Author Topic: Stamps as an inflation hedge?  (Read 8810 times)

EveningNewbs

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Stamps as an inflation hedge?
« on: April 11, 2013, 04:07:38 PM »
I was thinking about the possibility of buying postage to keep as "cash" that's protected against inflation. According to this page (and specifically the graph), the cost of a stamp has been keeping about with inflation since around 1980. It looks like they're intentionally trying to keep it around the same price, and recently price adjustments have been happening once a year. Since they introduced "forever" stamps, the postage rate of an individual stamp increases with the price increases. From a practical standpoint, you'd need to keep books and books of stamps around, plus find someone to buy them when you need to cash them out. I've read conflicting opinions on whether stamps are useful as "currency." You could try to pay someone with stamps, but they'd probably just laugh at you if you tried.

Anyway, it's probably a silly and impractical idea, but I just wanted to see what you guys thought.

Crash87

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Re: Stamps as an inflation hedge?
« Reply #1 on: April 11, 2013, 04:16:16 PM »
it's probably a silly and impractical idea

I think you already know the answer

EveningNewbs

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Re: Stamps as an inflation hedge?
« Reply #2 on: April 11, 2013, 04:23:09 PM »
it's probably a silly and impractical idea

I think you already know the answer
Yes, I do. It would just be fun to tell people that my cash investments are rolls of postage stamps.

jrs

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Re: Stamps as an inflation hedge?
« Reply #3 on: April 11, 2013, 04:46:20 PM »
Is this a pop history quiz?  A game of Jeopardy? 

This is literally how the original Ponzi scheme got started.

Fascinating reading, if you are unfamiliar.
« Last Edit: April 11, 2013, 04:56:51 PM by jrs »

EveningNewbs

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Re: Stamps as an inflation hedge?
« Reply #4 on: April 11, 2013, 08:09:55 PM »
Is this a pop history quiz?  A game of Jeopardy? 

This is literally how the original Ponzi scheme got started.

Fascinating reading, if you are unfamiliar.
Huh, I never knew that the original scheme involved reselling postage. It's not EXACTLY the same, since I'm not asking for your money to buy stamps with.

Then again, maybe you'd like to be my first investor?

Reepekg

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Re: Stamps as an inflation hedge?
« Reply #5 on: April 11, 2013, 10:50:18 PM »
This is literally the plot of "The League" season 3 episode 7 where a character named Taco invests in forever stamps. There are several funny scenes like when he tries to buy something with them at a hardware store or when his friend's kid puts them all over her mother's underwear because she thinks they're stickers, thus ruining the investment.

"One day, they might hit the big 5-0."

Great show. Poor real life investment.

Use it up, wear it out...

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Re: Stamps as an inflation hedge?
« Reply #6 on: April 12, 2013, 09:14:49 AM »
Fun article on this topic

EveningNewbs

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Re: Stamps as an inflation hedge?
« Reply #7 on: April 12, 2013, 10:04:02 AM »
This is literally the plot of "The League" season 3 episode 7 where a character named Taco invests in forever stamps. There are several funny scenes like when he tries to buy something with them at a hardware store or when his friend's kid puts them all over her mother's underwear because she thinks they're stickers, thus ruining the investment.

"One day, they might hit the big 5-0."

Great show. Poor real life investment.
So I should be a comedy writer instead of a financial consultant.

arebelspy

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Re: Stamps as an inflation hedge?
« Reply #8 on: April 12, 2013, 10:14:33 AM »
So I should be a comedy writer instead of a financial consultant.

Most of the latter ought to be the former, based on the advice they give.

;)
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brewer12345

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Re: Stamps as an inflation hedge?
« Reply #9 on: April 12, 2013, 04:23:48 PM »
Uh, how many letters were you planning on mailing?

peterpatch

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Re: Stamps as an inflation hedge?
« Reply #10 on: April 12, 2013, 04:50:31 PM »
it's probably a silly and impractical idea, but I just wanted to see what you guys thought.

