Stuck On Stamps
The Thrill of the Chase Keeps Collectors Stuck on Stamps
From the Print Edition:
James Woods, May/Jun 97
The "Ugly Duckling" was about to be auctioned off, and as an overflow crowd streamed into a Geneva gallery last November, a palpable sense of tension filled the hall.
Collectors had long been fascinated by this rather ordinary looking "work of art," and while knowing it was one of the world's great rarities, they joked about its bland, partially obliterated design. While expecting it to sell for more than $1 million, they never imagined the Tre Skilling Yellow, a faded 1855 stamp from Sweden with a big, black cancellation mark, would suddenly make history.
But once the crowd settled into their seats, and the bidding leaped from 900,000 to 1.2 million Swiss francs in a matter of seconds, serious stamp collectors immediately had reason to feel bullish.
Their rare and most prized holdings had risen steadily in value these past five years, appreciating about 14 percent to 20 percent annually, according to market indexes and auctioneers. Now, though, as the bidding for the Yellow continued to escalate, collectors' minds flashed back to the early 1980s, when speculators and syndicates were paying unheard of sums for investment-quality pieces such as "Graf Zeppelins" or the British Guiana one-cent magenta, and again fantasized about all hell breaking loose in the marketplace.
"1.3," signaled a prospective buyer from the back of the gallery.
"1.4," quickly countered another bidder. * Now reduced to a duel between two agents for anonymous collectors, the bidding war momentarily stopped. In fear of influencing the sale, auctioneer David Feldman, who's also an internationally renowned "collection builder," tried to disguise his surprise that the bids had moved into record-setting territory for a single stamp. Yet once the battle resumed, a few gasps were heard, as the two bidders finally drove the Yellow's price to 2.875 million francs ($2.3 million, or $1 million more than its previous sales tag in 1990)--and in effect gave all investors in rare, investment-quality stamps a resounding boost of confidence.
"When a stamp like the Tre Skilling realizes such a high price, it gives a lot of confidence to collectors holding rarities, even $10,000 stamps, and also to people thinking about investing," says Feldman, who recently sold a group of 1847 Mauritius stamps for $5 million. "Now collectors are spending more money on selective pieces. There's a new bullishness in stamps these days."
The "thrill of the hunt" is one reason for this fascination with stamps. Finding rare items at auctions or networking with dealers isn't exactly the stuff of Indiana Jones. Yet, according to one collector, "It's a macho thing. Landing a rare piece lets me say to the world, 'I've got it and the other guy doesn't.'"
According to the American Philatelic Society, about 50,000 "serious" collectors make up the core of an estimated 4.4 million hobbyist stamp collectors in the United States.
Along with the chase, which pits enthusiasts against the laws of supply and demand, collectors know that filling in album spaces is potentially profitable. Now, American baby boomers and new legions of collectors in Europe and the Far East are driving prices up from 1991 lows, when the stamp market stumbled. A prized block of four U.S. #2 stamps which had then dropped in value to $50,000, is now worth more than $100,000, as stamp prices have rebounded and generally kept pace with the Standard & Poor's 500-stock index, which has risen an average of 14.3 percent annually over the past five years.
"Moneyed and sophisticated buyers are increasingly recognizing they can enjoy a beautiful hobby and also show a return on their money," says Walter J. Mader, the president of the renowned Ivy & Mader auction house in New York. "While stamp collecting is a lone wolf hobby, these new collectors also want to win, out-compete the next guy, and that's heated up the market."
Investing in high-quality stamps, and feeling the exhilaration of landing a rare item, comes with numerous caveats. As philatelists always emphasize, collecting these miniature and extremely fragile engravings is primarily a hobby. The savvy buyer, if he passionately studies such minutiae as gum condition, margins and perforations, and holds on to his collection long enough (usually five to 10 years) to overcome dealer commission fees, might build a holding that will realize a future profit.
However, illiquid and ever subject to fluctuations in the economy and to the vagaries of what's "hot," stamp collecting remains a risky business. For example, 1918 U.S. airmails are selling for 25 to 35 percent of their 1980-'81 value. Perils abound, especially according to one longtime collector, when a "buyer's testosterone" gets in the way of better judgment.
