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Wednesday, October 14, 2015

Why Stamp Collecting is the Most Cool and Awesome Hobby

Today I wanted to share my thoughts for those of you non-stamp collectors about why I think stamp collecting is the most awesome hobby in the world. 

I start by examining the purpose of most hobbies. Hobbies generally are a way for us to relax doing something that interests us without any standards and goals beyond those which we determine for ourselves. There are many different kinds of hobbies, but most fall into the following categories:

1. Hobbies that involve collecting something. 
2. Hobbies that involve creating something.
3. Hobbies that involve experiencing something.

In all cases, the hobby activity stimulates our senses - smell, sight, touch, hearing, as well as our exercising and engaging our minds. Most people find comfort in one of the above categories and occasionally one encounters individuals whose hobbies span all three. Most hobbies have a life cycle:

1. Dabbling
2. Increasing the intensity of interest and goal setting
3. Pursuing the goal intensely or casually
4. Savouring the accomplishment
5. Moving on to another hobby

We start dabbling in a hobby that we think we might like to see if our interest takes hold. At that stage, we have no goals associated with it and are strictly focused on the fun of it. Many hobbies never progress beyond this stage, being abandoned in favour of something that the person finds more interesting. Assuming that a person's interest takes hold, then there is usually an increase in the intensity with which the hobby is pursued. Perhaps the individual becomes a member of a club, or associates with other people who hold the same interest, or they identify a specialty within their hobby that they like the most, or a particular creative outlet that they want to pursue. Eventually, the hobbyist begins to consciously and unconsciously set goals about what they want to accomplish in their hobby. It could be catching a particular size and type of fish for a fisherman, or for a traveler it could be exploring a particular region. For a photographer, it could be catching the perfect shot of a landscape or natural phenomenon. Finally, for a collector, it could be acquiring a complete collection of the chosen area and exhibiting it. What starts off as purely casual, becomes more an more serious and focused on the goal. As long as the pursuit remains fun and exciting, the person will continue with their hobby. When the person accomplishes what they set out to do, they savour their accomplishment and either choose a new goal, if they are still interested in their hobby, or they move on to a different hobby. 

Nearly all hobbies consume resources, both in the form of time and money, and nearly all of them provide no financial return whatsoever. In fact most of them involve an ongoing outlay to maintain the hobbyists participation in the said hobby. For example if you are a sportsman and are a member of several sporting clubs, those clubs all have annual fees that you must pay, and equipment wears out and must be replaced. If you travel, each trip costs money. 

Stamp collecting (philately) offers many advantages over other hobbies and overcomes many of the limitations inherent in most other hobbies:

1. Stamps are highly portable and take up very little space.
2. Stamp collecting stimulates many facets of the mind, including analytical thought, memory recall and the imagination. 
3. Stamp collecting almost always yields at least some residual return at the end, and in some cases can yield a high positive financial return. 
4. There is a lot of flexibility in how much time you can spend with your stamps. 
5. The range of collectible stamps is finite and the universe of collectible items is documented and well known, making goal setting possible and enabling one to envision the accomplishment. 
6. Stamps can be insured for their full value. 
7. Stamps fulfill our natural curiosity about the world and our desire to explore it without any of the physical dangers or risks. 
8. Completing a collection of stamps gives the same sense of pride and accomplishment that is obtained from the pursuit of most other hobbies. 
9. The hobby can be pursued all year round, regardless of the weather and seasons. 
10. Because it stimulates the mind, it can act as a catalyst in promoting a lifestyle that is focused on continual learning. 
11. Stamps can fulfill our desire to see, feel and touch beautiful things. 
12. Grading stamps is more objective and easier to do consistently. 

I will now elaborate on the above points. 

Most hobbies that involve collecting are pursued because of our desire to accumulate and experience beautiful objects and works of art, or because of our interest in history, or because we naturally have a desire to create order out of seemingly random things. Also many hobbies that focus on collecting fulfil our desire to profit from discovering rare items and acquiring them for relatively little. Many of them though have three main drawbacks. The first is that the universe of collectible items is not well known or documented. For example, lets say that you like collecting cigarette lighters, or makeup compacts, or teacups and saucers. There are no catalogues that I know of that would list every type of those things that has ever been made or exists. Now for those who like open endedness in their collecting, there is nothing wrong  with this. But if you are the type of collector who wants to accomplish completeness in a collecting area, or you want only the rarest items in your collection, you have to know what completeness is and what the rarest items are. For many collecting areas, the information simply does not exist. For stamps, very detailed records were kept by postal administrations and by security printers when stamps were issued and catalogues have been produced over the years that list every issue of every country since the first stamps appeared in 1840. So it is easy for a collector to know exactly what exists and what is rare. A stamp collector can set clear and measurable goals for his or her collection that can be tracked over time. 

