Academic
Stamp Arbitrage Part 3
Okay I must of been on crack when I did the last stamp arbitrage model. Also addressing Ted and Gabbie's comments.
Lets try again:
One buys $1000 worth of $0.41 stamps today = 2,439 stamps
In 10 years assuming stamps go up $0.02 cents a year the $0.41 stamp is worth $0.61. (Also assuming that one can sell for $0.61, of course in reality the stamp would have to be worth like $0.63 a stamp so somebody would buy from you at $0.61. But we're guessing so lets assume.) So at $0.61 those same stamps 10 years later sell for $1,487 that is a gross profit of $487, less the ebay selling fees ($45.10, I looked it up and buyer pays shipping) for a total profit of $442 for a margin of 44%. The margin sounds good but over a 10 year hold is a whopping 4.16% IRR.
If stamps go up to $0.71 over 10 years (which could happen with inflation and the revenue loss to email, fedex, etc) then that profit is $688m, the margin is now 68%, and the IRR 6.0%.
Okay so that not so good and yes with inflation at 3% a year and the lost oppotunity cost of investing that $1,000 in a mutual fund you could make more over 10 years.......
Yes so forever stamp not the best investement, but if you're going to use 500 stamps for the rest of your life then buy them today......... well I guess the USPS could go out of business and you could be screwed.
Lets try again:
One buys $1000 worth of $0.41 stamps today = 2,439 stamps
In 10 years assuming stamps go up $0.02 cents a year the $0.41 stamp is worth $0.61. (Also assuming that one can sell for $0.61, of course in reality the stamp would have to be worth like $0.63 a stamp so somebody would buy from you at $0.61. But we're guessing so lets assume.) So at $0.61 those same stamps 10 years later sell for $1,487 that is a gross profit of $487, less the ebay selling fees ($45.10, I looked it up and buyer pays shipping) for a total profit of $442 for a margin of 44%. The margin sounds good but over a 10 year hold is a whopping 4.16% IRR.
If stamps go up to $0.71 over 10 years (which could happen with inflation and the revenue loss to email, fedex, etc) then that profit is $688m, the margin is now 68%, and the IRR 6.0%.
Okay so that not so good and yes with inflation at 3% a year and the lost oppotunity cost of investing that $1,000 in a mutual fund you could make more over 10 years.......
Yes so forever stamp not the best investement, but if you're going to use 500 stamps for the rest of your life then buy them today......... well I guess the USPS could go out of business and you could be screwed.
posted by Frank
at 8:49 AM
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