Thursday, 7 July 2011

The false certainties of catalogue values

As if to prove their reliability, all general catalogues value stamps as if they were pricing new issues. Indeed, many current catalgoue values still reflect the original new issue valuations decades later, with used valuations driven by the face-value related mint valuations.

This is why high face value used stamps are generally catalogued at more than low face value ones even though, from periods of high inflation, it is the low values which may be hard to find in used condition.

Catalogues also tell you that their valuations are based on auction realisations and "market prices". This is not credible. There never were auction realisations for stamps valued under (let's say) $10 and even though it would now be possible to aggregate ebay realisations on low-value stamps to get price guides, it hasn't yet been done. It would need a huge amount of work.

The brutal truth is this: for over ninety percent of stamps listed in the catalogues, world supply by far exceeds world demand. When you buy these stamps, whether in bulk or singly, you are paying (or should be paying) only for the costs involved for someone in acquiring them and transferring them to you.

So these stamps really have no more "intrinsic" value than the everyday stamps you tear off envelopes and soak of the paper: in other words, ZERO. Kiloware only costs more than zero because you are paying labour, advertising and shipping costs. It's no different to bottled water. The water is a free good, it's everything else which costs money.

Above zero, there are the stamps where demand exceeds supply, at least in the following sense: someone has to make an effort to find them and may only be able to acquire them if at the same time they acquire lots of ZERO value stamps.

In fact, you could think of values above the ZERO level as created in this way: if to get a stamp for which demand exceeds supply I have to acquire (buy) 99 ZERO stamps, then this stamp is worth 100 points. If I have to acquire 999 ZERO stamps, then it is worth 1000 points.

The trouble with the catalogues is that they make gradations which are much finer than is justified by any real-world information they hold. I don't believe there is ANY basis on which they allot $10 to one stamp and $11 to another, $100 to one and $110 to another. They just want to look knowledgeable.

Consider how auction houses work. They have price and bid steps which start small and get bigger. The next bid above 100 is going to be 110, the next bid above 500 is going to be 550. And so on.

The same is true of how cover dealers work. In Germany it is common for dealers to sell covers by price steps: they have boxes at 1 , 2 , 3, 5, 10 €uros and above that they price individually but still often in 5€ or 10€ price steps. There just isn't a way of telling a 42€ cover from a 44€ cover, though those kind of prices may be the outcome of dealer taking his input prices and adding a mechanical percentage for costs, taxes and profit.

Catalogs should get the message and start being more honest about the limitations of their knowledge. I would find it more credible if I saw valuation steps like these:

ZERO [that would be over ninety percent of stamps remember] - 1 - 2 - 5 - 10 - 15 - 20 - 30 - 40 - 50 - 60 - 80 - 100 - 150 - 200 - 250 - 300 - 400 - 500 - 600 - 700 - 800 - 900 - 1000 - 1500 - 2000 - 3000 - 4000 - 5000. There are only going to be a handful of stamps above that.

Next time you see a catalogue value of "5.50" just ask yourself, How do they know?

1 comment:

  1. False certainties of catalogue values? how is this possible? well anyway I'll find out what's the reason behind this issue I'm very curious now.Great post