The second main drawback of a collecting hobby that stamps overcome is the space and insurability problem. Many collectibles take up a very large amount of space. Antique cars is an extreme example, where pursuing the collection seriously can involve having to purchase actual real estate to house the collection. But less extreme examples include antiques. Many items are bulky and can require large rooms in a home to be dedicated to them. With stamps, tens of thousands can fit into an album that is two inches thick that sits on a shelf. My stock, which consists of hundreds of thousands of stamps occupies a a six foot by six foot cabinet:

I'm a professional, and acquired this stock over a five year period. But an average collector could take a lifetime to accumulate this. If you only collect rare and expensive stamps, your collection could take up a lot less space than this. In terms of insurance, most home insurance policies will not cover any household item over $200 if it is a collectible, and specialized policies are either not available for many collectibles, or are very expensive and require expensive valuations to be done. Stamp insurance is available, and while not cheap, is much less expensive than what many other specialized policies would cost. Also, valuation is easier because catalogues are readily available to help a person value their collection. A person can use the catalogue to come up with a preliminary value and then a professional dealer can examine the valuation and provide their own opinion on letterhead for a small fee. 

A third drawback associated with collectibles is that the value of them is very highly dependent on grade. Grading the collectible can very subjective and the standards inconsistent and specific to the specific item in question. For example, coins are graded according to wear. The degree of wear is completely specific to the coin issue in question. There is no universal standard that applies to all coins to assess quality. This means that collectors often rely on third party grading and certificates from graders to support the value of the item. This certainly does exist for stamps. However, it is not universal. There is a universal set of grading standards for stamps that a collector can learn that will enable him or her to assess the condition of a stamp from any country and while individual collectors may disagree on specific stamps there are still many stamps that could be given to a large body of collectors for grading and the results would all be fairly close together. 

Most other hobbies are undertaken to stimulate the mind. Specifically the imagination or desire to explore the world, or the desire to study in detail and learn, or still the desire for creative expression. While the basic issues of stamps are well known and documented, the in-depth knowledge of those stamps is generally not. For example, most stamps today are replaced by newer designs every few years, but this was not the case 100 years ago. Back then, it was not uncommon for the same basic stamp design to be in use for 15-20 years. Of course there would be many printings, which would result in many subtle variations. This affords a rich opportunity for someone who enjoys learning and research to study the stamps and make hitherto unknown discoveries of the rare and unusual. Indeed this is possible even with modern stamps. Forming a collection of an unusual topic can be a very creative endeavour as well and can fulfill the desire for creative expression just as surely as painting a picture, writing a song or drawing a picture can. One can explore the world and experience different cultures just by looking at all the different images on the stamps and allowing one's imagination to fill in the rest, or by using google to look up things that one is curious about. Travelers like to travel to experience different cultures and see beautiful sights, many of which are pictured on stamps. While stamps cannot replace the physical experience of actually visiting a historical place, it does allow you to experience many of them without having to expose yourself to any physical dangers (air travel, diseases, jet lag, muggings etc.).

Many hobbies are inflexible with regards to time in the sense that in order to enjoy them, you need to devote an entire day or afternoon to them. Also the equipment for many hobbies is not readily portable and the hobby cannot be enjoyed everywhere. With stamps, you can spend as little or as much time is available to you enjoying them. I've often taken my stamps on flights or ferry rides to pass the time. You have to be careful not to lose or drop them, but you can look at them and study them in practically any location . The other thing is that you can work on your stamps all year round in contrast to many outdoor activities that simply cannot be done in Winter. In fact, I would suggest that a large part of the reason why people get so depressed in Winter is from a lack of hobbies that can be pursued during this time. Winter is actually a perfect time to hunker down with a cup of hot cocoa, a good strong light, a magnifying glass, your favourite stamps and the literature associated with them, and just lose yourself in them. 