They are almost guaranteed to be protected against inflation, and if you know you are going to use a lot of stamps in the future it might make sense to buy a whole bunch of forever stamps at today's prices. But beyond that I wouldn't take it to the extreme and fill your garage with them waiting for a hyperinflation or something, that crosses the kook line for me.

chucklesmcgee

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Re: Stamps as an inflation hedge?
« Reply #11 on: April 12, 2013, 06:36:58 PM »
I've actually contemplated this in passing.

The postal service usually announces rate increases a week or two before the actual increase, so you could buy up a couple grand in forever stamps and then bam, instant 3% return on your investment. Unfortunately the costs of finding anyone else to buy your stamps are not going to be worth it, but hey, if there's ever a "forever stamp ETF" I'm all in.

tooqk4u22

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Re: Stamps as an inflation hedge?
« Reply #12 on: April 12, 2013, 07:13:34 PM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.  I get so irrated when I actually have to write a check let alone mail one.

Thus the moral of the story is that even if forever stamps are truly forever it won't matter much if the provider of such stamps are not forever.

arebelspy

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Re: Stamps as an inflation hedge?
« Reply #13 on: April 12, 2013, 07:21:41 PM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.

...how is the bank able to send it without stamps?

Unless it's directly to their bank account, in general bill pay just shifts you buying the stamps to the bank, no?  So yeah, it's a great option I use, but I don't see how it would cause "the post office to fail miserably". (Email has much more of an impact than bill pay.)
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MountainMan

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Re: Stamps as an inflation hedge?
« Reply #14 on: April 12, 2013, 07:25:16 PM »
It would be an interesting idea in passing, if it wasn't for the growing obsolescence of the post office.

Jamesqf

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Re: Stamps as an inflation hedge?
« Reply #15 on: April 12, 2013, 09:06:51 PM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.  I get so irrated when I actually have to write a check let alone mail one.

Yeah, pretty much the only thing I mail any more is income tax forms.  And of the 8 physical checks I've written in the last year, 6 were to the IRS.

DaftShadow

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Re: Stamps as an inflation hedge?
« Reply #16 on: April 12, 2013, 11:59:49 PM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.

...how is the bank able to send it without stamps?

Unless it's directly to their bank account, in general bill pay just shifts you buying the stamps to the bank, no?  So yeah, it's a great option I use, but I don't see how it would cause "the post office to fail miserably". (Email has much more of an impact than bill pay.)

Commercial companies generally use machines like these from Pitney Bowes, to print a barcode stamp directly onto outgoing mail.  Not likely to be many buyers there... :)

tooqk4u22

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Re: Stamps as an inflation hedge?
« Reply #17 on: April 13, 2013, 06:06:12 AM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.

...how is the bank able to send it without stamps?

Unless it's directly to their bank account, in general bill pay just shifts you buying the stamps to the bank, no?  So yeah, it's a great option I use, but I don't see how it would cause "the post office to fail miserably". (Email has much more of an impact than bill pay.)

agree with the email part too and the internet in general as well (statements can be viewed online instead of mailed)  but most primary payments (utilities, credit cards, mortgages, etc) are sent and received by the banks electronically through ACH transfers not snail mail.   So it has reduced signifcant need for stamps, but your correct that for those few payments that can't be done electronically it has been simply a transfer.

arebelspy

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Re: Stamps as an inflation hedge?
« Reply #18 on: April 13, 2013, 07:53:16 AM »
Not that this is scientific but I am not the most tech savy person (by choice, not ability) and yet I use the banks bill pay for almost everything....so very few stamps for me and the reason why the post office is failing miserably.

...how is the bank able to send it without stamps?

Unless it's directly to their bank account, in general bill pay just shifts you buying the stamps to the bank, no?  So yeah, it's a great option I use, but I don't see how it would cause "the post office to fail miserably". (Email has much more of an impact than bill pay.)

Commercial companies generally use machines like these from Pitney Bowes, to print a barcode stamp directly onto outgoing mail.  Not likely to be many buyers there... :)

Right, I didn't mean the bank was literally running out to buy stamps, but rather that bill pay wasn't killing the post office because the bank was still paying that postage even if you weren't (besides the ones directly deposited).

