Forever Stamps or How I Learned to Stop Worrying and Love Postal Rate Increases

Millburn, New Jersey
19 July 2010

Everyone laughed at me two years ago when I spent $820 to buy 2,000 Forever Stamps. But I'm the one laughing now.

I'd known about Forever Stamps for perhaps three years but was wary of buying them. You buy a stamp today at today's first class rate and it's good forever, no matter how high the first class rate goes. At first glance, a great hedge against one of life's certainties - postal rate increases. It's like death and taxes. Right? Since 1958, the frequency of rate increases has gone from 5 years down to less than two years (1958 was the first increase in 26 years, the current 42 cent rate will be in effect for a mere 20 months). The typical increase used to be a penny, now its at least two cents - that's a 100% increase in the amount of each increase. Given the increases in both the frequency and the amounts of postal rate hikes, Forever Stamps could be one of the greatest inflation hedges since common stocks and home ownership. And even us disabled, retired guys have better things to do than counting stamps, buying small stamps and sticking two or more stamps on every letter to use up our pre-increase stamp supply. Nevertheless, my brilliant analysis seemed to put Forever Stamps into the category of "if it sounds too good to be true, it probably is." After all, for the inflation hedge to work you'd need to buy enough stamps to last through some number of rate increases. What if the spread of electronic communications really does force the Post Office to close it's snail mail services? Let's be real, who would go out and buy a supply of more than one year's worth of stamps? Would you? Would anyone you know, even your friend who owns the business that advertises and ships by mail? Heck no. Only some wacko would go out and do something like that just to beat some hypothetical future rate increase imposed by an agency that some people, many of whom are decidedly not wackos, think is going to disappear.

And so, on May 1, 2008, 12 days before first class rates increased from 41 to 42 cents for the first ounce, I walked into the town Post Office and officially became the town's resident wacko.I asked the clerk if he had Forever Stamps. He said he did and also, on further inquiry, said he did not sell many and could not understand why more people did not use them. Figuring there must be a catch to what seemed, to me, like a great deal, I asked if there was a limit on the number I could buy. He said the limit was whatever amount he had in stock. As it turned out he had a pack of 2,000 stamps (that's 100, 20-stamp strips). And so, I impulsively invested $820 in 2,000 Forever Stamps, knowing that in a mere 12 days my stash would increase in value all the way up to $840. The clerk gave me a look like he wasn't quite sure whether to take my credit card or push the button that brings the Postal Police in to subdue customers who go off the deep end. People waiting on line behind me gave me lots of room when I turned to leave.

Returning home in triumph, I told my Beautiful Wife what I had wrought and, without looking up from her laptop, she said, as lovingly as she could manage between the chortles, "That's nice dear, you now have something to leave the children since you will die before using up the stamps." Now I will admit to making the purchase on impulse without actually calculating my stamp usage. So, for your amusement, here's how the math worked out. Most of my monthly bills are paid electronically and most of my correspondence is by e-mail. As a result, my actual need for stamps has fallen dramatically (which, multiplied by millions of Americans, is probably why the Postal Service needs more rate increases). Being generous, let's say the Beautiful Wife and me use ten stamps a month. Since we regularly spend 4 months a year in Israel, our "US Stamp Usage Year" is only 8 months long. That's 80 stamps a year. Divide 2,000 by 80 and you have enough stamps for 25 years. Given my multiple heart conditions, to say that in 2008 I had a life expectancy of 25 years would be generous.

The next week, the Beautiful Wife was standing on line in the Post Office. The clerk who made the sale was regaling a few people with the story of how some wacko had come in the week before and bought 2,000 Forever Stamps. The Beautiful Wife, always quick to defend her loved ones, shouted out, "That wacko is my husband!" The clerk started to apologize but she cut him off saying I had lost it years before and this purchase was no surprise. She then rushed home to tell me that I had become a town celebrity.

Now, whenever I get the chance, I remind the postal clerk, and everyone else who scoffed at me, that I'm the wacko who loaded up on the Forever Stamps. Only I do it with a note of triumph in my voice. When I first bought these stamps the second person I told about my brilliant idea was my good friend, Allan Sloan, a nationally prominent financial journalist. Allan, who does this for a living, had a jolly time mocking me and pointing out that he had written almost two years earlier that Forever Stamps might be a convenience but were certainly not a better inflation hedge than money market funds, Treasury paper or CDs. Of course, what Allan and everyone else who wrote me off as a wacko overlooked is that past performance really does not predict future results. Today he, like all those people who gave me lots of room at the Post Office, my children and even my Beautiful Wife, are not scoffing quite so loudly (or, more accurately, have found other good reasons to mock me). Why? Throughout the worst financial collapse since the 1930s and a recovery that may take most of the coming decade to return us to where we were before the housing bubble burst and the banks started doing the dead cat bounce, my Forever Stamps have done nothing but increase in value. Come next January 2, when first class rates go up to 46 cents for the first ounce, the value of my remaining stamps will have increased three times, gaining more than 12% (that's an annualized return of roughly 4.4% for the 32 months from May, 2008 through December, 2010). Not exactly pre-bubble bursting day trading profits but slow, steady, reliable and not too shabby under the circumstances. How's your portfolio been doing? Read more!