BACK IN THE USSR & CUBA

Author - Richard Lehmann | Tuesday, 23 February 2016

The philatelic fortunes of this country mirror the misfortunes of its people. While the fall of the USSR often lead to higher stamp valuations, Cuba has not been such a case. Of the 125 mint stamps we rate for investment consideration (cataloging $82,172), the average appreciation for the last five and ten year periods has been about 2% which is about what 10 year US Treasuries yielded over the same period. Used stamps fared even worse, achieving appreciation of closer to 1.5%. In fact, an astounding 67% of mint and 87% of the stamps we would normally consider for investment purposes had zero appreciation over the last 5 years and we suspect the ten year status would also reflect this. The reasons for this abysmal performance can be attributed to two factors; the almost subsistence economic level of most people in Cuba and the trade restrictions by the US. All the people in Cuba worked for the government and their pay left no room for indulgences such as hobbies nor surplus income to invest. As for the large Cuban expatriate population in Cuba, they had little interest in buying stamps issued by a government they hated. The only Cuban stamps that showed any appreciation were those issued in the 19th century under the Spanish administration of the island and this is probably due to Spanish collectors.

Now you may be asking yourself, why am I wasting your time discussing stamps with no investment potential, but wait! Relations with Cuba are on the brink of change and it is unlikely that the next ten years will be like the last decade. Castor will soon be gone and Americans will be flocking to Cuba because it is a tropical paradise where a retiree can live like a king on a social security pension. Cubans in and out of Cuba will once more begin collecting these stamps and since these stamps were not in demand for almost 40 years, supplies will be scarce and prices will rise.

Because of the long dry spell, it is not practical to try to pinpoint specific stamps as investments. A better strategy at this point is to try to buy complete collections which will still be selling at prices well below where they are likely to be in five years. Look in auctions and in Europe and Canada where they have been trading. If you visit Cuba, ask there since such collections are probably in the hands of people who would much prefer cash. THE CASE OF RUSSIA

On a more immediate front, Russian stamps have been hot for the past decade. The short term outlook may not be so promising given the poor economic conditions there due to the low energy prices on which the country is so dependent. Longer term, however, the outlook is promising mainly because there are so few things for people to invest in that hasn’t already been stolen by some oligarch or the government itself. Banks aren’t safe and the ruble’s value will continue falling making the search for a safe haven very compelling.

The stats for Russian stamps are eye opening. We identified 725 mint stamps with a cumulative value of $1.4 million which have appreciated 37.4% in the last five years and a stunning 304.6% in the last decade. Used stamps did even better. Some 478 stamps with a value of $1.5 million appreciated 104.7% in the last five years and 340.9% for the decade.

Although stamps valued over $10,000 made up the bulk of the dollar amount ($1.2 million) plenty of opportunities exist in lower priced stamps. For mint issues, some 220 issues priced between $100 and $500 appreciated 43.4% over the last five years. The comparable sweet spot for used stamps is between $25 and $100 where some 232 stamps appreciated 92.6%. While these are glorious statistics, a word of caution. Our universe of potential Russian investment grade stamps numbers over 900. Of these 74% had zero appreciation for the last five years. However, since these stamps are included in the basket of stamp statistics cited above, one can see how much better the winners did. Such stamps can be weeded out by further analysis beyond the scope of this column. Below is a Russia sample list representing stamps for which both mint and used were top performers.