Chinese Stamps: Your Next Step in Wealth Protection

By Geoff Anandappa

Geoff Anandappa is an Investment Portfolio Manager at Stanley Gibbons Ltd., the oldest and largest stamp dealer in the world. Stanley Gibbons publishes the GB30 and GB250 indices of the value of rare stamps used by professional money managers and available through Bloomberg Professional. Asset Strategies International (ASI) is the North American representative of Stanley Gibbons Ltd.

Have you been following the ASI articles showing the huge demand in China for precious metals and other tangible assets? If so, you know what happens when an asset is part of the very fiber of Chinese culture. Demand becomes extremely high and it is growing. Such is the case with rare Chinese stamps.

One third of the world's 50 million stamp collectors are in China and one third are in other Asian countries. It is little wonder that stamps with subject matter of interest to the Chinese fetch unprecedented prices.

The stamp called 'The Whole Country Is Red,' issued in 1968, was intended to display a map of China entirely in red. But a mistake was made. In actuality, the stamp was printed leaving the island of Taiwan in yellow. Such a political faux pas created a valuable stamp. All but a single sheet of the error stamps were retrieved. Below is a horizontal version of the rarity, sold for $815,000 in 2013.

Stanley Gibbons' recent study showed that prices for heritage rare stamps performed at an average compound annual growth rate (CAGR) of 11.6% since 1989. We looked at 200 rare investment-grade Chinese stamps between 1989 and April 2012. We saw growth of £4 million over 23 years and a growth rate of 35.59% between 2011 and 2012 alone. With the usual caveat that past performance is no indication of future growth, this is consistent with decades of returns.

For those in the U.S., rare stamps in general - and rare Chinese stamps specifically - remain an underutilized asset choice allowing plenty of opportunity to get in the game before the pack.

Categories of Rare Chinese Stamps.

The most attractive investment-grade Chinese stamps fall into either of two categories:

• Classic older stamps mostly issued in the 1800s with great historical significance and collected around the world.
• More modern stamps of the Chairman Mao regime.

Do these categories come as a surprise to you? Understanding why these categories are in the forefront explains the heart of why Chinese stamps can be such a good adjunct to your portfolio.

Stamp collecting was frowned upon as bourgeois during the Cultural Revolution of 1966 to 1976. Then, all of that changed. In 1985, the nation's stamp aficionados were treated to the opening of The National Postal Stamp Museum in Beijing. The government now actively encourages stamp collecting to promote patriotism and Chinese history. Because stamps were printed in great number to support this effort, identifying rarity has become more problematic. And thus, it is even more important to work with an expert in investment grade Chinese stamps.

The Active Chinese Market.

I devote a good portion of my work to attending auctions and conferences. The Hong Kong and Chinese auctions are constantly packed with hundreds of live bidders, internet bidders, and representatives on at least five phones at a time. I compare that with London and New York, where there may be ten people in the room and two on the phones.

Although the Chinese market is active, we at Stanley Gibbons are clear that it has in no way peaked. We believe that we are in for at least ten to twenty years of Asian frenetic buying and collecting.

There are two factors that set Asian collectors apart from the rest:

1. Increased access to stamps through the Internet, which has opened up an opportunity that this population never had before.
2. The Chinese are now beginning to use credit cards. Although this is difficult for those in the U.S. to believe, until recently, even the most sophisticated business people did not use or take credit cards.

What this means to the investor is that we can ride on the coattails of this emerging passion of millions of people excited to spend their money on rare stamps, particularly those related to their own history and culture.

The Demographics of the Chinese Collector Is of Interest to the Investor.

Chinese collectors are younger than most worldwide collectors and incredibly enthusiastic. What sets their interest in the early stages of their hobby will last a lifetime and will drive the market as they age and their wealth increases.

They are passionate; taking 'selfies' next to stamp posters, asking for autographs of dealers and even of the people who produce stamp conferences and shows.

The world record price for Chinese stamps was broken three times in 2010 alone. In 1987, a 'Red Revenue' stamp sold for $712,000 at a Hong Kong auction. Four stamps of Chairman Mao and Lin Biao fetched $860,000. Clearly, Chinese collectors are much more than newbies on a limited collector's budget.

