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Friday, October 2, 2015

What a Difference Condition Makes and the Importance of Knowledge in Sourcing Philatelic Bargains

In my last post, I wrote about my take on catalogue values versus market values. In much of what I wrote, I talked about how most stamps are not worth anywhere close to catalogue value. But I also pointed out areas where the catalogue prices are too low or where exceptional quality can take an ordinary stamp to stratospheric heights. Indeed there are still many discoveries and bargains to be found in philately.

But what are examples of such stamps? How do you know when a stamp is a true condition rarity? How can you judge what constitutes exceptional quality for a particular issue? The answer is acquiring all the background knowledge that you can about the issue in question.

The examples I am going to use in this post relate to Canadian stamps, but the principles are the same for any country and you should read it with that in mind if you collect a country other than Canada.

Now for the  examples. Consider these four stamps from New Brunswick that I am currently selling:

They are all well centered and never hinged examples of stamps from the 1860-1867 Cents Issue. They were printed by the same company, and at the same time as these stamps:

These stamps are of course the Canadian Cents Issues from 1859-1867. They were all printed by the American Bank Note Company (ABNC) and most experienced collectors can attest to how difficult they are to find in well centered and sound condition. In fact, the first two stamps above are average quality for this issue. Because there were 5,700,000 of the above 10c stamps printed, there are still a lot of them around, so collectors get an ample opportunity to see just how scarce the bottom stamp actually is in comparison to the top two stamps. Despite being common in mint condition, the 10c stamps above are not common in mint condition, with most copies encountered having no gum at all, or being re-gummed. 

The reason why they are so difficult to find in well centered and sound condition is because:

1. They were only the second perforated issues of Canada and when the ABNC prepared the plates, they did not leave additional space in between the impressions as compared with the imperforate stamps. This left almost no margin for error in perforating the sheets. In those days, perforating was done on a large machine, much like a sewing machine, that punched the holes in straight lines while the sheets were fed by hand. The margins on these issues are so narrow that it was next to impossible for the machine operator to ensure that the sheets were fed through in the exact middle and get the job done in anything close to a reasonable speed. The result is that 90% of the stamps look like the first two above, if not worse, and in some cases, much worse like this:

2. The paper used to print them was both soft and thinner than the paper found on later issues of Canada. The average thickness of most issues after the Small Queens is 0.004" to 0.005" thick. In contrast, these issues are between 0.0025" and 0.0035" thick. That tiny difference makes all the difference in the world in terms of the incidence of corner creases and short or pulled perforations. If you look at the frequency of these faults on issues after 1897 you will see a sharp drop in the number of faulty stamps. For issues before this date, corner creases and perforation problems are widespread. This is the reason. 

The New Brunswick stamps were produced using the same papers, the same plate layouts and the same methods. So it would follow logically, that they would suffer from the exact same problems, and indeed they do. But what further compounds their scarcity is the fact that there were so many fewer stamps printed. New Brunswick today has just over 500,000 people. The population was much, much lower when this set was in use. I don't know the exact issue quantities of these stamps, but I would be very surprised if there were more than 100,000 printed of values other than the 5c. Do you know what other well known stamp from this time had a print quantity of 100,000? It was the 10c black brown from the Canadian Cents Issue:

Even with a huge tear, I sold this stamp two days after I listed it for $125. In VF condition this is an $8,500 stamp and it is missing from nearly all Canadian collections. 

Given how scarce these stamps are, and seeing how well centered they are compared to the above Cents issues of Canada, you can begin to get a sense of how truly rare they must be. The fact that they not only have gum, but are never hinged, means that they are, in my experience, world-class rarities. In 37 years of collecting, they are the first examples in this condition I have seen, except for the 12.5c, where I used to own one other example. 

How much do they catalogue in such fabulous condition in Unitrade?

The 1c lists for $50 in VF plus a 200% premium in never hinged condition, so $150.

The 5c lists for $30 in VF, plus 100% premium for original gum, plus another 300% premium for never hinged, so $30 x 2 x 3 = $240

The 10c lists for $60 in VF plus a 200% premium for never hinged, so $180

The 12.5c lists for $100 in VF plus a 200% premium for never hinged, so $300

A mere pittance given that they are from 1860! And when compared to what the same condition would sell for on the 10c Prince Albert from Canada. A basic 10c red-lilac, Scott #17 in very fine NH condition, lists in Unitrade for $1,500, plus 150% for original gum. They don't even ATTEMPT to give an NH premium. So just a copy with gum is $3,750 in Unitrade - more than 10x what the 12.5c above lists for and 25x what the 1c lists for. 

Does that make any sense to you? It shouldn't. It should tell you that these stamps are a sleeper if there ever was one and you should buy them if you have the chance. 

