IRAN, ARGENTINA, VENEZUELA

Author - Richard Lehmann | Saturday, 30 January 2016

You may wonder why a column on investing in stamps would address three countries with little common interest among collectors. For stamp investors, however, they have a common theme with significant potential.

Stamps have long represented a parallel system for investing, hiding, preserving and transferring wealth. The three subject countries have such needs today. They share common traits; they have repressive government, domestic economic turmoil, severe exchange controls, inflation and deteriorating currencies. As a result, stamps allow citizens a means to turn domestic assets into portable assets with low recognition and visibility. One well known Wall Street financier, with whom I discussed stamps as an investment, told me the story of an Iranian general acquaintance who related how he fled Iran with his family after a thorough airport search of all his baggage except for the paperback book he was holding in his hand. That book held his entire net worth in the form of high value stamps inserted between the pages. Stamp demand fills such a need as well as for transmitting support funds back to family members without government oversight and taxation or for just hiding and preserving wealth within the country against currency erosion and severe inflation.

For Iran, this phenomenon has led to spectacular stamp price rises in the last ten years. My universe of investment grade Iranian stamps has risen 113% in the last five years after rising 85% the previous five. This rise means a catalog value of $525,000 for 329 items in mint condition. There are pitfalls with Iranian stamps, however, since many earlier issues were crudely overprinted. Per Scott Catalogue, as much as 90% of such material in the market are fakes. This makes such stamps a high risk investment since many of the Iranians who buy them know little about stamps. It also leads to wildly different valuations between catalogs some of which appear to consider the fakes as the market norm.

Despite their spectacular rise, stamp investors would probably do well to stay away from Iranian material for the present since valuations could decline sharply should that countries current nuclear arms talks manage to lift trade sanctions, free its frozen exchange reserves and normalize trade. Recent bidding weakness at the D.F. Kelleher auction for Iranian lots seems to bear this out; of 36 lots offered, 16 sold mostly well below the estimate and 12 did not sell at all. Failure of the arms talks, however, could launch further price rises.

Events in Iran have been troublesome for some time, so it leads into an analysis of Argentina, where similar valuation drivers exist but, the game is not as far along. For example, my universe of investment grade stamps for Argentina has risen 83% in the last five years after a mere 4.5% in the previous five. This represents a cumulative value today of $273,000 for some 308 mint stamps.

Argentina's troubles have a long history of ups and downs, but they have only grown serious financially in the last ten years and are unlikely to reverse quickly despite hopes for change once the Kirchner presidency is over. Its current problems are financial and economic where stamps can provide financial mobility with valuations that are still well below the Iranian nose-bleed levels.

An even earlier-stage opportunity may lie with Venezuela. This country has a repressive political environment , economic chaos, flight of population, strict exchange controls, high inflation and a seriously debased currency. In short, it is the perfect environment for stamp appreciation. Best of all, spectacular appreciation has not yet begun. My universe of investment grade Venezuelan stamps shows only 8.5% appreciation in the last five years and 5.5% in the previous five. This amounts to only $65,000 for some 167 mint stamps. Used stamps have done even worse in terms of appreciation, rising only 4.2% and 1.2% in the same time periods. They do, however, represent a higher value, totaling $110,000. These are not numbers that would normally attract investors, however, their lack of appreciation in the face of a compelling need makes them a low risk, high reward speculation.

The attached table shows some of the higher appreciation items for each country (Mint, M/U or Used). The Iranian selection has no overprinted stamps to avoid the problems with bogus issues. I noted some wildly different valuations exist for the same items between Scott, Michel and Yvert. The table identifies the ratio of Scott pricing to Michel and Yvert. A large number indicates these stamps are best bought from foreign dealers not using Scott. A ratio well below 1 means there is significant appreciation likely in the USA. Where there is no ratio showing it means the foreign catalog does not recognize the item or has no pricing. In any case, whenever stamp prices vary greatly between catalogs, dealers will arbitrage such differences over time, thereby driving values toward the higher prices. Investors need do no less.