Quartz, which bills itself as “a digitally native news outlet for business people in the new global economy”, has an article explaining how you can make a whole lot of money buying and selling forever stamps, prompted by last week’s USPS announcement of a three cent price increase.
Yesterday, the US Postal Service (USPS) made a strange announcement: anybody who wants to turn a quick profit at its expense will have an opportunity to do so come January.
And of course, the “opportunity” consists of buying a lot of forever stamps for 46 cents now, and selling them for something more than that come January. It’s an interesting thought experiment- after all, in theory you could buy a million forever stamps the day before the price increase, and 24 hours later they will have increased in value by 6.5%. Not a bad profit!
The difficulty is in the details- starting with the small matter of coming up with $4,600,000 to buy ten million stamps. The Quartz authors suggest crowd-sourcing a $250,000 investment to start with. They make it sound like a simple matter, but you have to wonder how many people would actually be willing to finance what sounds a lot like the original Ponzi scheme.
But let’s say it works- what next? If you’re going to buy ten million stamps you still need another $4,350,000. The author’s suggested method for raising it couldn’t be simpler- use the $250K you got from the crowdsourcing to buy stamps. Then use those stamps as collateral to borrow another $250K. Use that money to buy more stamps. Use those stamps as collateral on yet another $250K loan. Then just do that again, and again, and again- 18 times in all. OK, so maybe it’s not that simple. But did you spot a slight problem with that process?
Or maybe two?
In the first place, the authors assume that a bank will happily loan you 100% of the value of your postage stamps. That hardly seems likely. More importantly, though, they assume that the bank would simply trust you to hand over the stamps if your project doesn’t work out. Somehow I don’t see a bank handing over a quarter of a million bucks based on your promise that you’ll give them a whole lot of postage stamps if things go wrong- and doing it 18 times!
Then there’s the little matter of unloading all of those stamps for cash. The authors suggest that convenience stores would be happy to buy them, although they don’t offer any evidence that they actually would. They suggest buying a convenience store database and using that to find buyers. Sounds slightly time consuming, doesn’t it? Alternatively, they claim that you could pay something called the Checkstand Program a flat fee of $3500 (plus a hundred store displays) to take the stamps off your hands and distribute them to stores. That may come as news to the Checkstand Program- what their website actually says is this:
The cost is $10.00 dollars per store and a free display for that store. We can distribute anywhere from 200 up to 5,000 convenience stores. Once we run the test with our convenience store distributors/stores and it was a success, we take the results and push it to all of our sales channels that include convenience store chains, c store distributors, DSD food and beverage distributors, convenience store brokers and convenience store rack jobbers throughout the U.S.
So let’s say Checkstand could somehow convince a thousand convenience stores to each buy 10,000 of your stamps- which seems far-fetched. That makes the fee $10,000, not $3,500. Plus a thousand displays at $3 apiece adds another $3,000 to your cost. And that’s assuming Checkstand would even be interested in taking on a one-time dump of a commodity, rather than what they seem to be interested in, new product launches. To say nothing of what the bank might have to say about you handing over all their collateral to Checkstand!
Yup, sure sounds like a plan, doesn’t it?