There are an infinite number of directions to go in with stamps, so that if you complete your collection in one area, you can simply start a new collection. Indeed many philatelists who pursue the hobby for life collect many different things over their lifetimes. I myself have had a dozen different collections that I have started and sold, Nigeria being my last one. 

Finally, stamp collecting will always yield some financial return. If all you collected were cheap packet stamps that have no real commercial value, sure you might only get $20 for your album, and then the hobby is in the same financial category as nearly every other hobby out there. But if you choose a collecting area that is not popular and you learn it inside and out, acquire the best pieces you can afford from that area, I can almost guarantee you that by the time you sell, you will get more money than you paid for your stamps.  Of course, for this to apply your stamps would have to have had some scarcity to them and you would have to have acquired them for a reasonable price and not overpaid. This is one of the reasons why choosing a popular collecting area may not yield the highest financial return: because you are having to pay top dollar to acquire your stamps, and unless prices go up you are unlikely to sell for more than you paid. However, even in the worst case scenario you will get 25-40% of what you paid. Can you say the same for used golf clubs, camera equipment, art supplies or used stereo equipment?

So there you have it - my take on why this hobby has everything going for it and why more people should seriously consider taking it up.   

Thursday, October 8, 2015

Of Stamp Gum and its Originality - How to Authenticate Gum

It has been said before that there is perhaps no substance on earth that is more valuable, in terms of its volume, than original stamp gum on classic stamps. Collectors will pay up to 1000% more for a stamp that has it, and more commonly 100-200%, than a stamp that lacks it.

This of course has led to a thriving industry involving adding gum to stamps that lack it. In some cases, the re-gumming job is so good that it can fool a collector who is unfamiliar with the stamp issue at hand. 

So how do you tell if a stamp has original gum or not?

Kind of like fingerprints, stamp gum has its own unique appearance for each issue on which it appears. Fortunately, there tends to be some uniformity in the chemical composition and method of application of gum by specific printing firms, so understanding the characteristics of the gum they employed in production will prove to be invaluable to a collector who encounters an expert re-gumming job. It will also enable you to authenticate gum that is original but sweated or redistributed, rather than entirely new gum. Unfortunately though, the same printer often changed the makeup of their stamp gum over time, so it becomes important when making comparisons, to use stamps printed at approximately the same time. 

So the key is to find an example of a contemporary stamp that you know for a fact was printed by the same company, at the same time as the stamp you are looking at, that you are certain has original gum. How can you be certain? Well, re-gumming is not worth anyone's while on a cheap stamp - say one that catalogues less than $50. So if you can either find a low value in the set, that is poorly centered, say, chances are excellent that the gum on this stamp will be original, since there would be little reason for a re-gummer to re-gum the stamp. Having said that, though there are occasions where a re-gummer will practice on cheaper stamps. So you have to look for the tell-tale signs of re-gumming, which I will get into in a minute. 

Another alternative to a low value, if there isn't any such stamp available, is to locate a stamp issue from another country that is inexpensive that was printed at the same time by the same firm, like these two:

Image result for nicaragua volcano stamps

I couldn't find an image for it, but the Nicaragua volcano design above was printed in rouletted form at approximately the same time as the Newfoundland Harp Seal stamp above. Both issues were printed by the American Bank Note Company around 1879. The Nicaragua stamps are inexpensive and very unlikely to be re-gummed when you find them. However, the Newfoundland stamp above is a $400 stamp with original gum, and most mint stamps on the market lack original gum. Therefore, one has to be on the lookout for re-gummed examples. The danger on this issue is higher because the stamps are rouletted rather than perforated, which makes the re-gumming much easier to conceal.

In describing gum, I find it useful to describe colour, whether it is evenly applied or streaky, and sheen. In describing sheen, I don't find the simple matte versus shiny to be quite good enough, since there is a continuum of different degrees of shine to gum. I find comparing them to the appearance of a painted wall to be useful: high gloss, semi gloss, satin, eggshell, matte and flat. 

The gum on these issues thus is a colourless, evenly applied, satin gum that looks just like this:

If you had a Nicaragua rouletted volcano design, you would see the same type of gum. 