Why, you may ask are they valued so low? Partially because the average stamps found from this set are not well centered and often have no gum. Most stamps from the New Brunswick set look like this:

There are simply not enough superb examples like the ones shown above for the marketplace to establish a proper value that reflects their true scarcity. Another reason is lack of demand. Why is demand less? Mainly due to positioning: The Canadian Cents Issue is at the front of every Canadian stamp album. What most collectors do is they buy all the modern Queen Elizabeth II issues in mint and then they work their way back. Provinces, like New Brunswick are located in the back of all Canadian albums after back-of-the-book material, like Airmails and Postage Dues. European produced albums usually incorporate the back-of-the-book material into the main issues, but this does not usually extend to provinces. As a result, most collectors never get around to seeking out this material. Sure they buy it if it comes along at what they think is the right price, but most of them never seek it out because they are too busy looking for the earlier Canada. 

That brings me to the next point which is knowing the right price. If you look at the back scans of the New Brunswick stamps, you will notice that the 1c and the 10c both have patchy gum and areas where there is no gum. Indeed an inexperienced dealer or collector may downgrade them on this basis without understanding how incredibly rare it is to find the 1c with gum period, and without understanding that this streakiness is perfectly normal for this issue because the gum was applied to the sheets after they were perforated, by brush. That is crucial information because it explains why mint stamps often look as though they have been re-gummed - having small spots of gum on the face and stiff perforation tips. If you didn't know how the sheets were gummed you could reach the wrong conclusion about the gum. Indeed you need to know this key fact and have some experience with what the gum on these issues looks like. It also explains the streaky appearance. Thus an experienced and knowledgeable collector would not downgrade these stamps from NH just because of the patches that had no gum. 

The other little known fact that accounts for the scarcity of the 1c and 5c stamps with gum is this: the remainders of this issue were kept at the Custom House in St. John, New Brunswick. In 1891 there was a massive fire that destroyed this building. As a result of the heat and water that was used to fight the fire, the gum on the sheets of the 1c, 2c and 5c became softened and the sheets stuck together.Consequently, most of them were soaked to get them apart and so they lost their gum. Knowing that fact puts you in a position to appreciate the true scarcity of those 1c and 5c stamps above. 

So if you were visiting a dealer and looking for under-valued material, you would be well advised to buy all four stamps if you saw them. But lets say you only had $200 to spend and you had to make a decision as to which one to buy. Because the 12.5c and 10c are more common with gum than the 1c and 5c are, I would say it should be a toss up between those two stamps. The 1c is actually slightly more common than the 5c with gum, and the never hinged premium on the 5c is higher. Also, the basic catalogue value of the 5c is lower. Thus there are three ways that the value of this stamp can go up in Unitrade:

1. The premium for original gum (OG) can go up from  100% say 150%, just like their Canadian cousins.
2. The basic catalogue price can go up from $30 to something more reasonable like $50. 
3. The never hinged premium (NH) can go up from 300%. 

Personally, I think the first two factors will increase before the NH premium does because it is already at 300%. Assuming that Unitrade increases the basic catalogue price to $50 and the OG premium to 150%, the value of this stamp would increase to:

($50 x 2.5) x 4 = $500, up from $240.

What is the likelihood, do you think of a $5 Jubilee doubling in value now, given that it already sells for $10,000 in VF NH condition? I think you would agree that the 5c stamp above is a much better buy in the long run, although the $5 Jubilee is still a very smart investment. 

Now, I've quoted Unitrade values. I haven't even talked about Scott or Stanley Gibbons. Scott doesn't even list an OG premium or an NH premium, nor are there any footnotes to explain the scarcity of the stamps with OG. Gibbons lists a mint 5c for 28 pounds, with no premiums of footnotes of any kind. Thus if you owned these stamps and were unaware of everything I have said, you could be persuaded to sell them at a pittance. 

This is why they say that knowledge is power in this hobby: because there is so much to know and understand. 28 pounds is perfectly fine for a copy that looks a little better than the off centre one above and without gum. Remember that just because Gibbons lists it for 28 pounds and they say the will sell it to you for that price, doesn't mean that it is available at that price. If it is, the above analysis should tell you that you should snap it up without a second thought. 

Thus my advice to you as a collector is: don't rely solely on Scott, Gibbons, Yvert, Michel or any other standard catalogues for your philatelic knowledge. Spend the money amassing a library of handbooks. Yes they are expensive, or so they seem. But I can guarantee you that the knowledge you gain from them will more than pay off over the long term. Remember that today's gems were yesterday's regular stamps. Most collectors today would be surprised to know Jubilees, 1893 USA Columbians and 1898 USA Trans-Mississippis used to sell for below face value in the 1930's. And even as recently as the 1960's many of the dollar values could be bought for as little as $100. Even after adjusting for inflation, those prices were minuscule compared to what they are today. Much like the prices for the New Brunswick stamps above. 

I learned about the Custom House fire and the issues with the gum by reading the reference work on these issues that was written by Nicolas Argenti and published in 1962. I paid $100 for my copy when I bought it in 2000. But I see is selling one right now for $31.50. How can that not be a bargain?

And this is just one issue from one country in the world. Staggering when you think of all the opportunities out there. 

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