Credit and the Stamp Business

Lost in all the discussion about how the recession is affecting philatelic demand is a discussion of the role that bank loans and credit have played in the softness in the philatelic market. The vast majority of philatelic material on the market at any given time is in the hands of stamp dealers. Most dealers maintain stocks of stamps from which they sell. When credit is easily available (and for most smaller stamp dealers credit takes the form of home equity loans and credit cards) these dealers are willing to expand their stocks and resist selling at prices below what they want. When credit is difficult or impossible to obtain dealers reduce their stocks (which places more commercial grade stamps on the market), reduce their prices to prune inventory, and reduce buying new inventory. Thus at the very time that collectors have retrenched because of the recession, dealers are flooding the market with inventory to raise cash. This has been a significant cause of market weakness in the last 18 months and it seems to have reached its bottom. We don’t have good (or even any) econometric measurements in philately (like the monthly durable goods report or M1 supplies) so we have to rely more on anecdotal reports. From what I am hearing many mid sized dealers have reduced inventory below levels that they are comfortable with. We still have serious credit issues on the professional side of the hobby, but at least demand seems to be coming back. And considering the dramatic pressure on collectors and dealers alike during this recession, prices have held up quite well.

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