How rare stamps could be the safe haven you need right now
Last week, I explained how the current weakness of the British Pound presents an obvious opportunity for overseas buyers of British assets right now.
If you missed that, you can still read all about it here:
As you know, worries over a “No-Deal Brexit” have resulted in a short term devaluation of the British Pound.
When I’m abroad, all the UK seems known for at the moment is Brexit.
No-Deal Brexit has become a cliché.
It all started with a referendum held on June 23, 2016…
The population of the UK were asked whether they wanted to “LEAVE” the European Union (EU) or “REMAIN” in the EU.
52% voted to leave, a close call.
The people had spoken and the result was the UK would leave the EU.
Strangely, there was no option to vote for “LEAVE WITH A DEAL”.
Yet, this is what our politicians decided we had voted for.
And… ever since, Britain has been cast into a shadow of fear around the implications of leaving the EU without a deal.
It now seems most likely this will be the outcome. The EU don’t care much about doing a deal with us.
I understand this is dangerous ground I tread talking about such a heated subject. But, the rights and wrongs of Brexit are not the subject I want to cover today.
Regardless of your views on the subject, the political and economic instability caused by Brexit is a fact we have no choice but to be concerned about.
As you would expect, I have been thinking a lot recently about what a no-deal Brexit will mean for the market for rare British stamps.
And, my conclusion is…
The GB rare stamp market could fair quite well out of all this turmoil.
Not only that…
Rare stamps offer a safe haven investment in the choppy times ahead.
The 5 Biggest “No-Deal Brexit” Economic Fears
From everything I have read, there are 5 major economic consequences which are causing the most worry.
The deadline looms. Currently, the UK will leave the EU officially on 31 October.
I have considered each of these big economic themes and how they may impact the GB rare stamp market.
And, of course…
I have some recommendations of where I think you should be putting your hard earned cash into stamps before October 31st.
These are my ultimate no-deal Brexit protection measures…
1. Devaluation of the Pound
The Pound has already plummeted amid fears of a no-deal Brexit.
The Pound is currently sitting at around $1.22 = £1.
I was listening to an expert talking on CNBC yesterday. He believed the impact of a no-deal Brexit is already priced into the currency value.
He said that, based on the conversion rates Purchasing Power Parity (PPP), the British Pound is currently undervalued by around 16%.
I’ve also heard the polar opposite view…
Some commentators expect the Pound to fall further to $1.10 = £1 in the event of a no-deal Brexit.
So, what does this mean for the British stamp market?
A cheap Pound makes buying rare stamps from UK-based sellers very attractive to overseas collectors and investors. This could potentially increase demand for rare British stamps and cause prices to rise.
As I said last week, if I were living in the US - or in fact anywhere in the world but the UK - I would be buying British stamps right now.
One of the big benefits of rare stamps as an asset class is their portability.
This, coupled with the existence of a large international market, means you can buy your stamps in one country and easily sell them in another.
As an investor, you can effectively protect yourself against volatility of currency exchange rates.
This is one of the factors which make rare stamps a nice secure little part of your investment portfolio.
You could, of course, buy a rare stamp from an altogether different economy, well away from any economic risks in the UK:
China Szechwan Province 1933-34 Dr. Sun Yat-sen issue with thick circle, overprint at Peking, set of 8 to $5 blackish green and scarlet, SG4/11.
Price: £300 ($370)
The Chinese economy is not influenced in any material way by what happens in the UK. As such, buying Chinese rare stamps is putting your money somewhere Brexit is of no relevance.
Unlike the UK, the Chinese economy continues to grow.
It also boasts an active and growing rare stamp market.
This is the most attractively priced low value Chinese stamp set I have available.
These are in exceptionally fine condition for a set of Chinese stamps, fresh with most of the original gum in place. It is very difficult to find a comparable set of this quality.
The catalogue price is £475, meaning you can land this ultimate Brexit protection purchase at a 37% discount.
You will need to purchase it quickly as I am all but certain this fine set will sell very quickly at this price.
2. High inflation
The BBC recently reported 30% of our food comes from the EU. They say this will become more expensive.
