Sunday, December 13, 2009

Graded Stamps: Perpetuating the Decline of Stamp Collecting -- Absurd Valuations

Where does one start in a discussion of ridiculous prices and graded stamps?  There are some absurd situations, like that with the used and in-a-slab C19 below.  While the whole industry is overpriced, the stamp below is special:


Graded stamp for sale at Jerry Connolly
2010 Scott Catalog Value:  25 cents
Jerry Connolly Price:  $575.00
Graded Stamp multiple over catalog:  2300 times VF catolog value

A common stamp that I might find in my grandpa's old shoe box is in a plastic case/slab with a PSE sticker.  The cancel is uninteresting, uncentered, and provides no information.  The stamp trades at VF for no more than a price that might allow a dealer to recover costs, and even then that is doubtful.  The truth here is that the intrinsic value of the plastic slab is nearly greater than the stamp inside.  Yes, yes, we have what salespeople in the business call a condition rarity.  Well this sort of condition traded for years before the advent of PSE and whoever else has jumped on the professional grading bandwagon.  Nearly 70 years of professional dealer and collector judgment would have never valued the stamp at more than a two digit multiple over its listed Scott Catalog value.  Indeed, most dealers would have sold it for the catalog price.  Yet here we have a stamp that Mr. Connolly will sell you for two thousand three hundred times the VF catalog price.  Maybe you should feel guilty the price is so low and offer him more.  Maybe three thousand times? 

The stamp market last experienced a value bubble in the mid to late 1970s, during a period of stagflation and poor stock market returns.  The broader collectibles market also rallied during those years.  But an almost democratic, across-the-board rally developed in stamps, very different than today's graded stamp market bubble, which dismisses most stamps as not grade worthy.  Somewhere in storage I have a pile of old Brookman price lists starting in 1976.  I don't know if they do now but then they came out semi-annually.  During that period price changes were staggering.  The staggering part wasn't so much the domain of certain classics.  It was the more common stamps that amazed.  I casually tracked the 6 cent Botanical Congress plate block.  I can't recall, but by 1980 it was priced by Brookman at somewhere near $20.  The Scott value today is $1.75.

There was even action in contemporary stamps.  The 1976 50 state flag issue was being purchased in bulk by dealers for nearly two times face in the immediate years following its issue.  I remember full page ads on Linn's back page by companies looking to buy the sheets.  Some of them may be the ones trying to sell you graded stamps today.  Across the board stamps went up, and the bull market had an impact on what the stamp trade today would call "postage" even more than it had on rare classics. 

But then the market collapsed.  Things went back to earth.  By the early 80s, and as inflation subsided, the speculative and irrationally exuberant money ran out of the stamp market.  The VF $2.00 MNH Prexie I bought for $55.00 around 1980 now is valued by Scott at $17.50.  Players in the broad market lost a ton in the value of their bulk inventories.  And the hopes were dashed of retirees and soon-to-be retirees across America that had purchased sheets of 3, 4, 5, and 6 cent commemoratives for years and saved them for their nest eggs.  Most of those sheets are postage now.

Its hard to know when but this scenario will play out with a stamp like that above.  Once the crash hits maybe you can use the plastic case as a coaster or something. 

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