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Stuck On Stamps

The Thrill of the Chase Keeps Collectors Stuck on Stamps
Edward Kiersh
From the Print Edition:
James Woods, May/Jun 97

(continued from page 1)

Intriguing exceptions exist, of course. Richard Lehmann uses Wall Street investment techniques to evaluate the value of stamps, and operates a site (www.stamp finder.com) that provides a handy listing of dealers who own "potentially profitable" items. The long-respected Linn's Stamp News (www.csmon line.com/linns/) also details trends in the marketplace. But in general, clicking away at sites that promise Marilyn Monroes and other contemporary commemoratives is pure Mickey Mouse.

The real action takes place at auctions. Mano a mano, collectors vie against dealers and agents (for anonymous buyers) to capture everything from $600 mixed lots (wholesale groupings of stamps) to five- and six-figure rarities.

Unlike 15 years ago, when these sales were predominately attended by individual collectors, contemporary auctions are packed with both longtime collectors and "seasoned" agents. The agents know all the tricks of bidding, from disguising their intentions, to shilling for sellers who want to artificially drive up prices, to fully understanding how the merest variation in color or condition of a stamp will dramatically affect its value.

So the neophyte collector must approach auctions cautiously. Though no hard and fast bidding rules exist, a few general guidelines will prevent new enthusiasts from getting "buried."

Once again, knowledge is everything. Buyers must understand that auctioneers, who collect a 10 to 15 percent commission on purchases, are primarly working for sellers. They solicit all sorts of esoteric and commercial material from consignors, but don't tailor their sales to the specific needs of a buyer. Consequently, auctions are not always the best avenue to acquire scarce items that will complete a collection.

Buyers should compare the published values of items in the Scott Standard Postage Stamp Catalogue with the prices realized at auctions. It's also vital to study the photos and descriptions in past auction catalogs, since that's one way to understand why, for example, a 10-cent Panama Pacific that listed for $300 in Scott's was bought for $1,000 by a Mader customer. This may be because the latter offering has been judged by Mader or an expertizing service to be better centered, clearer in color or generally finer in quality.

It is equally important for collectors to be aware that sellers sometimes put stamps on "reserve" to falsely jack up values. For instance, an item that is worth $20,000, might experience a market boost if the seller put it on a $40,000 reserve and had an agent or shill bid on the stamp at exaggerated levels. Typically, the bidding could stop at, say, $35,000, when the stamp reverts to the seller. Yet some less reputable auction houses will say the item "sold" for $35,000, and so this falsely manufactured price tag becomes a reference point at subsequent sales.

Bidding is also a test of nerves, "a poker game" according to Mader, and collectors must set spending limits. Yet here again, there are no absolutes, as certain rarities do appear at auction, and in those instances, a buyer of specialty items will often adjust his budget.

"We had a four-cent Columbian 'error of color' in 1991; the prevailing consensus put its worth at $16,000," recalls Mader. "But when the dust settled at auction, this ultra-high-condition item brought $32,500. Why? There are only 200 of these stamps in the world, and this one was perfecto. It was a once-in-a-lifetime opportunity, a chance to acquire a very specialized item, and that's when a buyer has to go for it."

To secure these fine--and expensive--rarities, a buyer might think it wise to use the services of one of those "seasoned" agents. But this strategy normally entails giving the intermediary a 2 percent to 5 percent commission fee and a fixed spending range that could easily lead to "bidder's remorse."

To appreciate those woes, keep in mind that some stamps, such as the 1851 One Cent Blue series, form a distinct specialty collection. A philatelist could spend years just amassing the many varieties, multiples and usages of this series, and one empty space in his album could greatly lower the resale price of that particular collection.

This missing stamp might not be offered at auction that often, as a greater range of specialty items are usually bought through dealers. Yet if, for example, a mint 1851 One Cent Blue (worth about $175,000) ignites a fierce auction battle and the collector is locked into a maximum bid with an agent, he could lose that rare chance to acquire the stamp. Hence, buyer's regret.

"An agent might be instructed to go to $50,000 for a once-in-a-lifetime offering, but what happens when someone bids $52,000?" asks Mader. "If the actual buyer was at the auction, he could make that split decision to go to 55. While an agent is a check on a buyer's worst habits, if it's a special item, and he only has limited discretion, this stamp could be lost forever. When buying specialty items, good judgment sometimes has to kick in."

While you can pick up certain rarities at auctions, they aren't the best bet for acquiring scarce items. As Saadi says, "I've built 12 specialized collections, and you can't do that going to auctions, since they don't offer enough pertinent pieces."

How has he discovered the rarer material? By going to dealers, or "collection builders."

In U.S. philately, where there are hundreds of distinct specialties, ranging from rare cancellations to classic "Washington-Franklin heads," dealers stake out particular segments of the marketplace. Able to plug into a vast network of contacts (which includes stampdom's large coterie of anonymous collectors), an internationally known dealer like Andrew Levitt knows exactly "where the bodies are buried." He knows who wants to sell, negotiates the "private treaty" sales and, unlike collectors who have professional interests besides stamps, he can devote himself to a client's specific needs on a full-time basis.

