Posted on 01/01/2011 9:21:45 AM PST by DeaconBenjamin
The United States Postal Service announced this week that all future first class postage stamps sold will be the so-called "forever stamps" that have no face value but are guaranteed to cover the cost of mailing a first class letter, regardless of how high that cost may rise in the future. Currently these stamps are sold for 44 cents, but will increase in price if and when the Post Office hikes rates.
Apart from sounding the death knell of the one cent stamp, the news is interesting on two fronts: it provides insight into remarkably irresponsible government accounting, and it provides investors with the most attractive Federally-guaranteed inflation protected asset available on the market today.
Over the past fifty years, the USPS has raised the rates on first class postage 20 times. During that time the stamp prices have gone up more than 1,100%. Given the increasing frequency of rate hikes (three in the last four years) the Post Office claims it made the move to forever stamps to save money on printing costs and to increase customer convenience. The public seems to appreciate the product and has snapped up a staggering 28 billion forever stamps since they became available in 2007.
But the real reason behind the permanent switch is that it allows the Post Office to hide its insolvency behind phony accounting numbers, setting itself up for a massive taxpayer financed bailout in the not too distant future.
Much the way Greece used phony accounting to qualify for euro zone inclusion, the USPS is using creative accounting to avoid making significant cuts in current wages and benefits. By offering forever stamps, the Post Office moves forward future revenues to pay current expenses. But every forever stamp sold today represents a stamp not sold in the future. The revenues booked now will not be put in escrow to deal with revenue shortfalls that are guaranteed to plague the Post Office in the years ahead. This simply kicks farther down the road any intractable fiscal problems that the USPS can't solve through more conventional means.
The Post Office also ignores that their ability to sell higher priced forever stamps in the future will be restricted. Those individuals and institutions who hoard the stamps now could offer them for sale in competition with the Post Office. Even though the Post Office will not redeem forever stamps for cash, there is no law against reselling them for whatever price the market will bear. How many forever stamps will the Post Office be able to sell at full price if customers can buy them at a discount on Ebay?
On that note, forever stamps provide the most conservative investors with a much more attractive alternative to zero interest checking accounts, low yielding Treasury bonds, or even inflation protected government securities (known as TIPS).
Given these stamps will always be completely liquid, the only way an investor can lose money on forever stamps is if the price of postage goes down. There may not be a single human on the planet who thinks that this is a likely scenario. On the other hand, if postage rates rise with inflation then the stamps are a very, very safe bet.
And unlike Treasury bonds or TIPS, investors do not have to pay a premium above face value for the privilege of buying stamps. While it is true that stamps do not pay interest, the extremely low rate offered by government securities should not fundamentally alter the investment calculations comparing bonds with stamps. More significantly, stamps are backed by an actual tangible service, postal delivery, whereas U.S. Treasury debt is backed by nothing but a printing press.
Forever stamps are about as close to a sure thing as most people will ever get. Over the past 10 years stamps are up 29%, while the S&P 500 is up a measly .1%. With labor and other costs continuing to mount inside the Post Office, there can be little doubt that many price hikes are coming. Minimum investment in forever stamps is just 44 cents, with no brokerage fees. Plus as an added bonus, if you use the stamps yourself, you pay no income tax on your capital gains.
Sure, without a federal bailout there is a chance the Post Office will go under, and those forever stamps will end up lining bird cages. However, given the track record of government bailouts and the clout of unionized postal workers, chances are very high that the Post Office will always get the bailouts it needs. As a result, forever stamps are a better bet than Treasury debt. They also have prettier pictures.
Well, there was that guy who bought something like 20,000 of them as an “investment”...
Also remember that the Do Not Call list doesn’t matter if you have a business relationship...which is why there are so many “free” offers out there, just to get your contact info opened up to marketing.
44¢ to send a letter across country is a bargain to me.
(Your opinions most likely will vary)
Actually modern US postage rates are a good deal historically speaking.
In 1847 (when the US issued its first postage stamps) it cost 5 cents to mail a 1/2 ounce letter, 300 miles or less (over 300 miles cost 10 cents). Adjusting for inflation, those same letters today would cost $1.14 or $2.28 respectively.
Our postage rates are actually at a minimum, less than half of what Americans paid before the mid-19th century. Early 19th century US Postal rates were even higher.
Good thinking...I hadn't thought of that. It's like an un-used gift card. ($2+ billion gift cards are unused annually in the US)
Good thinking...I hadn't thought of that. It's like an un-used gift card. ($2+ billion gift cards are unused annually in the US)
I have wondered about that. It seems, based on what I have read, and your information about this Act, that the way to make a real profit on these is to buy a bunch right before an announced rate hike, then resell them immediately.
I wonder if this article was written by someone here:
http://shop.ebay.com/?_from=R40&_trksid=p5197.m570.l1313&_nkw=forever+stamp&_sacat=See-All-Categories
Nothing really prevents a default on these, so I would not want to by thousands of dollars worth.
Happy New Year
‘zactly
buy a bunch right before an announced rate hike, then resell them immediately.
If you find buyers...will they be redeemable at the new rate? I doubt it.
Post 42 had one possibility - legally making you a junk phone call target.
Other than that I’m clueless, LOL.
I imagine in a few years we will be hearing about the “forever” dollar bill. That will save a lot on having to create new bills ($10,000 - $50,000 - $100,000, etc.)
The No Value is one idea. The Forever Good for First Ounce of FCM is a newer idea.
That's good. I'm stealing that idea.
Yes...a friend of mine sent me a block when they first came out in the late 80s. He didn't explain and I wasn't a serious collector, so I didn't know what IST meant. He later sent me a 2ND, and I got it. I originally thought the ST meant "Pound Sterling" and wondered why it didn't just say £I.00 like my others!
I don’t keep track of the postal rates when they go up so I like the forever stamp...don’t have to go to the PO and buy 1 or 2 cent stamps to cover the new rates. Oh wonder if the rates went up and my stamps are not enought to send a card or bill.
My lawn grows plastic bags with papers in them also...I hate spring when all the snow melts and I have to go pick up a winters worth of useless plastic bags with mushy papers in it you couldn’t read even if your wanted to..
(Why not just "Evergreens"? Unless to remind us that they don't like the word Christmas, like the Lexus car commercials do.)
Stamps which show a definite monetary value are still needed for mail sent to other countries.
Schiff from above on Anytime Stamps: Apart from sounding the death knell of the one cent stamp, the news is interesting on two fronts: it provides insight into remarkably irresponsible government accounting, and it provides investors with the most attractive Federally-guaranteed inflation protected asset available on the market today......But the real reason behind the permanent switch is that it allows the Post Office to hide its insolvency behind phony accounting numbers, setting itself up for a massive taxpayer financed bailout in the not too distant future.
And maybe they figure no-one will buy stamps in the future anyway. I cant see a reason to buy the stamps with the prices still on them anymore, but people actually do.
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