Last week, CNBC reported on something I've noted for several years: Many affluent individuals have quietly been investing in alternative investments such as rare coins and stamps. The CNBC report stated that some who have taken profits from the stock market have reinvested that capital in "treasure assets" — specifically, rare coins. CNBC compared them to investments in art and antiques of similar beauty.
They cited that in 2012, the world's millionaires put more than 10 percent "of their fortunes to nonfinancial assets, such as collectibles." One of the reasons is that six-figure price tags for select collectibles are now almost commonplace. And, according to the Luxury Investments Index, rare coins rose in value some 248 percent over the past 10 years — even during the recession.
Anyone old enough to recall the tumultuous investment arena of the late 1970s and early 1980s will surely remember the unprecedented run-up in the cost for tangibles. With interest rates soaring, demand for everything from gold and silver to diamonds, rare coins and stamps shot through the roof.
That was the era of the coveted 1804 silver dollar and Brasher Doubloon. For stamps, the set of three Graf Zeppelin issues catapulted to over $10,000, and the unique 1856 1cent magenta British Guiana stamp made national headlines and TV news when it was auctioned off for $935,000.
What was fascinating about the British Guiana stamp was that kids and adults alike had grown up seeing pictures of it in all kinds of magazine ads — everything from Boy's Life to Popular Mechanics. It was the stamp of dreams once found by a 12-year-old boy. Naturally, that fostered the belief that there were far more to be found by other young boys. Alas, no.
The demand for the admittedly unattractive 1856 stamp was huge for the small country. It came to be when the local postmaster in Georgetown ran low on postage and, in an effort to keep the mail moving, asked a local printer to produce a few temporary stamps. Once the rarity was discovered and the price began to soar, the small country took pride in its notoriety. In 1967, Guiana even produced a 25-cent stamp with a picture of the 1856 stamp on it. It was billed "the world's rarest stamp."
Since its last sale in 1980, that mystical 1-cent British Guiana stamp has all but vanished into the collection of an unknown owner — until now. In a few months, the "world's rarest" title may prove to also be the "world's most valuable."
This June, Sotheby's has been tapped to once again put the ultra-rarity under the gavel. After almost 35 years in hiding, the long-term holding may just pay off handsomely. Presale estimates for the stamp are between $10 million and $20 million.
What's staggering about all this is what is being sold — a flimsy rectangle of reddish-colored paper not even 1 square inch in size. It's not even a piece of the Shroud of Turin. Doesn't matter. In the philatelic world, this stamp is and has always been tantamount to the Holy Grail.
The escalation in price also isn't unheard of. Recently, an attractive half dollar from the revered collection of numismatic icon Eric Newman sold for close to $1.5 million. Most staggering was the notation of $1,000 on the outside of the coin's small envelope that it came in when Newman originally purchased it in the 1940s. That was what he paid for it. Since then, it has increased around 150,000 percent in value.
The bottom line is that for rarities and select collectibles in top condition, time has consistently delivered extraordinary prices. It can again. The scarce, high-grade coins and stamps today that are still comparatively modestly priced can prove to be stunners a decade or so from now. They key is rarity, condition and patience (even though I can't wait to see what the 1-cent magenta goes for). As always, I'll keep you posted.
Editor's Note: A JPEG visual of the original 1856 1-cent British Guiana magenta rarity and the 1967 Guiana stamp featuring the rarity has been sent with this column.
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