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Buy low, mail high

The Postal Service's new `forever' stamp takes the sting out of rate hikes. But is it a good investment?

March 01, 2007

PSSST -- LOOKING FOR a hot investment? Something with a better chance of paying off than that "sure-fire" stock touted in an e-mail you received this morning? Then we've got just the thing for you: a 41-cent stamp.

This is not just any 41-cent stamp. It's the new "forever" stamp that the U.S. Postal Service is expected to issue later this year. These babies will always be good for first-class delivery; whenever the Postal Service raises the price of stamps, they'll increase in value. Automatically. Talk about a sure thing! If you buy them for your Christmas cards in December, they'll still be good when you finally get around to mailing those red envelopes in 2011. And all those thank-you cards you've been after your daughter to mail since her 16th birthday? Now she can wait to mail them till she gets to college.

The Postal Service came up with the idea last year as a way to ease the sting of rate increases, and the independent Postal Regulatory Commission endorsed the plan Monday. The new stamp won't have a value printed on its face; instead, it will sell for whatever the current rate is for first-class letters, starting as early as May, when the price of a first-class stamp will rise from 39 cents to 41 cents.

The idea is a winner for the Postal Service because it reduces the need for money-losing 1- and 2-cent stamps every time a new rate goes into effect. Those increases have come at an accelerating pace -- the hike approved Monday will be the sixth since 2000, compared to 12 increases in the previous 40 years. Whether it makes sense for consumers, however, depends on the rate of inflation and the gains made by other investments.

The "forever" stamps seem like an insane bargain, particularly over the long term, but that doesn't mean they're a good investment. Given that the Postal Service raises stamp prices at almost exactly the rate of inflation, the new stamps will rise in value at that rate as well. In other words, they gain 2% to 3% a year -- more than the money in your checking account but probably less than you're earning in your IRA.

In the meantime, the cash parked in "forever" stamps can be invested by the Postal Service; after all, each stamp that's hoarded represents a letter that doesn't have to be delivered. So the smartest route for consumers would be to snap up some "forever" stamps just before the next rate hike, but only enough to last for a year or two.

On the other hand, given all the ups and downs in global stock markets lately, maybe hoarding stamps is a good idea.

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