The bidding in the auction room stood at 2 million Hong Kong dollars — and all eyes were on me.
Ceiling fans offered some respite from the stifling heat outside, but the room still seemed unbearably hot.
Some 40 or 50 collectors and dealers — many of whom had made the trip from mainland China — jostled for elbow room. A bank of auction assistants manned telephones and laptops, processing bids from around the world.
It was one of the Chinese dealers who was currently the highest bidder. I had noticed him earlier. He had already beaten me to a couple of lots I had earmarked.
But not this time.
I nodded to the auctioneer. “$2.1 million,” he announced, and a murmur ran through the room.
My rival shifted uncomfortably in his seat. This was already a record price — and more than he wanted to pay. “2.1 million Hong Kong dollars,” the auctioneer announced again, looking at the dealer. He shook his head.
The auctioneer scanned the room for other bidders, but there were none. The hammer came down to a round of applause and camera flashes. A couple of collectors came up to shake my hand.
I had just paid around US$325,000 for a stamp.
A Lucrative Mistake
I have been a stamp collector since childhood when my grandfather introduced me to the hobby. And as much as I would have liked to own this stamp for myself, on this occasion, I had someone else in mind.
Hong Kong is the global hub for buying and selling Chinese stamps, with seven or eight international auction houses and hundreds of stamp dealers crammed into tower blocks in Kowloon and Wan Chai.
Unlike the U.S. and Europe, where stamp collecting is the preserve of the older generation, the hobby is thriving in Asia. Around one-third of the world’s stamp collectors, some 20 million people, are Chinese — with around the same number in India and Southeast Asia.
Most stamp dealers and auctioneers now have an online presence, and the increasingly prosperous Chinese middle class is getting access to home computers and personal credit cards. Demand from Chinese collectors has mushroomed — and auction prices have soared.
The world record price for a Chinese stamp was broken three times in 2010. It currently stands at $2 million, bought in 2018 by an unknown bidder.
The stamp I purchased was one of these record-breakers. It’s sometimes known as one of the “Treasures of the Republic” and features one of the founding fathers of China, Dr. Sun Yat-sen.
But what makes this stamp so valuable is the portrait of Dr. Sun is inverted.
Dr. Sun Yat-sen was a Chinese philosopher, physician and politician, who served as the first president of the Republic of China.
The normal version of the stamp is common and sells for around $1. But shortly after the stamps were issued in 1941, one sheet — just 50 stamps — was discovered with an inverted center. To Chinese philatelists, the “Dr. Sun Invert” has been an iconic stamp ever since.
The stamp has remarkable parallels to a famous U.S. stamp, the Inverted Jenny. This time, it was the Curtiss JN-4 biplane that was printed upside-down by mistake back in 1918 — and only one sheet of 100 was found.
The discovery caused a sensation. The stamps immediately started trading for thousands of dollars. In 2018, a single Inverted Jenny sold for just under $1.6 million.
An example of the Inverted Jenny…
Given the growing market for rare Chinese stamps, the Dr. Sun Invert clearly had good investment potential. One of my clients clearly thought so too. He snapped it up a few days after the auction.
Perils & Pitfalls
Buying collectibles at auction has its advantages. For one thing, items generally end up being sold at the open market price. And although the buyer will have to pay a 15–30% auction premium on the hammer price, it is usually cheaper than buying from a dealer.
However, auctions are certainly not for the novice collector or investor. Here are a few of the most common stumbling blocks…
The first hurdle is what to buy. Billions are spent on collectibles every year — from a $1 stamp on eBay to a $100 million Jackson Pollock painting. Rare coins can be a good investment, but how do you choose between a 1,000-year-old Viking silver penny and a gold sovereign from Victorian England?
Collectibles, like any other commodity, follow trends. So as an investor, how do you decide which area has the greatest potential for growth?
The next question is how to judge condition. Many coins, banknotes, comic books and baseball cards sold in the U.S. are independently graded, but it is not so easy for most other collectibles.
The most expensive stamp in the world — the 1856 British Guiana 1-cent magenta — is badly damaged and faded. Yet it sold for $9.45 million. And what about fakes and forgeries? There are no guarantees at auction, so buyer beware.
Once you’ve selected which auction lot to bid on, how do you decide how much to pay? Bidding in a live auction requires a cool head — it’s easy to get carried away.
One of my favorite areas of collectibles is vintage movie posters. About five years ago, I purchased an original James Bond Dr. No poster, which hangs in place of pride in my London apartment.
I have been pleased to see auction realizations creeping up in recent years: first $10,000, then $15,000, even $20,000. And at Sotheby’s last year, one example sold for over $100,000!
The film that launched the James Bond saga… released in 1962 and starring Sean Connery as 007.
What happened to account for this surge in price? The answer is two eager collectors (with more money than sense) got caught up in a bidding war — and one of them ended up paying too much!
This may not be a problem for a collector who intends to hang on to an item for 30 years or more. But as an investor, it’s important to buy at the right price.
Advice & Expertise
It is critical that novice auction buyers seek expert advice before buying at auction. I have worked in the collectibles business for some 15 years. And I set up my own company, Rare Tangible Assets (RTA), to offer independent advice and guidance to investors who wish to diversify into this asset class.
As an example, one of my U.S. clients, who already had a significant portfolio in mainstream investments, decided to invest around $100,000 in English coins.
As well as being undervalued in comparison with U.S. coins, buying English coins in London would also offer currency diversification into British pounds — currently very cheap because of Brexit.
Together, we identified about 25 coins in an upcoming London auction, which I attended on his behalf. I passed on most of the lots because they exceeded our agreed maximum bids.
But I managed to secure three coins for my client for a total of around $65,000 — including auction premium. One of these was an extremely rare 1661 Elizabeth I silver coin, previously sold by a London dealer for 45,000 pounds, which my client acquired for 31,000 pounds.
Here is an example of the extremely rare 1661 Elizabeth I silver coin…
I am a consultant with major dealers and auctioneers in Europe, the U.S. and Asia, and I have a network of trusted experts in rare stamps, ancient coins, historical documents, first-edition books, limited-edition artworks, vintage movie posters, luxury watches and more.
I work with Mike Hall, CEO of JustCollecting, specialising in rare stamps, coins and autographs; and Rich Checkan, president of Asset Strategies International, for rare U.S. coins. Our services complement each other well.
With the right advice and expertise, investing in rare tangible assets can be an excellent medium- to long-term diversification strategy.
In the 2008 financial crisis, rare tangible assets proved to be uncorrelated to equities, property and even gold. Whether you are looking to protect your retirement — or invest for your children and grandchildren — we can help safeguard your portfolio for the future.
P.S. I can’t wait to get to my next auction and join in the fun… If YOU can’t wait to start or improve your rare tangible asset investment portfolio, you don’t have to wait for an auction.
I hope you get out there and experience a local auction soon. But until then, let our expert partners help you build something that will grow in value over the coming years.