One caveat to this is that the gum can change over time. So when you are working with a set that was issued over a period of years, you have to be aware of these changes. Take, for example, the New Brunswick Cents Issue of 1860-1867. This set was also printed by the American Bank Note Company. However, the gum differs, depending on whether we are talking about an 1860 printing, and 1861-62 printing, or an 1864-1865 printing:

The above 12.5c and 17c values from the set are both perforated 11.75, which indicates that they were printed before 1861. The gum on these issues is a very light cream, is evenly applied and has a satin like to semi gloss sheen. 

This 1c stamp from the set is perforated 11.75 x 12, which indicates that it was printed between 1861 and 1863. The gum from this period is generally evenly applied, but can be streaky as well on some stamps.It has a deeper, coffee-cream coloured appearance and an eggshell sheen. 

Lastly, this 5c value, which is perforated 12, is from the last printings made after 1864. It is very similar to the gum on the Newfoundland stamps above, but is a bit shinier. I would describe it as colourless, evenly applied and semi-gloss.

However, it is important to look at more than one set to understand the gums that the American Bank Note Company used. So lets take a look at the Nova Scotia Cents Issue that was printed at the same time as the New Brunswick Issue above:

This 1c black from the set on white paper is perf. 12, which places it in the last printings issued after 1864. It is a clear, evenly applied, high gloss gum. 

This 10c vermilion on white paper if perf. 11.75 x 12, which places it in the intermediate period from 1861-1863. The gum is similar to the 1c New Bruswick above, but is a bit lighter in colour and a bit shinier. I would describe this as very light cream, evenly applied but occasionally streaky, and semi gloss sheen. 

This 8.5c green on yellowish paper is perf. 11.75, placing it in the 1860-61 period. As you can see, the gum is darker than that found on the New Bruswick issue and also shinier. I would call this, yellowish, evenly applied and semi-gloss. Though one has to be careful because the appearance of this gum, particularly the colour, may simply reflect the colour of the paper it is on. 

I mentioned in an earlier post that the 1859-67 Cents of Canada:

was printed by the American Bank Note Company at the same time as the two issues above. Mint examples of the New Brunswick and Nova Scotia stamps are very inexpensive, with a few exceptions, so the authenticity of the gum on these is not likely to be a problem. Getting a good understanding of what these gums look like will prove invaluable in authenticating the gum on the above Canadian issue, which is very problematic for collectors, as stamps with original gum are very expensive and typically worth 150% more than stamps without. 

So if a see a stamp that appears to have a gum that you are not familiar with, what are some things to look for that will indicate the possibility of re-gumming?

1. Look at the perforation tips. 

Nearly all stamps are gummed before perforating, though there are some exceptions. Thus when the stamps are separated from one another, there will usually be very fine micro-fibres at the very tips of the perforation teeth. There may also be very small areas of gum loss where the gum has been pulled away by the shearing action of separating stamps. 

On a re-gummed stamp, gum will be present on the micro-fibres. Often you will see under magnification, little tiny globules of dried gum. You may even see gum on the face of the stamp in the perforation troughs that has crept there from the application process. On multiples, you would see gum in the perforation holes, where there should not be any. 

A caveat here is in order: you must be aware of whether some sheets of the stamp issue you were looking at were gummed after being perforated, as you could wind up classifying a genuine stamp as re-gummed. Some of the sheets of the New Brunswick Issue above were gummed after being perforated, and many stamps have gum on the face. 

2. Look for signs of the perforations being filed

Smart re-gummers are aware that their work can be detected by the above test, so many resort to filing the perforation tips down to remove the excess gum. Usually, it is impossible to do this without thinning the perforation tips to a degree, and this can be detected by either strong back lighting or watermark fluid. Another way to spot this is to examine carefully under magnification. You will see gum loss that is just too uniform all the way around the stamp, to be plausible. 

3. Look at the Direction of Paper Curl

To use this test properly you have to know what direction the paper is normally supposed to curl in when the stamp is placed face up in the palm of your hand. Some issues are printed on both horizontal and vertical wove paper, so they can curl in either direction, in which case, this is not such a useful test. But assuming you have a stamp that was printed on one type of paper and you are familiar with the way the paper normally curls, lay the stamp you are looking at face down in the palm of your hand, if it stays flat, or curls in another direction, it may be a re-gummed stamp. 

