A note from Jeff Opdyke: I began investing overseas specifically because of Asia. I wanted a brokerage account in the region so that I could participate directly in the rise of consumer wealth that is evident from Mongolia to Indonesia.
And it’s not just the stock market where that wealth is evident. Collectibles have taken off. High-end auctions of exclusive French Bordeaux set record prices in Hong Kong. Contemporary Chinese art is pulling in huge dollars at Sotheby’s auctions. And rare, collectible Chinese stamps are setting huge prices as regional wealth seeks real assets to own.
So, today, I bring you an excerpt from a private report written by Geoff Anandappa of Stanley Gibbons, a London-based stamp dealer that has been in this business since the 1850s. Geoff wrote this report exclusively for our Total Wealth Fellowship members, but given where I know America is headed in coming years, I wanted our Sovereign Investor Daily readers to see this as well, because hard, alternative assets – collectibles like stamps – will prove beneficial to a portfolio when the aftershock of America’s low-rate, money-printing policies finally rip through the economy.
Chinese Stamps – A Safe, Alternative Asset Class
By Geoff Anandappa, Guest Contributor
Hong Kong is the global hub for buying and selling Chinese stamps, with seven or eight international auction houses and hundreds of stamp dealers crammed into tower blocks in Kowloon and Wanchai. Unlike the U.S. and Europe, where stamp collecting is the preserve of the older generation, the hobby is thriving in Asia. Around one-third of the world’s stamp collectors, some 18 million, are Chinese — with around the same number in India and South East Asia.
Most stamp dealers and auctioneers now have an online presence, and as the Chinese middle class get access to home computers and personal credit cards, demand from Chinese collectors has mushroomed, and auction prices have soared. The world record price for a Chinese stamp was even broken three times in 2010.
An Expensive Mistake
A stamp I had purchased was one of these record-breakers. It is sometimes known as one of the “Treasures of the Republic” and features one of the founding fathers of China, Dr. Sun Yat-sen. But what makes this stamp so valuable is that the portrait of Dr. Sun is inverted. The normal stamp is very common and sells for around $1. But shortly after the stamps were issued in 1941, one sheet — just 50 stamps — was discovered with an inverted center. To Chinese philatelists (a person who studies or collects stamps), the Dr. Sun Invert has been an iconic stamp ever since.
The stamp has remarkable parallels to a famous U.S. stamp, the Inverted Jenny. This time, it was the Curtiss JN-4 biplane which was printed upside down by mistake, and only one sheet of 100 was found, back in 1918. The discovery caused a sensation, and the stamps immediately started trading for thousands of dollars. In 2007, a single Inverted Jenny sold for just under $1 million; and a plate-block of four sold for $3 million.
The block of four Jennies was purchased by an avid U.S. collector, Bill Gross, better known to the investment world as “The Bond King” and co-founder of PIMCO. Gross manages hundreds of billions of dollars of investments — but, when it comes to stamps, he is a true collector at heart. He has amassed a complete collection of U.S. stamps, a feat accomplished by only two other collectors in the past. Gross owns what is regarded by some as the most expensive stamp in the world today: an 1868 1c Benjamin Franklin Z-Grill, one of only two known examples. It was the last stamp he needed to complete his U.S. collection, and he swapped the Inverted Jenny plate block to get it — thereby effectively paying $3 million for the Z-Grill.
USA 1868 1c Ben Franklin Z-Grill acquired by Bill Gross in a $3 million swap, probably the world’s most prominent stamp collector.
The Chinese Stamp Dynasty
In China, the use of small colored stamps began in the 1860s. Today, stamp collecting has become a sign of a respectable, scholarly disposition and a sign of middle-class status for the Chinese. Now collectors from all over the world are interested in Chinese stamps as an investment.
China’s most sought-after stamp, the Small One Dollar, was issued in 1897. After only a few dozen were printed the stamp was recalled because of problems reading it, making the stamp very rare. Recently, one of these stamps was auctioned for $332,000 at a Zurich Asia’s and Postal History autumn sale in Hong Kong. The sale set a record for the most expensive Chinese stamp ever sold.
As you can see, from the chart above, China stamps have shown remarkable strength. Despite the financial crises, these stamps continue to shine, proving to be a valuable asset.
The demand for rare stamps is growing worldwide: in the West from newly-retired Baby Boomers who are picking up their childhood stamp collections; and in Asia from hoards of young collectors who now have more spare cash and home internet access.
Rare stamps have shown stable growth in value, averaging around 10% per year over many decades. Most are owned by collectors, not investors — so they are uncorrelated with mainstream investments.
Investing in rare stamps and collectibles is also a good way to diversify out of the U.S. dollar with the stamps stored outside the U.S. in Guernsey or Hong Kong.
For these reasons, we advise a sensible proportion (20%) of China stamps in the typical stamp portfolio. Those who are happy with more risk can include more. I (personally) am confident that China stamps will do very well in the medium to long term (5+ years) and have purchased some for myself.
China stamps can be bought through our Hong Kong office and stored in our vaults there free of charge. Our clients can also sell the stamps by public auction in Hong Kong, commission free. This has the added benefit of realizing funds in Hong Kong dollars, currently linked to U.S. dollars.
To good investing,
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