of both double-digit inflation, and collapsing stock and bond markets. In 1979 alone, the overall value of collectible stamps rose nearly 61% while the stock market increased only 5.3%.
Postage stamps became a favored haven for investment dollars and retirement funds, and as usually happens when a market for a particular investment is discovered, stamp dealers set up shop in record numbers. Most of them, however, had one thing in common: before the influx of money into the market, their closest association with postage stamps had been licking them and affixing them on their outgoing mail.
These dealers pointed out that since the first British Penny Black postage stamps was issued in 1840 and the first US 5c Benjamin Franklin postage stamp in 1847, stamps were a commodity the value of which never decreased (an uncancelled penny stamp, no matter when issued, will still buy you a penny’s worth of mail transportation) and collectible stamps were one of the very few commodities which held their value even through the dark days of the Great Depression.
Stamps were being promoted as investments in terms of their rarity, grade, and collectibility. Little mention was made of the lack of liquidity which would arise as the number of collectors who had all the stamps they wanted increased. Before the buying frenzy was over, some speculators would simply show up at stamp shows, buy a stamp lot from one dealer, and flip it for a five or ten percent profit before leaving the building. Holding an inventory of stamps simply became unnecessary.
But like the 21st century real estate bubble, the stamp bubble of the 1970’s ran into reality, and like those real estate speculators who ended up losing their last home purchases to foreclosure when home buying came to a screeching halt, the economic policies of the Reagan years spelled doom for the stamp market. The market fell by nearly 70% over the next five years, although some eternally optimistic dealers kept their catalogue prices well above what the market would bear.
The stamp market of the 21st century is back in the hands of the true collectors who buy stamps for the pleasure of holding them, but collectors who have the discipline buying to limit their purchases to the right postage stamps at the right point in the economy are the ones who will avoid the disappointments left in the wake of the 1970’s postage stamp boom.
Article Source: DesireToRetire.com