Increased import taxes and transport delays could all mean a rise in prices.
Add to this, a potentially weak pound and inflation in the UK could become a concern.
The Bank of England governor, Mark Carney, states a worst-case scenario of average shopping bills increasing by 10%.
Tangible assets, as a general rule, attract more investor attention in times of high inflation when paper money is being devalued.
Historically, rare stamps have grown considerably in value during periods of high inflation.
The last time we had high inflation rates in the UK was in the late 1970s…
The GB30 Rarities Stamp Index recorded growth of almost 600% during the 5-year period from 1975 to 1980.
Holding rare stamps as part of your investment portfolio could provide a valuable hedge against inflationary risk.
Some may say the referendum itself was a major error of modern history.
In this vein, I would recommend you seriously consider adding this modern British stamp error to your collection:
Price: £1,400 ($1,725)
There are only 36 known examples of this well-known and visual British stamp error.
The current price of £1,400 is low in relation to its rarity and compared to many of its peers. As such, I consider this a good value stamp error with huge room for future price inflation.
I also believe we will see an increasing influence from new investors entering the rare stamp market as they seek to protect themselves from economic turmoil.
Historically, modern British stamp errors have attracted a lot of investor interest. This can cause prices to rise quickly and sharply due to the very limited numbers available to buy in the market.
A no-deal Brexit is widely expected to, at least in the short term, cause a fall in business and consumer confidence. No one likes uncertainty and Brexit certainly delivers that.
I also read reports that businesses in the UK will pack up and move to the EU in response to the costs of new tariffs, disruption and regulatory and customs changes.
This would cause increased unemployment and a contracting economy.
With growth in the UK already close to zero, any negative impact would likely tip the country into recession.
Even I could not put a positive slant on recession… or could I?
Naturally, lower consumer confidence could flow through to lower spending by collectors, and reduced liquidity could impact prices of British stamps.
However, collecting is a passion and compulsive - so I do not foresee this as being a major factor.
I would also expect any downturn in demand amongst collectors compensated by a heightened demand from investors seeking to protect their wealth.
Historically, rare stamps have continued to grow in value in difficult times. The most startling recent example of this was when the GB30 Stamp Rarities Index reported growth of 38.6% in 2008, the year most other investments tanked in value.
One way to avoid recession is to put your money in an economy where recession is not even considered a possibility right now:
Nyasaland 1913-19 £10 Purple and Royal Blue, SG99e. A very fine mint example of this scarce and attractive high value stamp.
Price: £3,600 ($4,450)
This famous high value African stamp had a face value of £10 in 1913. That’s the equivalent in value to over £1,000 in today’s money!
As you would expect, not many were ever needed for postage so print quantities were small.
Finding this stamp in this fine a condition is not something I expect to achieve twice in a lifetime.
The catalogue price for this stamp is £4,000, meaning you can own it today at a 10% discount.
African countries may benefit from the creation of new export opportunities after Brexit.
Ironically, Africa is now even more focussed on realising the benefits from the recently signed African Continental Free Trade Area, with the benefit of being able to learn from Europe’s mistakes.
Africa is an up and coming area of the stamp market and this looks an interesting area to allocate capital to as part of a Brexit protection strategy.
4. Property market crash
The Bank of England says there could be a significant impact on the housing market from the UK leaving the EU. It believes house prices could fall by up to 30% in the event of a no-deal Brexit.
The property agents Savills are also downbeat on the UK property market this year. They believe the impact will be most felt from the reduction in buyer confidence caused by Brexit concerns.
Obviously, I’m not suggesting you should sell your home and buy stamps with the proceeds.
But… you might want to think about properties you hold for investment purposes.
A number of other alternative tangible asset investment options are looking more attractive at the moment.
The Daily Telegraph reported on July 11, 2016:
“Stamps have become an unlikely safe-haven investment against choppy markets, outperforming shares, property and gold…”
My favourite safe-haven investment we have available right now takes us back to the beginning of the prepaid postage revolution which changed the world and greatly assisted huge economic growth:
Great Britain 1840 Oxford No 2 'Boating' envelope. Very fine used example sent from Oxford to London and datestamped on front accordingly for AU.7-8.1840.
