When the Post Office introduced the "forever stamp", the first question on many people's minds was whether this would be a good investment. Should they buy a bundle and save them up for the next time rates go up? Of course, the economist in me figured that if such a strategy would benefit postal customers, it would be unlikely that the Post Office would offer the new stamp. Indeed, the reverse should be true. The fact that the post office is offering the forever stamp suggests that it's a good deal for the Post Office, not for you.
So should you invest in the "forever stamp"?
No. Not as payment for mail services. Slate explains why.
Not being a stamp collector, I can't say whether it would be a good investment from a philatelist's point of view. But my guess is that there will be a lot of them out there, so the scarcity value should not be great. I suppose, however, that I would want a first day cover if I was a serious collector. I'll probably buy a couple to put away for a while and drag them out in twenty years to show to my classes and to my kids. I might even order a first day postmark for the novelty and historical value of it, but that's about it.
UPDATE: ErikR makes a comment that allows me to elaborate on something that the Slate article misses.
Bill,
My kids & the Stock Market are my loves, but collecting Classic/USA [late 1800s - early 1900s] stamps is my mistress.
As a long-time stamp collector, you are correct in your hypothesis that the "Forever Stamps" are a poor collectible: high volume being issued = little appreciation potential. In addition, as a tenured auction-house buyer, I can tell you, too, that the stamps --on the secondary market, would command no more than 80% of face value by bidders! [bid = 80%; ask = 90% of face]
Best-
David J. Phillips, Editor
www.10qdetective.blogspot.com
The Slate article has some difficult to follow reasoning.
They say that first class stamps in 1971 would cost 31 cents in today's dollars. This implies that postal rates grew faster than inflation.
But the article's 2nd paragraph states, "Since 1971, postal rates have increased more slowly than the actual inflation rate, as measured by the U.S. Consumer Price Index."
What?
It also mentions 1975 stamps costing 50 cents in today's dollars. Which implies that postal rates grew more slowly than the inflation rate.
The only sense I can make of these conflicting statements is that the real cost of first class postage versus time is very noisy. But it would appear that the "range" of real first class postage growth includes zero. Perhaps we should conclude that postage rates tend to grow at the rate of inflation, but with a lot of "noise" in the signal.
In which case the Forever Stamp isn't a horrible buy. But you'd still be better off with an I-bond which is guaranteed to beat inflation...
It may make a poor investment, but a good expense.
David,
Thanks for the comment.
Lord,
Perhaps. Is the end of the fiscal year approaching for you?
ErikR,
The Slate article does skip over an interesting detail. To be precise, it is not noisy in the usual sense of the word. It is simply that the changes to the rates are discrete. It is the same phenomenon you see in the data for the real minimum wage. The real minimum wage is lowest right before an increase in the nominal minimum wage, and then it jumps up discretely and begins trending down again.
Hence, with the stamps, there may be periods of time (right before a rate increase) when the forever stamp is a marginally good deal. Immediately after the rate increase, it is most certainly not.
So will we see a surge in sales of the forever stamp before future stamp rate increases? Probably, but even with perfect timing, the real rate of return in holding the stamps probably won't beat that of a certificate of deposit. So I wouldn't expect people to buy more than they will actually use in a reasonable period of time.