Is there profit in 'forever' stamps?
By Matt Krantz
USA Today
Investors tired of the ups and downs of the stock market may wonder if they can make more money from an unlikely source: the post office.
As part of boosting the price of a first-class stamp to 41 cents, the U.S. Postal Service is also selling a "forever" stamp for that price. This stamp would be good anytime from now on for a first-class letter.
So, here's the question: Should investors take their money out of stocks and bonds and buy forever stamps instead?
The stamps have some things going for them. When they come out, postal rates will have increased four times, by 24.2 percent, since 2000. Rates even go up when stocks fall. The price of a stamp, for instance, rose from 34 cents to 37 cents, or 8.8 percent, in 2002, while the Standard & Poor's 500 index lost 22.1 percent even including dividends.
Also, postage rarely drops. It only fell once, from 3 cents to 2 cents in 1919. And stamps are guaranteed by the U.S. government.
But before you cash in your 401(k) to buy steamer trunks full of forever stamps, here's a dose of realism. Stamp collecting and market experts alike say it's a poor idea because of:
Postage hasn't even kept up with long-term Treasury notes and bonds, Morningstar says. Stocks, meanwhile, completely lick stamps. The broad stock market, measured by the S&P 500, has gained 10.4 percent on average a year since 1926 and 11.8 percent the past 20 years, including dividends, Morningstar says. "Why give the government the money upfront, unless there's a strong future growth rate?" says Robert Maltbie of Millennium Asset Management.
Also, it can be years between postage rate increases, such as the almost four-year span between June 30, 2002, and Jan. 8, 2006. During such periods, stamp holders got nothing, says Jack Ablin of Harris Private Bank.