"Too many guys get 'buried' in a stamp, pay far too much for an item, when they let macho vanity cloud good sense," insists Wade Saadi, the owner of a national computer software and services company, who focuses on classic U.S. issues and recently sold a set of 1869 stamps for a six-figure sum. "The key to having fun--and to potentially coming out [financially] ahead--is studying the market, taking three to four years to aggressively educate yourself about one subject of material, what's available, cancellations, realized prices, frauds, etc. In stamps, knowledge isn't only important. It's everything."
In other words, stamp collecting demands a thorough commitment and dedication. There are mere "trophy hunters," guys with no particular collecting goals, who'll throw money at agents to secure a fabled piece or two. That "shopping list" approach, which relies so heavily on an intermediary, says Mader, "just isn't any fun. The chase is what rare stamps are all about."
Before a prospective collector starts to hunt down material, he must chart a road map, or decide on which segment of philately interests him. Here, the thematic choices are seemingly limitless, as philately gives collectors total freedom to choose a specialty. While Americans gravitate towards U.S. stamps with their preponderance of Washington and Benjamin Franklin busts, there are also Asian butterflies, British monarchs, nineteenth century "covers"--envelopes that recount global journeys through a series of postal marks--and newly popular Cuban stamps.
To make sense of this galaxy, and to select a specialty among mint or used stamps, engraved "fancy cancellations," and "postal history" covers, the smart collector seeks counsel. In other words, he plays the Stamp 101 game, by studying the values of stamps in catalogs, perusing exhibits, talking to members of philatelic societies and consulting with dealers and auctioneers.
In oak-paneled offices, surrounded by tongs, perforation gauges and other accoutrements worthy of a surgeon, these advisers soft-pedal the promise of windfall profits. Though many scarce items exchange hands in cigar-filled rooms after exhaustive haggling, collecting is strictly billed as gentlemanly and scholarly, a quiet escape from the stresses of the workaday world.
Cloistered in his sedate auction house, self-described "stamp nerd" Scott Trepel is also obligated to treat moneymaking as a sticky subject. As the president of the Robert A. Siegel Auction Galleries, he keeps "an arms-length relationship" with rarities soon to be sold. "Stamps aren't an investment," he insists, "they're a speculation. If I was an investor, I wouldn't follow an auctioneer's advice about what's going to be profitable. That would be like a broker's pushing a current stock."
Yet Trepel, who's exposed numerous fakes and has distinguished himself by selling a four-stamp block of Inverted Jenny biplanes for $1.1 million, is still an invaluable source for would-be philatelists. By assessing collections before they're auctioned at one of his sales, he reads the pulse of the marketplace. He knows where the high-priced action is, and what's hot.
"I first try to direct new collectors into an area which will have a good frequency of acquisition rate, where there's enough material and trading going on to sustain interest," says Trepel, who typically works with clients willing to spend about $50,000 a year on new purchases.
"Once you start buying only six or so items a year, it's easy to become bored. You've got to be acquiring at least a few items a month, and $50,000 will go a long way in basic U.S. stamps. Not rarities, but relatively scarce items. Yeah, with $50,000 a year over five years, you'll have a pretty meaningful collection."
While the prices of some of those classic U.S. items (i.e., reissues and special printings issued by the U.S. Post Office during the 1870s and '80s) have been flat recently, Trepel likes their future investment potential. Though still hesitant to recommend where collectors should "place their bets," he also concedes "there're a lot of opportunities" in stamps printed by the Confederate states. "There's a lot of fascination and scarcity here. And while lagging [pricewise], once one or two collections come onto the market, you could see some real life breathed into this segment. Some real movement."
Tapping into one of these areas that suddenly becomes white hot is akin to being ahead of the curve in the stock market. The prescient collector is holding what everyone else wants, and that's more than profitable. It's one of philately's special charms--the heady rush to choose a specialized segment among thousands of possibilities, and to make just the right investment.
"While a lot of people just wind up with salvage value, collecting something at exactly the right time is an incredible emotional high," says Trepel, as he recounts the stratospheric price rise of nineteenth century stamps issued by private mail-carrying firms. "Not much was happening with these items. Then a few collections came onto the market in 1990, and prices went wild. If someone had decided to invest $1 million in these stamps 10 years ago, they would've been in the middle of a feeding frenzy. That $1 million collection is now worth three, four, five million dollars."
