A New Twist on "Forever"

Everything we buy seems to be getting more expensive almost by the day, whether it is gasoline, a gallon of milk, a McDonald's value meal, or even first-class postage stamps. These are just some of the many items that you may have noticed have risen in price lately. With this last item, the postage stamp, something very interesting has happened recently, and it could be called the most pure marketing genius to ever come from the halls of government: the "Forever Stamp".
In May 2007, the United States Postal Service (USPS) introduced this latest innovation, which depicts an image of the Liberty Bell and the word "forever" on it. The truly unique aspect, however, is that the stamp will be good for mailing first-class letters up to one-ounce in weight anytime in the future, regardless of price changes. So, it's good for -- well -- forever!
While this may be a great marketing tool to help justify the two cent increase that went along with the rollout of this new stamp, it also could be viewed as a zero percent interest rate loan made to the post office through millions of these mini "gift certificates" that they have had printed. Sure, each is only valued at forty-one cents, but since they have printed millions upon millions of them the dollar amount becomes much more significant. Consider each person in the United States has a few lying around, while many of the stamps will either be lost or somehow destroyed, and you can see the benefits to the USPS.
But while this event marks yet another two-cent postage increase, provides a zero-percent interest loan to the postal system, and saves the USPS the hassle of printing, distributing, and selling millions of "make up" stamps (the stamps that "make up" the difference between the old postage rate and the new one) in future years when rates undoubtedly will increase again, could this new stamp and concept be good for consumers too?
Since the postage rates seem to always be rising, could this be a quirky, yet viable investment opportunity? After all, if a person can literally use them forever -- or sell them to someone else to be used in the future -- could someone reap the benefits of "postage rate inflation" by hoarding these unique stamps?
A little bit of research was necessary to answer that question, namely discovering what postage rates have been in the past and exactly when they have changed. Although "past performance is not indicative of future results" as they say in many investment disclosures, the past postage rates should tell us if we are on to something, as off-the-beaten path as this investment idea may seem.
An internet website for the Postal Regulatory Commission (http://www.prc.gov/) yielded the results we needed, which is summarized below, showing the first day the rate became available and the postage rate for the first ounce of a first-class letter:
Date:
Rate ($):
July 1, 1999
0.02
July 6, 1932
0.03
August 1, 1958
0.04
January 7, 1963
0.05
January 7, 1968
0.06
May 16, 1971
0.08
March 2, 1974
0.10
December 31, 1975
0.13
May 29, 1978
0.15
March 22, 1981
0.18
November 1, 1981
0.20
February 17, 1985
0.22
April 3, 1988
0.25
February 3, 1991
0.29
January 1, 1995
0.32
January 10, 1999
0.33
January 7, 2001
0.34
June 30, 2002
0.37
January 8, 2006
0.39
May 14, 2007
0.41
At first glance, the rate hikes appear to have grown by leaps-and-bounds, but it is important to keep in mind that although the postage rates have risen from only two cents in 1919 to forty-one cents today, the increases have occurred over roughly eighty-eight years.
Applying this to investments, if you made an investment of two cents in 1919, which ultimately returned a total of forty-one cents in 2007, the result is an annual return of less than 3.5%.
With many interest rates currently available on money market accounts and certificates of deposit currently between 4 to 5 percent -- or even slightly more -- it appears that those are much better returns than hoarding postage stamps for use or to sell in the future, yet it may make for a much less interesting dinner conversation…