Stamp Newsletter for Collectors

If one thinks about it, one can notice that most living institutions or biological entities evolve over time. Our political institutions evolve, if ever so slowly, as do our judicial courts. Economic institutions evolve as eloquently stated in Thomas L. Friedman’s book, "The World is Flat," which explores the forces of economic globalization and its effects on the twenty-first century’s workers and corporate structures. Economic markets evolve as a result of new technologies and emerging markets for these new products. Likewise, the stamp market is not immune to the forces of evolution.

As mentioned in past Croton newsletters and increasingly in the philatelic press, the two most noticeable forces driving change in the stamp market are (1) technological innovations such as Ebay and the emergence of e-commerce stamp web sites, and (2) the numerical grading of stamps, most noticeably by the Professional Stamp Experts (P.S.E.) in California and to a lesser extent by the Philatelic Foundation in New York. Both of these forces have been active for more than a few years, so they are not new. But even within the last year, they are still driving changes in the philatelic marketplace.

Ebay is still a strong force to be reckoned with in the stamp market. It has raised its commission fees significantly over the last twelve months. This has forced sellers, both dealers and stamp collectors, to re-evaluate their selling strategies. Most have considered it wise to increase the average dollar sale per lot and/or the shipping fees to help cover the increased Ebay fees. The labor involved in posting items on Ebay is not insignificant either and needs to be factored into the equation. Stamp dealers are more sensitive to that fact than collectors. Collectors tend to figure the cost of their time performing this task at near zero. Dealers can’t be that cavalier and stay in business. The number of stamp items trading hands on Ebay seems to be fairly stable. In reaction to Ebay, new well-financed web sites have grown up where collectors and dealers can buy and sell stamps online with lower selling costs. One of the largest of these new sites sells most of its stamps at a fixed price with a small percent being purchased using an auction format. Many stamp dealers are frustrated with the low price realizations and high costs of Ebay and are turning to new online sites for a more effective venue. The fixed prices available at these new web sites also offer them some protection.

The low realizations on Ebay are not a result of a weak stamp market, but rather in a loss of confidence in the accuracy of stamp descriptions of Ebay lots. To protect oneself when bidding on US stamps prior to Scott #715 (or thereabouts), one must ignore the lot description on Ebay and go by the photo and assume the lot has faults that are not described. A number of dealers who need large quantities of US faulty stamps for large promotional customers are successfully buying the quantities they need on Ebay. They can ignore the inflated descriptions and buy the stamps cheaply (along with their faults) for an easy turnover to their non-discriminating promotional customers. The inaccuracy of Ebay stamp descriptions, as an example of an evolutionary process, has caused the ever decreasing stamp price realizations on this site. The reaction to this reality has been the creation of new online venues, and also, and this is a big one, the premium placed on stamps with graded certificates. Collectors are frustrated and tired of inaccurate stamp descriptions.

More and more graded stamps are finding their way into the traditional auction catalogues. A number of auction houses are running certain sales that consist of 100% graded stamps. P.S.E. was the first to grade stamps, and they have a corner on the market even though the Philatelic Foundation offers a similar service. There are a half dozen or more web sites that have significant inventories of US graded stamps. Even CrotonStamp.com offers a US graded stamp section. Buying a stamp with a graded certificate is analogous to buying a stamp with an insurance policy attached. The owner of a graded stamp knows exactly what he has and possesses a professional opinion as to the exact quality of that stamp. To some collectors that is worth a lot. Some stamps with a grade of 100 Jumbo have sold for around 5,000 times catalogue. I remember the time, not that long ago, when a superb NH stamp that sold for 10 times catalogue was considered a fully priced stamp.

I have a couple of observations/speculations about graded stamps which I would like to pass on to you. PSE separates US stamps into two groups: vintage stamps (Scott #1-703) and modern stamps (post #703). PSE publishes a quarterly catalogue of stamp values called the Stamp Market Quarterly (SMQ) based on their grading system. In the future if one were to graph the price curve (versus time) of these two categories of stamps using the SMQ catalogue values, I think the graphs would look quite different. I think the vintage stamps will show ever increasing values over time (an upward sloping curve), whereas the modern stamps may show something like a typical "bell" curve. A bell curve would increase over a certain period of time and then start to fall. Unlike the vintage stamps, there is almost an infinite supply of the modern stamps from which one can extract superb looking stamps and submit for certification and grading. Over a period of time the number of stamps of a certain desired grade may greatly outnumber the number of collectors willing to pay the SMQ price. According to economic theory, the price of that grade of stamp would then begin to fall; hence the bell curve. The only brake on the submission process is the $18.00 certification fee per stamp. If one submits a low catalogue, modern stamp for grading, and it comes back with anything less than a grade 95, recovering the $18.00 cert fee upon the sale of the stamp will become very problematic. One thing that potential submitters should also keep in mind is that a stamp that might grade 98 or 95 because of its centering, could receive a grade one or two levels lower due to what are considered extremely minor or very minor faults. An extremely minor fault won’t be mentioned in the opinion on the certificate, whereas a very minor fault will be. But in both cases the grade of the stamp will be lowered accordingly. Being able to predict before submission what grade a stamp will receive requires a certain level of technical know-how and experience. In a somewhat recent decision PSE now refuses to grade any stamp that is considered to be reperforated. This is in keeping with their policy of not grading stamps that have been altered by human hands.

PSE has done some number crunching using the prices realized over a number of different auctions of graded stamps from December 2006 to February 2007. They noted that for 67 NH stamps, from the ‘vintage’ era in grade of 98, the auction realizations including buyers premium were 1.46 times the SMQ value of those 67 stamps. In contrast 30 National Park stamps (#740-49) from the ‘modern’ era, and in the grade of 98, sold for an average of .94 times the SMQ value. I can see this trend continuing. For your information vintage NH stamps of grade 90 realized on average 1.22 times SMQ, while grade 95 stamps averaged 1.35 times SMQ. Because of the escalating prices of graded stamps, there has been a secondary effect on high quality, ungraded stamps. Collectors are bidding up prices of ungraded stamps in hopes of obtaining them before they become graded and are priced beyond reach.

Like all markets, the stamp market is not static. It is constantly changing due to changing forces in the market place. If I only had a crystal ball, I would be in a much better place to take advantage of all these changes. As a postscript because space does not allow otherwise, the Canadian market in early premium quality mint stamps is also red hot. Canadian collectors are, in a way, fortunate that the graded stamp phenomenon has not infected their collecting area. The basic supply and demand fundamentals, though, are accelerating the upward push in prices.

Thomas Vaillancourt

There are certain modern Canadian issues that just keep moving up, and that are very difficult to keep in stock. Rather than mailing out new price lists, I will list a few items that have changed:

#1818-34 Millennium S/S $109.95

#1991c-d Full Pane $70.00

#2045-48a Bklts $79.50