Before any fortunes are won, however, rare-stamp seekers must know how to go after these little jewels. For once a new collector has set goals in sessions with a Trepel or Mader, and has decided to eschew the common, face-value world of post-1930s stamps, he's again buffeted with an array of high-stakes choices.
Will those album blanks be filled with used or mint stamps? Does a new collector delve into the pricey, yet still seductive, trappings of "postal history," where steamship timetables and descriptions of ocean passages accompany envelopes tattooed with cancellations? And since fake items are common, how do you start buying stamps without getting burned--by surfing the Internet, rummaging through dealer catalogs, going to stamp shows or bidding at auctions?
While some buyers will immediately flash their checkbooks at Trepel's high-voltage auctions, collector Wade Saadi says attending a stamp show is "the best way to get your feet wet." At these expos the neophyte will, of course, be able to buy scores of commercial, inexpensive stamps, which form the backbone of even six-figure collections. But even more important to Saadi, these shows are a philatelic networking bonanza, allowing new collectors to meet a constellation of dealers, auction house representatives and vendors dispensing everything from tongs to ultraviolet lamps.
"Unless you're going to recreate the wheel, collectors can draw on a wealth of knowledge at a stamp show," says Saadi, a consultant to the Philatelic Foundation, a New York-based nonprofit educational institution. "Here, collectors get tips on expertizing [sending stamps to a society to ensure that they're genuine], preservation, what clubs to join, and they can pick up lots of items cheaply."
Setting spending limits is a wise strategy at these shows. Especially because the novice is still unprepared to judge such fine points as a stamp's gumming, perforations or the centering of its margins--characteristics that vitally affect an item's worth. As Saadi warns, "An unscrupulous dealer can regum a stamp, and that falsely doubles its value." If older stamps, like 1860s issues, are regummed, "you could be talking five times the value."
Saadi has gotten burned. When he started to collect U.S. items, he didn't know that a dealer can change the perforations (the rows of holes that are put on the edges of some stamps) and centering of stamps, and was taken for $1,500. As he grimly explains, "My eye wasn't trained to judge these phony reperforations and this cost me. That's why I strongly recommend going slow, spending-wise, early on, studying numerous catalogs to get a sense of realized prices, not just published prices, and sending investment-quality stamps to be examined at [nonprofit] expertizing bodies."
When buying $50 to $300 items from mail order houses like Valley Stamps in Winstead, Connecticut, or Ventura Stamp Co. in Brielle, New Jersey, it makes little financial sense to have experts at New York City's Philatelic Foundation issue a certificate of authencity. These common, readily accessible stamps will have faults, and won't attract the attention of forgers.
Yet once buyers increase the ante and start to acquire scarce, more valuable pieces either through a dealer or at auction, a condition of sale must be an "extension," the right to cancel the purchase if the stamp is doctored, or not genuine. The fees for expertizing are based on the value of the material, and as auctioneer Walter Mader advises, "[It's] the only way to go. For that certificate isn't only a safeguard against the good amount of fakes out there. There are subjective distinctions in judging the value of a truly 'fine' stamp, and this certificate is an insurance policy that ends most discussion."
Though Mader predictably encourages collectors to buy "lots," or groups of stamps, at auctions, he also acknowledges that on-line marketing on the Internet is growing. "It gives people a chance to see stamps they wouldn't ordinarily be exposed to," he says. Yet again, Mader warns, "Don't be 'rookiedoed.' If a seller doesn't agree to an extension, walk away from the purchase, fast."
Traveling through cyberspace, and interacting with hundreds, if not thousands, of Web traders, such as the Macau Post Office and the Grateful Dead page, can also be dizzying. Nearly every site offers "show-stopping bargains" and "joy of collecting" testimonials. Yet amid this electronic overload, one of philately's most seductive attractions is lost. While stamp collecting is heralded for bringing enthusiasts together in diverse social settings (clubs, societies, etc.), the Internet is just a cursory look at all too impersonal icons.
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