a better investment than the forever stamp

this livingsocial offer in inbox this morning was sort of a stunner for a few reasons. first, hard times are clearly upon us: this one is for a discount to commodity food items.

at first glance, you laugh, maybe purchase. second glance, second thought, you read the fine print: “Individual tear-away vouchers do not expire.”

wait a minute…is this the new forever stamp? and how much are forever stamps actually worth? should i have invested in stamps instead of sino-forest?

WSJ says no: “The bottom line is that, by law, the post office can’t increase the cost of stamps beyond the rate of inflation.” However, the author also notes:

There is one scenario, though, that could make the forever stamp a good investment: deflation. The Postal Accountability and Enhancement Act only addresses inflation and rate increases. It doesn’t take deflation into account. There’s no legal requirement for the post office to lower rates if the CPI turns negative. That means that if the cost of a stamp stays fixed at 44 cents, but other prices decline, the stamp has appreciated in relation to other costs. Forty-four cents buys more in a deflationary environment than it does currently. This isn’t exactly a recipe for success. Most economists say that low inflation rates are much more likely than deflation, and the post office could decide to cut rates.

All of this speculation has an element of the absurd to it. Stamps aren’t exactly in short supply, and to get a decent return on your investment you’d have to find someone willing to buy hundreds, if not thousands, of stamps that they could just buy at the local post office. …  Forever stamps are definitely a worthwhile purchase, they just don’t make a good investment.

so fine, stamps aren’t a good investment. but now consider the economist’s big mac index.

THE Economist’s Big Mac index is a fun guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of a basket of goods and services around the world.

there is an FX arbitrage opportunity in here. however, like the forever stamp, this deal requires a serious buyer for precisely the physical good. the next line of fine print reads, “limit one per customer,” i.e. no hoarding. so the return is negligible after transaction costs.

they are always two steps ahead of me. i might buy anyway, just so i can enjoy a big mac in 20 years and savor the fine taste of cash $.

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