The only drawback to the above tests I find is that you can have a stamp with genuine original gum where the gum has either been re-distributed or sweated, or otherwise disturbed that can fail tests 1 and 3. So you really do need to have some familarity with the gum normally found on the stamps printed by a particular printing firm at a particular time. After a while you will get a 6th sense about whether the gum "looks right".

Any questions, comments?

Tuesday, October 6, 2015

The Face Value Follies - 5 Reasons Why Treating Modern Stamps as Discount Postage is Damaging to the Hobby

Today's post is about a development within the hobby that I have found to be very damaging to the hobby in general and damaging to the long-term ability of dealers to service their collector market. That development has been the tendency by dealers and collectors to perceive modern stamps issued after 1945 as mere postage and to take the position that it is worth less than its face value.

It is hard to be certain where it started, but I have a fairly strong hunch that it was started by dealers back in the day of brick-and-mortar retail stores. I can certainly understand why dealers at this time saw no harm in this practice: in their collective minds, they could not envision a time when demand would be sufficient to absorb the then colossal supply of mint stamps. Back in the 1970's and most of the 1980's, most of the industrialized countries in the world were issuing upwards of 30-50 million of each commemorative stamp, so the supply seemed endless. At the same time, most dealers were wholly reliant on foot traffic into their shops and the occasional want list to sell their stamps. Consequently, the quantity that many dealers considered adequate for stock was very low: 5-10 sets. Anything above that was seen as overstock. So dealers were confident that they could start offering less than face value for these stamps and could thus start using them on their mail, thus saving on their mailing costs, which have always been considerable in the stamp business.

But as with many well practices grounded in good intentions, there are a number of things that I don't believe were considered by dealers as a whole before they all jumped on this bandwagon. These things are all the reasons why I believe this practice has damaged the hobby, and with it the long-term viability of many stamp businesses:

1. It lowers collector confidence in the modern stamp issues.
2. It alienates collectors that actually prefer modern material over classic stamps.
3. It has resulted in collective ignorance about the modern stamp issues.
4. It has effectively removed a large quantity of otherwise collectible material from the marketplace.
5. It has made it difficult for many dealers to survive.

I will not explain these reasons in more detail.

Lowering of Collector Confidence

Even though most philatelists collect for pleasure, there is a very strong concern by collectors for the ultimate monetary value of the stamps in their collection. Most collectors spend a lot of money on their hobby during their lifetimes. It makes them feel better if they believe that they can dispose of their collections when the time comes for a reasonable price. I think most seasoned collectors know that it is not realistic to expect to make a profit unless they have specialized in an obscure area for a long time and the popularity for their collecting area has grown since they started. However, I do believe that most collectors expect to receive at least 30-40% of their money back when they sell.

Thus their decision as to whether to collect a particular type of stamp issue or country will be influenced by their perception as to whether they can sell their stamps at a reasonable price. If they see a situation where they are only receiving 10-30% of their investment, then I believe that they will avoid collecting that area and will move to areas where they see more upward potential.

Indeed this is exactly what we have seen in recent years. There has been a huge amount of upward pressure on the prices of scarce pre-1945 material, while most material issued after 1945 has languished. This has not always been the case: when I was a boy, there was still a lot of demand for modern material. Plate block and First Day Cover collecting was still very popular.

The problem that dealers have created for collectors is one of value perception, which I will illustrate by way of an analogy:

Practically everyone is aware of the value of high-end brand name products like Prada glasses, Rolex watches and Louis Vuitton bags. Most people are willing to pay thousands of dollars for these items because the believe them to be better than their non-brand name counterparts. Most people though, if they really think about it, probably suspect that these items are not really handmade by some craftsman sitting at a workbench somewhere in Geneva, but are probably mass produced on some factory floor, just like every other product out there. But as long as most people don't know this for a fact, they are happy to continue buying it in the perception that it really is handmade and therefore different from the goods that the rest of us buy.

Now imagine a situation where you purchase a Louis Vuitton purse and inside that purse is photograph of a factory floor with a pile of what looks like a million bags just like yours. How would you feel about the bag you just bought? Would you still see it as a valuable item? Probably not.