Price: £9,000 ($11,100)
After 1840, Great Britain abandoned mercantilism and practised “free trade”, with no tariffs, quotas or restrictions. Between 1870 and 1900, economic output per head of population in Britain rose by 500%, generating a significant rise in living standards.
The ‘Boating’ envelope we have is very rare and a work of art. There are only 4 other examples. The other examples include one front, one unused, one with the address expunged and one with an adhesive removed.
What we have is an incredibly rare and attractive piece of early British postal history. We are experiencing much higher demand at the moment for postal history as more collectors become increasingly specialised in their areas of philatelic study.
I consider it a strong addition to any collection and very reasonably valued considering it is the best quality example of an extremely rare early British postal envelope.
5. Stock market crash
Naturally, most investors are hard wired to put more of their money in the stock market than anywhere else. There is certainly no other investment which receives more air time.
Many commentators are predicting a stock market crash in the event of a no-deal Brexit. MSCI’s Risk Manager stress test analysis suggests if no deal is agreed upon, UK and European stocks could fall by nearly 25%.
You don’t need me to tell you the impact this would have. Retirement might be a bit further out for many of us because of the impact on pension values.
Rare stamps offer a diversification to protect against these events both as part of sensible wealth management and also retirement planning.
The UBS/Campden Wealth Global Family Office Wealth Report 2017 states that the average Family Office puts only around 30% of their wealth into stocks.
Amazingly, the uber-wealthy put over 35% of their net worth into “other” investments. That includes things like fine art, coins and, of course, rare stamps.
As you would expect, the uber-wealthy focus their attention on the big rarities. These may be less liquid but over the long term have proven to deliver the highest returns, like this major Queen Victoria rarity:
Great Britain 1878 10s Greenish grey Plate 1, SG128var. Very fine and fresh unused original gum imperforate imprimatur lettered CC.
Price: £35,000 ($42,750)
This ticks all the investment grade boxes:
1. Rarity – this came from the very first approved printed sheet for this classic stamp issue. Only 24 examples were removed from the imprimatur sheet. Only 18 of those are in private hands, the remainder held within institutional collections and museums.
2. Condition – it is in the best condition possible, being fine and fresh with original gum. Premium quality counts for so much in today’s more condition-focussed collector market.
3. Authenticity – it is sold with independent certification from the British Philatelic Association (BPA).
4. Price – the catalogue price for SG128 is £50,000. Our stamp is available to purchase today for £35,000.
5. Long term growth – this stamp has averaged growth of 10% per annum over the past 65 years.
This is an example of one of those moments where:
“The time to buy is when there’s blood in the streets” – Baron Rothschild.
He should know. He made a fortune buying in the panic following the Battle of Waterloo against Napoleon.
A major rarity like this, available at this price, is one of those moments you may regret seizing.
Don’t lose sleep over Brexit
Rest assured, whatever happens from a no-deal Brexit, ultimately this is only ever going to be a fairly small event in the history books.
But, that doesn’t mean I would not recommend taking assertive action now to adjust your investment composition.
Specifically, I believe tangible assets are more important right now than they have been since around 2005 (a few years before the last major economic event destroyed the wealth of millions of investors).
If you would like to find out more about building a rare stamp collection as a means of protecting an element of your savings or investments, why not give us a call on +44(0)1534 639998.
Our expert advisers are on hand and eager to help you protect your wealth.
Alternatively, reach out to us simply by remail or eplying to this blog and we will respond ASAP. Time is of the essence…
The deadline of October 31 is fast approaching. We look forward to speaking to you.
Mike Hall CEO Just Collecting
PS. We always recommend you “collect to invest”. We aim to help you to focus on building the best quality collection possible and to encourage you to develop an increasing interest in rare stamps along the journey. This is how we best help our clients to prosper over the long term.
Enjoyed this blog? Try these:
May 17, 2019: The Weird and Wonderful World of Stamps
May 10, 2019: Don't overlook the most obvious investment in stamps
April 26, 2019: 10 Secrets to Successful Stamp Investing
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