"I align myself with a few dealers so that they'll be my eyes and ears," says Saadi. "These guys see hundreds of times more stamps than collectors do. Plus, if I go to Ventura Stamp Co., I don't have to waste time weeding through Zimbabwes and Australians [which regularly appear at auctions]. Ventura's stuff is mainly classic."

Levitt, who specializes in U.S. material, boasts, "I've handled some of the rarest pieces two or three times." Selling more than $250 million in philatelic holdings since 1961, Levitt frequently advises clients about the potential market value of individual items or entire specialties. He often acts as an agent at auctions. "I know the tricks of the trade," he asserts.

At those sales, Levitt has been known to buy an entire collection merely to get one prized gem. Chuckling, he also claims, "I know how to disrupt a competitive bidder's rhythm." Yet to most serious collectors, Levitt's chief asset is his ability to spot future market trends and pinpoint choice investment prospects.

Most of these prospects are U.S. issues. Though such items as 1918 first-issue Airmails, the 50-cent 1933 Graf Zeppelin and 1898 Trans-Mississippis have long been selling for a fraction of their 1980 prices, Levitt feels these stamps are now "very good buys and will increase in value." Many other collectors strongly disagree, saying there's so much of this material in the marketplace that prices will never go up.

Levitt also likes Cuban items. "Cuban stamps are very popular right now," he says, "and while the market has been discovered, I think these items will continue to go up in value."

Other dealers tout everything from Chinese and Vietnamese stamps to Latin American issues and U.S. Postmaster Provisionals, which were unofficial stamps issued from 1845 to 1847, and interim stamps issued by Confederate postmasters in 1861. Equally debatable is the notion that going abroad will translate into bargains at obscure auctions. Saadi dismisses the value of this practice, warning that many European auctions "are rigged," while Stamp Finder's Richard Lehmann insists, "If you want to stockpile Cuban stuff cheaply, you go abroad, especially to Russia."

So who's to be believed, and how do you find a reputable dealer who will work honestly on your behalf? Once again, there are no absolutes. As one collector warns, "Don't be swayed by all the fancy brochures dealers put out. It makes more sense to visit stamp societies. Talk with other collectors. Just do some homework and, above all, get referrals."

The same strategy also makes sense when collectors move into another risky arena, the seller's market. There, a philatelist is faced with two options. He can test the value of his holdings at an auction, where items might fail to realize estimated prices. Or he can opt for a fixed price through a dealer, and risk losing out on what Saadi describes as "two or three guys beating their brains out at an auction to get specific pieces."

No matter which approach is taken, it's imperative that the seller knows the value of his material. "Too many guys I know have considered their material to be unattractive, sold it for $5,000 to an auctioneer, and the stuff winds up selling for $15,000," says Saadi. "What they should've done is taken the pieces to a dealer, given him his commission and instead pocketed $13,000."

Taking assurance from the premise that less is sometimes more, auctioneer Trepel still insists his regular sales are the most advantageous approach for a seller. "Prospective buyers can love a small part of a collection, be disinterested in the rest, and that will drive the price down," says Trepel, who averages a 10 percent commission from sellers.

"Yet if, for example, this collection includes issues, misprints, an eagle on some of the items, we break everything down. We offer specialized units, or put one item into two or three collecting subjects, and that creates a multiplier effect on the competition for any given stamp. By breaking collections down, we increase their value."

However, now that specialty-hunting dealers dominate these sales, many basic items often fail to generate excitement. That exposes sellers to a double indignity. Along with seeing their prized holdings returned to a "residue" pile, they also suffer financially.

Trepel admits, "Many people don't like auctions. They want their money right away." Before the actual sales, auction houses have to evaluate

material, sort items into lots, prepare catalogs, etc., but if necessary they will give sellers a fraction of anticipated revenues up front. "There's also that emotional attachment," he adds. "They want to keep their collection intact."

Still, if a collector is selling a true rarity, a limited-issue stamp that hasn't sold in several years, it's generally agreed that the auction route is the best way to maximize interest. For besides having the financial ability to publicize a sale through global mailing lists and advertising budgets, auction houses can create "a comfort zone" for buyers.

"When dealers go one-on-one with potential buyers to pay $500,000, $1 million for a stamp, it's often a struggle," says Mader. "Yet at an auction, where there's widespread interest in an item, it shows a guy he's not alone on a limb. When bidders start driving up the price of an item, this gives a buyer the appetite to raise the ante."

Collectors say that auction houses are also the best avenue for liquidating generalized collections quickly. An auctioneer will usually give the seller his money within 30 to 45 days after the sale, while there's no telling when and if a dealer can find a buyer for a large collection.

Selling specialized material is a whole different ball game. Here, dealers hold a definite advantage over auction houses. Take, for example, a rather esoteric collection of 25 three-cent 1861 stamps with different cancellations. The best five usually realize their anticipated price. But as interest in these items drops off, the next 20 could easily be snared by bargain hunters.

As Saadi says, "When selling specialized material you go to a dealer. I can take these items to him and get a fixed price. The downside is that it might take him a longer time to sell the material. But you have much more control when selling through a dealer."


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