You might be asking yourself, "what does this have to do with the stamp business and the hobby? stamps are not consumer goods. The makers of Rolex watches have never bought back watches from their customers.". That is certainly true, but for decades now, dealers have been using old stamps on their mail which is being sent to their customers! They are not using contemporary stamps, but stamps that are as old as 50-60 years, although due to the labour intensive nature of using the early stamps, they are mixed ages. By doing this they are telling their customers that modern stamps have essentially no value beyond postage. That is the message that has continuously been broadcast to collectors as a whole for the last 30 years at least. In the old days prior to this, you would see occasional use of old stamps by a dealer, but usually it was because the stamps were damaged in some way. You didn't see dealers using perfectly good, mint never hinged stamps from decades before on their mail. At the same time, demand for modern issues 30 years ago and 40 years ago was quite strong.

Dealers did not want to maintain large quantities of what they saw as overstock, and they saw an opportunity to save on postage costs, so they started offering less than face value for stamps that collectors were bringing them. When I first saw this happening, the discount was 10-20% below face. But as postage rates have gone up and the early stamps become more labour intensive to use, the discounts have gotten as large as 40-50% under face value.

What this has done is created an entire generation of collectors who think that modern stamps are essentially not worth collecting because no dealer will ever pay them more than a percentage for face value for their collections, including situations in which they have formed specialized studies. Even in situations where a collector wants to collect these issues, they don't see it as a good investment of their resources.

I wrote in an earlier post about how dealers essentially make the resale market for stamps. Thus collector confidence in modern stamps would be much higher if dealers collectively would be willing to pay reasonable prices for these stamps as they would with earlier material and were prepared to market them as collectible stamps. Once the price of something becomes depressed in the marketplace it is very difficult to get prices back up again.

The sad part of all this is that issue quantities of really modern stamps after the mid-80's have decreased significantly with under 1 million being a very common quantity for the same types of material that was produced in quantities of 30-50 million just years before. For example, the souvenir sheet shown at the beginning of this post had an issue quantity of just 700,000. When you consider the popularity of this hobby in countries like India and China, as well as other populous countries in the developing world, these are not large quantities at all. It would not take much demand from each of these developing markets to exhaust supplies and make them very scarce. Despite this scarcity, the perception that all modern stamps are postage is so deeply entrenched among collectors and dealers alike that these issues too are languishing.

Alienating Collectors Who Are Interested in Modern Material

Believe it or not, some collectors prefer modern stamps over older ones. For one thing, there are many more beautiful colours to see on modern stamps, where modern mixing technology has created a much wider spectrum of colour. The range of subject matter depicted is greater. Lots of people like thematics like birds, flowers and art. The whole area of ink and paper fluorescence is fascinating to many collectors and has provided a very fertile field of study for these philatelists. Not having to worry about forgeries, repairs and poor condition is a relief for a lot of collectors because they are then free to appreciate the subject matter on the stamps.

But is is very off-putting and frustrating to go a dealer and say "I'm looking for the Leigh-Mardon printing of the 1985 parliament definitive", or "I'm looking for the Helecon paper varieties of the 1960's Australian definitives" and have the dealer dismiss you with a wave of his hand and "aaah I can't be bothered with that stuff". It is even worse when you are in their shop and five minutes later you see them fawning over some customer who collects a classic area like Large Queens. You think to yourself "my stamps are just as good as his. My area deserves some respect too."

After a while, if you can't secure the supply as a collector; if the only way you can get material is to buy bulk auction lots, then eventually you might wind up abandoning the area even though you really like it in favour of a collecting area where you can actually obtain the stamps you want.

The collective perception among dealers that there is not enough demand for modern material is obviously the reason why many of them take this position. But what they don't realize is that over the long term, they are the ones in the strongest position to influence collectors and therefore demand. If they can't be bothered to learn about it and supply it, then demand will never be strong.

Collective Ignorance About Modern Stamp Issues

Dealers used to have extensive knowledge about all the stamps they sold. I remember as a kid going into my stamp shop and verbally describing to the dealer's wife the 3c and 4c Caricature designs of Borden and Mackenzie King and she knew right away what stamps I was talking about. My descriptions as a 6 year old kid new to the hobby did not include the proper name of the issue, but were along the lines of "Two stamps with sketches of two old guys on them. One was black and the other was brown." I doubt that would happen today unless the I was talking about a Canadian issue. If it was any other country forget it. Most dealers that I have dealt with don't seem to have any detailed knowledge of modern stamps issued in the past 30 years.

