Forever Stamps

In a New York Times editorial "The Next Financial Crisis (the Stamp Bubble?)," Eduardo Porter explains why investing in stamps could reap large profits... and why we shouldn't do it. In the near future, the Postal Service plans to raise the price of first-class postage by 2 cents, which is about a 4.5% increase. They also plan on selling forever stamps at their current price until the switch is made to the higher price. This means that companies willing to invest in forever stamps at the old price and then sell them at the higher price would be making a fairly decent return.

Porter likens the situation to the unsteady mortgage market that was the root of many problems last year and I'm inclined to disagree. Porter's argument stems from big banks pouring borrowed billions into forever stamps and "Jan. 2 would come around and stamp-stuffed banks would find there weren’t enough letter writers left in the country to buy their hoard. Many would try to sell them at 45 cents. Meanwhile, their loans would come due," Porter cautions. But is the risk of a drastic drop in postage sales that big? Stamp usage should be a steady, if not predictable market. As long as investors stay on the side of caution, an investment return of 4.5% is surely better than that of a treasury bill.

Sure, it's good to be wary of detrimental investment trends, but where do we draw the line? Every investment has a risk, but the disaster Porter speaks of is a bit exaggerated. If banks were to invest a safer, more moderate amount (like millions instead of billions) then there will be an opportunity for profit. The real lesson that we should have learned from investing in mortgages is that too much of one thing is always bad. There will always be different markets to invest in, but as long as banks and companies don't drown them in borrowed cash, the system will work just fine, as it has done for so long. Porter's frightening warnings about some banks going under and others liquidating bonds in order to pay back borrowed cash only apply to the most extreme situations. With the mortgage market collapse still fresh on investors' minds, surely they would know the safe amount to put into forever stamps.