Magnificent Desolation wipes out investors: don't let it happen to you

The Stamp Man

The Stamp Man

2019-03-24 17:06:06

Rare Collectibles v Icelandic 9% fixed income bonds 

I’m just back from a break in Iceland with my wife.

Iceland is visually an awe inspiring place to visit.

The words of Buzz Aldrin on describing the landscape of the moon came to my mind – “magnificent desolation”.

Here’s one photo I took from my trip. Believe it or not, this is not a black and white photo!

This was my second time in Iceland. 

I had been there before on business rather than pleasure…

My disaster pitch 

I was invited to Iceland in the summer of 2006 by a famous US investment guru, Dr Steve Sjuggerud. He was entertaining a selected group of his readers there.

He asked me to come along to a seminar to pitch the idea of investing in rare collectibles as part of a wealth diversification strategy.

I duly delivered my pitch explaining the merits of investing in tangible assets with a history of long term price appreciation, but I missed the mark completely.

I didn’t recruit a single client from the seminar. No one seemed to care about what I had to say.

You see, the audience was already hooked on the preceding presentation by an Icelandic bank. They had just been offered a 9% pa guaranteed fixed income bond.

Everyone was very excited about the idea of 9% interest every year from a bank.

At dinner with the US investors, I did try to put my point of view across.

Rather crudely, I made my point, “Look around you, there is nothing here. With just 300,000 people, it is the most sparsely populated country in Europe. What do you think these returns are backed by?”

Hopefully a few people listened. As you know, the Icelandic bubble burst in 2008 and investors were wiped out, losing everything.

At its peak, the highly leveraged Icelandic banking system had foreign liabilities of $100 billion. That represented 7 times the annual Gross National Product (GNP) of the country. Put another way, every resident of Iceland, including children and retirees, owed foreigners £300,000 each.

Although some time ago now, I still think this serves as a valid reminder of why investing in tangible assets is so important as part of your investment strategy.

Most investment funds and financial advisers won’t do this for you. They also live in the intangible world. Traditional currencies such as the British Pound and US Dollar are nothing but a keystroke on a computer nowadays. They are backed by absolutely nothing.

The fact remains that banks could only ever pay back a fraction of the funds they conceptually hold on behalf of their customers.

You may consider my views a bit extreme, but there is one inescapable truth in my argument…

Intangible assets can go down to zero in value, tangible assets will always have some value, no matter what. They are backed by something which is real.

The other thing – no one becomes passionate, obsessive or emotionally attached to fixed income bonds or any other fancy named financial product. The whole reason collectibles have such high values is because people become so passionate about them.

I have always said, apart from making good returns on holding collectibles over the years, nothing else I do with my investments gives me anything like the same amount of pleasure, enjoyment and fulfilment.

The collectibles you should have bought in 2006, but now have a second chance to buy from me today

As an exercise I decided to recreate, as far as possible, the kind of investment portfolios I recommended to those US investors in Iceland back in 2006.

I thought it would be interesting to see how they would have fared if they had listened to me instead of the Icelandic bank.

I have taken great care in my selections, effectively based on what I would personally invest in at each price point.

Asset allocations and selections also reflect my future expectations of where market growth will most likely materialise over the next 10 years.

I urge you to take a look at the portfolios I have built for you:

Rare Stamps Portfolio Value: £5,000

  • Total growth (2006-2019) - 98%
  • Average annual growth - 7.5%

CLICK HERE to view £5,000 portfolio

Rare Stamps & Coins Portfolio Value: £10,000

  • Total growth (2006-2019) - 93%
  • Average annual growth - 7.2%

CLICK HERE to view £10,000 portfolio

Rare Stamps & Coins Portfolio Value: £25,000

  • Total growth (2006-2019) - 77%
  • Average annual growth - 5.9%

CLICK HERE to view £25,000 portfolio

Mixed Collectibles Portfolio Value: £50,000

  • Total growth (2006-2019) - 108%
  • Average annual growth - 8.3%

CLICK HERE to view £50,000 portfolio

Mixed Collectibles Portfolio Value: £100,000

  • Total growth (2006-2019) - 74%
  • Average annual growth - 5.7%

CLICK HERE to view £100,000 portfolio

The US investors in 2006 chose the wrong track. If they had picked the right one, they would have enjoyed capital growth in their investments of between 74% and 108%. 

Bear in mind, these growth rates occurred during a terrible and volatile period in economic history, illustrating the defensive quality of rare collectibles as an asset class.

For information, I also display in the table below the percentage asset classifications across all the portfolios together with average annual growth rates between 2006 and 2019:

In summary, I am bullish on the prospects of British stamps, stamps from Australia/New Zealand and historical documents and signatures over the next 10 years. 

I have therefore placed a significant allocation within the portfolios to rare British classic stamps and popularly collected historical documents and signatures.

My confidence is because these areas of collecting have large passionate collector bases.

Furthermore, recent growth rates were below the long term growth rates experienced, which have averaged c.10% compound per annum. Historic long term evidence shows growth rates were not linear, with periods of low growth followed by periods of high growth being evident.

I consider stamps from South America and ancient coins to be undervalued but have only allocated a prudent amount to these areas. This is simply because assets can remain undervalued for longer periods than one would expect before finally hitting their moment of appreciation.

English coins and stamps from Asia and Africa represent momentum investments. These areas have shown strong recent growth rates, with prices being tested regularly with successful results in auctions around the world.

Buying at the right price

I am offering these portfolios at the best price I can do for you. Most importantly, your buy price will be at a discount to the current recognised market retail valuation (eg. discount to SG catalogue price for stamps).

This gives your investment a head-start and a built in margin of safety. The discounts I can offer are inherently restricted by my cost prices, which vary depending on my ability to source high quality collectibles at below market value (which is not easy!). The table below summarises the discount on offer for each portfolio:

In case you’re wondering, the item I am able to offer today at the largest discount is a 1911 Postage Due stamp from China. This is offered at a price of £1,000 compared to a catalogued price of £2,000 (50% discount). 

CLICK HERE TO VIEW CHINA STAMP

How you can invest in “real” assets today

I am giving you the opportunity today to avoid the same mistake made by those US investors back in 2006.

I believe the need to protect yourself from an ever increasingly leveraged intangible economy is more critical now than it has ever been.

Investing in tangible assets with a history of value appreciation is a common sense protection measure, in my mind.

If you would like to allocate a proportion of your investments into the passionate world of collectibles, please email me at mike@justcollecting.com and let me know which portfolio you would like to secure.

You can also call us on +44(0)1534 639998 although hardly anyone ever does that these days!

If you don’t feel comfortable yet to commit or have more questions you need answered, please contact us and we will do everything we can to ensure you are fully informed before deciding.

Also, you don’t need to go with the portfolios I have selected. We are able to provide you with a personal bespoke service as your partner in collectibles to meet your specific needs and objectives.

The team here look forward to helping you.

Kind regards 

 

Mike Hall

CEO, Just Collecting

 PSClick here to view the best performing item in the portfolio, which went up in value by 374% since 2006. This is a good example of how exceptional returns can be made through buying tomorrow’s historical legends whilst they are still alive. In this case, we have a limited edition book signed by Nelson Mandela, which showed explosive growth in value following his death in December 2013.

Enjoyed this email? You may also like:

March 8, 2019: A profitable trip to the Post Office 

March 4, 2019: A history of Britain in 7 coins 

February 28, 2019: The Penny Black blunder

Come and join us on JustCollecting – the community for collectors

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