A large part of this is because of the sheer volume of new issues that have come out during this time and the fact that countries have issued exponentially more sets than they used to. For example the number of Scott numbers for Canadian stamps at the beginning of 1980 stood at 846. As of mid 2013 it stood at 2,651! However, I do not see the collective desire among dealers to know and understand  this material either and to meet the large volume of it as a challenge deserving of their collective effort and attention.

The reason of course lies in the fact that there is now no large market for this material that will make it worthwhile for dealers to spend the time acquiring this knowledge.

Removal of Collectible Stamps From the Marketplace

Using old stamps on mail reduces the number of mint examples in existence. Over time, the number of mint stamps available for material issued between 1945 to the end of the 1970's has been reduced significantly. It is hard to estimate the percentage, but it can be seen quite readily when you look at the bulk postage lots available for sale today. When I first noticed postage lots back in the late 1980's, it was commonplace to find 1950's Canadian issues, including the high value definitives. It was also common to see the 1967 Centennial Issue and the 1972-77 Caricature and Landscape Issue. I can't remember the last time I saw a postage lot that had any of this material present in large quantity.  One might argue that there are still more than enough mint stamps to supply every collector who may want one. But I would counter with the point that you don't know what demand will be in the future. Another point that people might make is that this reduction in supply is good because it will result in higher prices for those that have the remaining stamps.

While that is indeed true, I think it is preferable to achieve those kinds of increases by increasing the number of collectors in the hobby. It certainly will be better for the health of the hobby over the long term. I don't believe that having a small number of very wealthy collectors controlling an even smaller supply of collectible material is good for the hobby in the long run. Those collectors have to be replaced eventually, and accessibility to the hobby is the key to attracting more entrants. We live in a time where every form of entertainment is expensive:

1. It costs $3 to download a movie online for 48 hours.
2. It can cost $100 for a family of four to go to a movie.
3. Going out for dinner can cost $50-$200 at somewhere that isn't even fancy.
4. Going out to a club and having drinks can cost $100 easy.

So stamp collecting should be a very viable hobby choice for more and more people now because compared to the above it is actually quite inexpensive. But people aren't going to consider it as a possibility if it is way more expensive to get started than all the other alternatives open to them.

Using the old stamps on mail does create used stamps, but not stamps properly used in period, which is what most collectors of used stamps want. Covers bearing mixed frankings of 1940's to 1980's stamps are not desirable to collectors of postal history either. So by using the older stamps on mail, dealers are essentially removing it from the real of collectible material completely: it is no longer mint, and it is not contemporary used either.

Threatening Dealer Survival

One trend that I have witnessed in my lifetime is the growth of auction houses while many bricks and mortar dealers are going out of business. I, along with maybe 2 or 3  other dealers that I know of, are the entire population for full time stamp dealers in Toronto - a city with over 2 million people. Why has this happened?

The reason why I think it has happened is because the only markets that have grown over the past 30 years are the rare stamps. While dealers can sell this material just as well as the auction houses can, it is very hard to maintain a stock of this kind of material, precisely because it is so scarce. There is only so much of it to go around so as collectors lose interest in modern material and gravitate towards the scarcer early material the prices increase and a climate is created in which a dealer simply cannot supply this material in a cost effective manner. For example, I had a customer tell me that he thought my $1 Jubilee stamps were overpriced because he said he could buy them at auction for less.

So I have to compete with him at the same auction for the same stamps, how can I possibly supply those stamps to my customers? I can't. If  my customers aren't interested in modern material, then my opportunity as a dealer to earn a living by supplying my customers with stamps starts to dwindle.

I have already posted before about the value that a good dealer brings to the hobby and I have pointed out that while auctions have their place, they do not offer the same ongoing service to their customers that a good dealer does. However, most customers aren't seeing this value now, and are quite happy to buy their stamps at auction if it means they can save money. In the long run, I believe that this will effectively kill the market for mid-range and low range material. The only markets that will continue to grow and prosper under this model are rare stamps.

But as I pointed out above, people don't usually take up hobbies by starting with the most expensive items. Golfers start with cheap clubs before they eventually splurge on expensive ones. In the same vein, if we as dealers want to attract people to this hobby, we have to be able to offer them affordable and collectible stamps, as well as the piece of mind that comes with knowing that we will gladly buy them back when the time comes for a reasonable price.

What is your opinion on all of this?

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.