Tuesday, January 4, 2011

Investing In Forever Stamps

Peter Schiff wrote an interesting commentary on the USPS moving toward selling only "Forever Stamps" (stamps without numerical denomination).

If Forever Stamps are a store of wealth and begin to trade like currency, will the Federal Government accuse the USPS of creating unlawful money?

Peter Schiff says:
Over the past fifty years, the USPS has raised the rates on first class postage 20 times. During that time the stamp prices have gone up more than 1,100%.

Those individuals and institutions who hoard the stamps now could offer them for sale in competition with the Post Office. Even though the Post Office will not redeem forever stamps for cash, there is no law against reselling them for whatever price the market will bear. How many forever stamps will the Post Office be able to sell at full price if customers can buy them at a discount on Ebay?

On that note, forever stamps provide the most conservative investors with a much more attractive alternative to zero interest checking accounts, low yielding Treasury bonds, or even inflation protected government securities (known as TIPS).

Given these stamps will always be completely liquid, the only way an investor can lose money on forever stamps is if the price of postage goes down.

Over the past 10 years stamps are up 29%, while the S&P 500 is up a measly .1%.