Recently, I have set up offices for Stanley Gibbons in Hong Kong and Singapore to gain a foothold in that area of Asia, Malaysia, Hong Kong, and mainland China. There is enormous room for growth in the investor market with unpredictable upside growth.

This is why Stanley Gibbons has multiple avenues for selling your stamps to investors, collectors, and dealers, at auction, privately and through our own buyback system.

Unique Investment Features of Rare Chinese Stamps.

Rare Chinese stamps offer wealth protection for the same reasons found in ownership of any other rare stamp portfolio. They are uncorrelated to other markets, have price stability, and upside potential. But they do so with the added fervor of the emerging Chinese collector.

Price Stability.

The GB30 Rarities Index has never fallen in value in the past 60 years. In the stock market crash of 2008, the GB30 gained 38.6%, and sports a CAGR over 10% for the last 40 years. Our GB250 Rarities Index shows a CAGR of 13.18% over the last 10 years. In the past six years, including the financial crisis, it went up 73.89%.

Rare Chinese Stamps show an equally impressive performance.

Uncorrelated Diversity.

While investors are drawn to these figures, frankly, collectors do not care - or at least they do not care much. Warren Buffett and Bill Gross (the billionaire investor that runs PIMCO Bond Funds) are among the family of collectors bitten by the bug. All rare stamps are uncorrelated investments. This means their price is dictated only by the desire of collectors, not by other market pressures. Recession, inflation, and market news have not affected the Chinese collector market and affords you a ballast against the volatility of your other investments.

Upside Potential.

Although Mr. Gross began collecting as a tribute to his mother, after making four times the cost of a few of his holdings at auction, he uttered the now famous words about rare stamps...

"It's better than the stock market."

Expertise is Essential.

No layman can predict value based on the tastes of collectors. Nor does mere popularity establish the rarity or value of a stamp. True, even slightly popular stamps can go up ten times in value, but we cannot construct a portfolio based on current popularity. It takes an expert to predict what will be both rare and valued.
ASI's Preferred Client Relations Manager, Steve Emerick, came to visit Stanley Gibbons in London and now tells the story of how one of our experts detected a fake stamp by the smell of the glue on the back of the stamp.

At the wonderful ASI event at the Smithsonian National Postal Museum in April, I showed attendees a picture of stamp forgeries that are very valuable because of their rarity and the reputation of the forger! In fact, some forgeries of rarities are more valuable than the rarities themselves.

It takes a lifetime of expertise, indeed, to put together an investment portfolio. It takes only passion and some money to put together a collection.

How to Construct an Investment Portfolio in Rare Chinese Stamps.

With our Flexible Trading Portfolio you will start with 5-7 stamps and a timeline of at least 5 years. Whether you make a minimum investment of £10,000 or much more, you want the flexibility to sell and upgrade while we are managing your portfolio. Over 90% of Stanley Gibbons investors make additions to their portfolios. We will help you get the right balance from the start and keep it up.

First, we will discuss your purpose in becoming an investor.

Next, we craft an exit plan for you. The difference between the investor and collector is that the collector has no exit plan and the investor always has a selling strategy.

We ask you whether you want to sell your collection for retirement, education, or other cash needs. We select different stamps depending on the length of time before you contemplate selling. We can adjust our mix as times change for you. We even buy back your stamps in an emergency for at least 75% of the current catalogue price.

Our profits come from your profits, and nowhere else. When you sell after 5 years we receive 20% of the profit. If you decide to sell earlier, we receive a higher percentage on a sliding scale. Storage is free, insurance is free, management is free, and portfolio selection is free, as are regular appraisals.

With Chinese stamps you can opt for storage in the Channel Islands or Hong Kong. When it is time to sell, we do so for you. You may also sell to a private dealer on your own or at auction. Stanley Gibbons also conducts its own auctions.

You may receive your proceeds in British pounds or in Hong Kong dollars, which are tied to the U.S. dollar. Remember, ASI's admonition to keep your assets across currencies, across countries, and across assets.

What to do next.

At Stanley Gibbons, we are proud to work with ASI to bring to you an excellent opportunity in rare stamp investing and rare Chinese stamps in particular. I want to emphasize that I will personally oversee each and every ASI client's portfolio.

Your ASI Preferred Client Relations representative is your conduit to me and all that Stanley Gibbons has to offer. Simply call 877-340-0790 to discuss the right way to capture the benefits of rare Chinese stamp investing.