And tooq's right, some of the transfers are done automatically when they have an agreement set up, but for many you type in the whole address and a physical check is sent (my 5 HOAs, for example). In these cases, the post office makes just as much money as me using a stamp (unless the bank worked out a lower rate with the PO I suppose), it's just shifted the cost from me to the bank (which will be shifted back to the bank's customers, obviously).

Anyways, I think we're all on the same page. :)
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peterpatch

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Re: Stamps as an inflation hedge?
« Reply #19 on: April 17, 2013, 05:05:20 PM »
If you want to make the inflation protection play then the best thing I have heard of are US nickels and pre 1983 pennies. They are protected against deflation because price and cost are always the same, ie a nickel will always be worth 5 cents. The melt value is inflation protected, one guy bought millions of dollars worth of nickels for the inflation protection. Here is an article that explains the details http://www.johntreed.com/nickels.html. Please note I am not long US nickels and pennies nor do I plan on initiating a position in then next 48 hours :-).

Reepekg

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Re: Stamps as an inflation hedge?
« Reply #20 on: April 17, 2013, 07:32:13 PM »
If you want to make the inflation protection play then the best thing I have heard of are US nickels and pre 1983 pennies. They are protected against deflation because price and cost are always the same, ie a nickel will always be worth 5 cents. The melt value is inflation protected, one guy bought millions of dollars worth of nickels for the inflation protection. Here is an article that explains the details http://www.johntreed.com/nickels.html. Please note I am not long US nickels and pennies nor do I plan on initiating a position in then next 48 hours :-).

And before anyone gets any big ideas I should also point out that melting U.S. currency is a federal crime.

Maximum penalty is 5 years in prison, $10k fine, and confiscation of metal. You also can't take the coins out of the country to melt them as it is illegal to leave the country with more than $5 in nickels or pennies.

peterpatch

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Re: Stamps as an inflation hedge?
« Reply #21 on: April 17, 2013, 08:33:17 PM »
If you want to make the inflation protection play then the best thing I have heard of are US nickels and pre 1983 pennies. They are protected against deflation because price and cost are always the same, ie a nickel will always be worth 5 cents. The melt value is inflation protected, one guy bought millions of dollars worth of nickels for the inflation protection. Here is an article that explains the details http://www.johntreed.com/nickels.html. Please note I am not long US nickels and pennies nor do I plan on initiating a position in then next 48 hours :-).

And before anyone gets any big ideas I should also point out that melting U.S. currency is a federal crime.

Maximum penalty is 5 years in prison, $10k fine, and confiscation of metal. You also can't take the coins out of the country to melt them as it is illegal to leave the country with more than $5 in nickels or pennies.

I don't suggest buying nickels in volume unless you have a real commerical "cash register" type of reason for it. However you have to keep in mind that if there was enough inflation that people were actually contemplating melting nickels then the real (inflation adjusted) face value of those coins is going to be greatly diminished. Therefore the government will most likely pull them from circulation (and get the melt value) and could repeal laws against melting like they did with junk silver in the 60's (as cited in the article I linked to). For example if money is reduced in buying power by say 10x by some huge inflation then it would make no sense for the government to mint nickels that have an after inflation value of half a pre inflation penny but still carry a material value 10x in excess of face value. Nobody would want to carry around that much change (10x what you used to), the mint would be running a massive deficit on materials costs and people would probably start illegally melting down the currency for profit. Rather they would issue a new coin with a higher face value (debasement in the most ancient sense) or move directly to paper currency.
« Last Edit: April 17, 2013, 08:35:36 PM by peterpatch »

gotaholen1

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Re: Stamps as an inflation hedge?
« Reply #22 on: April 18, 2013, 06:54:25 AM »
This is literally the plot of "The League" season 3 episode 7 where a character named Taco invests in forever stamps. There are several funny scenes like when he tries to buy something with them at a hardware store or when his friend's kid puts them all over her mother's underwear because she thinks they're stickers, thus ruining the investment.

"One day, they might hit the big 5-0."

Great show. Poor real life investment.

EveningNewbs' next big idea is NeckFlix.... Oh wait, someone else already stole that idea from Taco... http://www.avclub.com/articles/the-leagues-netflix-for-neckties-is-a-reality,67780/