Investing in stamps?

Postal officials pitched the idea of creating a “forever stamp” that would be good for sending first-class mail no matter how much — or how often — the cost of a postage stamp goes up. The announcement came on the same day that the Postal Service said it would seek to raise the price of a first-class stamp for the second consecutive year.

The forever stamp, which would cost the same as a first-class stamp, would provide a hedge against future postal rate increases and end the search for 2- or 3-cent stamps that usually follows a price increase…

Consumers could squirrel away forever stamps for months or years; they essentially would gain value every time rates increase… The cost of a first-class stamp has gone up 13 times since 1974, when the price was raised from 8 cents to a dime. Kearney said rate increases soon could become an annual affair. [WaPo]

The AP version of the story that I read in my local paper said that hoarding was not expected to occur.

Hoarding stamps (say, buying one million stamps now, and selling them after the next hike for a price slightly below that offered by the USPS) is profitable if the revenue exceeds the cost of storage and the opportunity cost of rates of return of other financial instruments.

If hoarding is not expected to be a problem, the USPS is saying that it expects future price hikes to be small relative to these costs. What other factors are relevant and what other information does the USPS reveal by saying it doesn’t fear stamp speculators?

David Andrew Taylor predicts fairly sizable stamp price increases in the next two years and estimates that the return on investment would be 7.7%!

1 thought on “Investing in stamps?

  1. Tim Lee

    I think the cost of purchasing the stamps at the beginning (i.e. the gas and labor time it would take to drive to each post office) and the retail costs at the end (the need to either sign deals with retail establishments or pay for shipping and handling on eBay) would be a major factor. Given that the value of a stamp is so low, it wouldn’t take very much cost to make it uneconomical.

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