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Sunday, May 27, 2012

General Commentary: The Holy Grail of Philatelic Investing

Over the last 2+ years, I've published over 400 StampSelector blog articles recommending various stamps or souvenir sheets as investments. However, I have never made any comparison between the issues recommended, nor have I attempted to rate their prospects and predict which might provide the best returns.

The desire to provide some kind of stamp investment rating system ("S.I.R.S.?") is an ongoing obsession of mine, because it would be extremely valuable to be able to provide an educated guess as to which stamps will appreciate in value the most over the long-term. Obviously, a philatelic investor could use it to determine which stamps to target for investment, and a blogging hack who tips stamps, such as myself, might acquire immense influence over the stamp market by providing a credible system, and could even use such information to hoard the top-rated stamps before publishing it. Such a strategy would invite a friendly visit from the Securities and Exchange Commission and a probable prison term if the subject were stocks, which it isn't.

It is for this reason that I compare such a ratings system, or formula, to the Holy Grail of Arthurian legend, and as with the search for the mythical Grail, the paths to it are hidden due to lack of information, and remain obscured by clouds of ambiguity. Nevertheless, it is possible to list some of the criteria which might be taken into consideration in order to determine a stamp's rating.

Firstly, the formula's intended solution - the rating itself - would be a number which represents an estimate of a stamp's long-term growth, perhaps the estimated average annualized return (L.T.E.A.R.) on the investment over the next ten or twenty years. Hence, a stamp with an LTEAR of 15% have a rating of 15.

Variables which would factor into the formula would include the stamp's printing quantity and/or estimate of its current supply, the population of its country of origin and population growth rate, the country's economic growth rate and/or projection of the growth of its middle class, the country's current current population of stamp collectors, sources of external demand (such as topical, regional or "mother-country" demand, if the country of origin is a former colony, as well as the population of those with ties to the former country now living in other countries). Population aging rates might also be factored in, since serious stamp collectors tend to be middle aged or older. Ideally, the formula might also include a quantification of cultural factors, as some nations/ethnic groups have more affinity to stamp collecting than others; however, estimating this variable would probably prove insuperably difficult. Finally, there would have to be an application of the stamp market's version of the Heisenberg Principle - an incorporation of the effect of investors, speculators, investment tips, and even the rating system itself, on demand.

In all likelihood, the prospect of creating a SIRS will remain nothing more than a dream. I encourage any reader with an interest in pursuing the project to post a comment either here or on the Facebook StampSelectors group site.

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