LUXURY INVESTMENT INDEX
Going Postal Will China save a dying alternative asset class? B Y S T A FF WRIT ER
ISSUE 01
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NOVEMBER / DECEMBER 2013
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www.investmentlifenews.com
68
12 MONTHS
5 YEARS
10 YEARS
-19%
-15%
-19%
Watches
4%
33%
83%
Chinese Ceramics
3%
43%
83%
Jewellery
2%
51%
146%
Wine
3%
3%
182%
Art
-6%
12%
183%
Coins
9%
83%
225%
Antique furniture
Stamps
7%
60%
255%
Cars
28%
115%
430%
KFLII
7%
40%
174%
Gold
-23%
68%
273%
PCL*
7%
27%
135%
FTSE 100
12%
11%
55%
*Knight Frank Prime Central London Residential Index Data for coins and jewellery provisional from Q4 2012
he use of stamps is becoming increasingly rare as the world turns to electronic forms of communication – however the humble sticky backed stamp is still producing some surprises as an alternative investment – and Asian investors are at the forefront of the move to stamps. There are two main components to the value of a stamp, the first is rarity and the other is the often-fascinating story behind how they reach the investment market. Probably the most famous stamp of all time, except for the well-known Penny Black is the 1856 British Guiana 1-cent stamp in black on magenta. This is not a stamp you would be placing on an envelope any time soon. It is estimated to be worth in the region of USD $3 million, but estimates vary, due to the fact that the stamp has not changed hands since 1980, when it went under the hammer for USD $950,000. Before any would be investors start reaching for their wallets to order the latest Stanley Gibbons catalogue* here are some sobering facts to consider. Although the price of British Guiana 1-cent stamp is estimated to have tripled in the past 30 years, the owner of the stamp, John E. du Pont, could have done better by putting his money in a run of the mill savings account. Here are the numbers. The stamp's growth in value represents a 3.9% compounded interest rate. Mr du Pont’s estimated return on investment is about 216% over 30 years (should he choose to dispose of the stamp, which after 30 years seems unlikely).
The bottom line – if this particular collector had invested in the S&P 500 he would have earned a return of about 1,000%, a step up from his paltry 216%. It seems, that John du Pont is a classic example of the collector of so-called ‘passion investments’ which are purchased in line with the collectors interests and emotional needs. This is in contrast to typical investments that are purchased as vehicles to supply a financial return. The flip side of the coin (or sticky side of the stamp if you will) is the fact that top tier stamps by and large do deliver – across the board rare stamps have risen in value by an average of 11 percent annually over the past 40 years, outperforming many equities and leading many to believe that these collectibles should be an asset class of their own. So the question needs to be asked – is emotion and the status of stamp collecting (philately - the study of stamps and postal history and other related items – ed.) the driving force behind indulging in a passion for collecting examples of what is soon to be a relic of the past? Or for those who are willing to part with large sums of money is stamp collecting a viable way to diversify a portfolio? Asian interest The new style collectors are not fixated on stamps from Britain or the stamps from Crown Colonies that formed the backbone of many collections over the years. Neither are they interested in the mega profits that can still be made from the rarest of the rare examples of both British and US stamps, which still reach auction blocks across the world.