By Leslie C. Norins, MD, PhD | April 4, 2017
This year the Post Office’s “Forever” stamps celebrate their tenth birthday. You remember how they work: buy one now, and you can use it “forever” to mail a simple first class letter—no matter how much the price of such a stamp increases over the coming years.
As a publisher whose business actually uses stamps, I was curious. Suppose back in 2007 I had been concerned about steadily increasing postage rates. So assume I decided then to buy $1,000 of the brand-new Forever stamps and store them until 2017. How would the price I paid in 2007 compare to what I would have to pay today? Basically, it would be a ten-year investment in postal stamps.
As to the safety of doing that, it seemed pretty free of risk, probably as secure as a Treasury bond. After all, would the U.S. Postal Service be allowed to go broke? No, I probably wouldn’t lose money.
But, for that ten-year holding period, would I have been better off putting my $1,000 into stocks, bonds, or even gold, instead of buying the stamps? And did the Consumer Price Index (CPI) rise more or less than the stamp price?
First, let’s look at the year-by-year changes in price of each asset over the holding period (Figure 1). The actual price of the Forever stamp in 2007 was 41 cents, and today it is 49 cents. (Temporarily, in 2016, it was reduced to 47 cents, but in January became 49 cents again.)
Gold immediately increased in value, and remained ahead of the other three assets until very recently.
Stocks, as represented by the Dow-Jones average, declined sharply in the recession starting in 2008, and only pulled ahead of stamps by 2012. But only in recent months have stocks become the leader of the four.
Figure 1. Asset price changes 2007-Feb. 28, 2017
Next, consider the total growth and increase in value of the four assets over the period 2007-February 28, 2017 (Table 1).
Not surprisingly to some, stocks, as measured by the Dow Jones average, win this ten-year contest. But for our purposes, observe that Forever stamps rose the least.
Table 1. Increase of $1,000 in four assets 2007-Feb. 28, 2017
|Final $||% Increase|
|Dow Jones average||$1,944||94.4|
Here’s how I sum it up. If I had bought $1,000 of Forever stamps in 2007, they would have stayed usable, and that batch of ten-year-old stamps was up 19.5%. They would now be worth $195 more than I paid. So I would have come out slightly ahead by buying and holding.
But as for being an “investment,” it would have been lousy compared to alternatives. (Note: the Postal Service offers the Forever stamps only for convenience, and has never recommended them as an investment—this theoretical scenario was my idea.)
Of course, nobody knows in advance how any particular asset class will perform. But it was interesting to find that for the 2007-February 2017 period, stocks would have given me the best result, the Dow Jones average rising 94.4%. However, for most of the ten years, stocks were not in first place, and only won this horse race, as fans say, “by a nose”..
Maybe unexpectedly, gold led for many years, and only slipped to second place toward the end. Its increase was 84.6%.
The 10-year Treasury note, usually considered conservative and even stodgy, gave a cumulative yield of 59.4%. Not bad for very low risk.
It was also of interest to check house prices, though houses are not a liquid asset like the other items. In ten years (Q2 2006-Q2 2016; most recent data available) the average price of a U.S. home increased an astonishing 263 percent.
There is a bright side to Forever stamps. They’re a relative bargain. Over the ten years, the cost of living, reflected in the CPI, rose about 15%. The Forever stamp increased by only a bit more,19.5%. So, hats off to the U.S. Postal Service for keeping this postage price down even as many asset prices climbed greatly, and despite its mail volumes decreasing▪︎