With James Barron, New York Times reporter and author of The One-Cent Magenta: Inside the Quest to Own the Most Valuable Stamp in the World
The One-Cent Magenta: Where It All Began
Veteran New York Times columnist and author James Barron has published a book entitled The One-Cent Magenta: Inside the Quest to Own the Most Valuable Stamp in the World. The story about how a rather plain magenta stamp issued in the 1850s came to be sold in 2014 for $9.5 million dollars is surprisingly entertaining in its twists and turns and edifying in its illumination of the obsession with rarity and its acquisition within the universe of serious and rich collectors. Barron describes how he first heard of the the One-Cent Magenta at a cocktail party where he bumped into an auctioneer he knew. He had written earlier stories of other famous sales of rare items that this auctioneer had made, e.g., copies of the Declaration of Independence and the Magna Carta and one of the pianos from the movie Casablanca. This auctioneer mentioned that he hoped to sell the stamp for $10 million but was worried that a group of collectors in London might destroy the stamp by trying to ascertain its authenticity using a benzene solution. At this point, Barron was already convinced that there was a great story to tell. (The benzene tangent, by the way, turned out to be a red herring. Stamps these days are authenticated through some expensive forensic gadgetry.)
The story begins in British Guiana in the 1850s when a local postmaster found himself out of stamps and had to go to the town newspaper to print off a quick batch of stamps so that the postal system could carry on. Several hundred one-cent stamps and a lesser number of four centers were printed. The one-cent stamps were immediately used to send out newspapers, presumably to subscribers outside the range of the paper’s army of paperboys. The stamps were immediately forgotten about until 16 years later, when a 12-year-old stamp collector in the throes of adolescent philately found a stash of stamped letters in his deceased uncle’s home. There was one rather homely and smudged stamp on a newspaper that was not interesting enough to keep him from trading it for other stamps from London. As Barron puts it, this was the worst stamp deal ever. What would become the holy grail of stamp collecting, the One-Cent Magenta, a dream to countless future philatelists, was pawned off for a few shilling’s worth of ephemera.
Once There Were Two
After a brief digression on extremely rare and expensive American coins and stamps such as the Inverted Jenny, we pick up the story again with a wealthy collector named Arthur Hine who acquired the One-Cent Magenta at some point in the 1920s. He had spent around a million dollars (a fantastic sum in pre-depression dollars) building his stamp collection. Another collector contacted him claiming to have another One-Cent Magenta stamp and offering Hine the opportunity to buy this only copy in existence. As the story goes, Hine invited this seller to his home, where they examined the two stamps side-by-side. Even though there were slight differences—mainly in the size of the initials written on the face of the stamp—Hine was sufficiently convinced that he agreed to buy this other One-Cent Magenta. While the two men were about to enjoy post-sale celebratory cigars, Hine set the stamp he’d just bought on fire. He now had the only One-Cent Magenta in the known world. While Hine may have merely thought he was preserving the value of his only-one-in-the-world stamp by burning the other, his action might represent the psychological pinnacle of the search for uniqueness. There’s little doubt that decades later, the singularity of Hine’s One-Cent Magenta did contribute heavily to its extreme value to collectors. Hine’s stamp was supposed to go to his British relatives after his death, but his wife finagled it for herself by dint of it being accidentally stored in the house she’d inherited from her husband. After displaying it at the 1940 World’s Fair and shopping it around a bit, she eventually sold it for $40,000, a very handsome sum for the times.
In another odd turn of events, the stamp was bought for $935,000 in 1980 by the uber-rich scion John du Pont, who just days before his purchase had shot and killed an Olympic gold medalist at his home. Most recently, the shoe designer Stuart Weitzman bought the One-Cent Magenta at auction—led by Barron’s auctioneer friend—for $9.5 million. Barron described Weitzman as being deeply driven by a desire for one-of-a-kind items that tie into his boyhood interests in stamps and coins. As a kid laid up in bed with a broken leg, he’d devoted an empty space for the One-Cent Magenta at the front of his stamp collecting book which he never expected to fill. Decades and nearly $10 million dollars later, he’s finally the owner of the world’s rarest stamp.
The One-Cent Magenta’s Rate of Return
Steve recounts that when he first heard the story of the One-Cent Magenta, he ran some quick calculations to see how much the stamp had appreciated in terms of compounded annual percentage returns from 1856 to 2014. He was surprised to discover that it worked out to “only” a 14% average rate of return, a figure that is less than what some of the very best investors make in the stock market. Give compounded returns enough time and they’ll deliver spectacular results.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: In 2014, a piece of tiny, red, square-shaped paper, which originally cost one penny, sold at Sotheby’s for nearly $9.5 million. To tell us this intriguing story behind this singular spectacle is James Barron, reporter for The New York Times who wrote a book about it and also some articles as well. Welcome to my show, James. How are you?
James Barron: Very good. Good to be with you.
Steve Pomeranz: First of all, let’s set this up. How did you come across this event and what spurred you to write about it?
James Barron: I went to a cocktail party and the only person I recognized in the room was an auctioneer I’d written about before. I’d written about him when he sold one of the copies of the Declaration of Independence; I’d written about him when he sold one of the copies of the Magna Carta; I’d written about him when he sold one of the pianos from Casablanca—there were two. This one went for just over $600,000. It only had 58 keys, most pianos have 88 keys. He’s only the person in the room at this cocktail party, so I walked over to him and essentially I say, “What have you done for me lately?” What I said was something like, “What are you up to now?” He said, “I’m going to sell the most expensive stamp, the most valuable stamp in the world by size and weight, but there’s a problem.” I said, “Oh?” He said, “There’s some stamp people in London who may want to dip it in benzene and the risk is dunk, puff, no more stamp.”
Steve Pomeranz: Why benzene?
James Barron: He wanted to sell it for nearly $10 million. I was hooked. I mean there’s lots of good stories; this one already had the possibilities. It turned out they didn’t have to dunk it in benzene; stamp people don’t do that anymore. The reason to have done it back in the day was to find out if a stamp had been altered. You could see if there was ink on it that wasn’t original. They don’t have to do that anymore. They have really cool machines that were developed for … The stuff you see on in NCIS. They can use them on stamps and make the same determination and that’s what happened.
Steve Pomeranz: This square-shaped, red piece of paper obviously is a stamp. It sold for one penny. Take us through the story.
James Barron: Sometimes your ship doesn’t come in. If you’re the postmaster in British Guiana in South America when that happens, maybe you panic, but then you go to the local newspaper and you say, “Print me some stamps.” That’s what the postmaster did. They ran off probably several 100 one cent stamps and some four cent stamps as well. Of the one cent stamps, they were supposed to be put on periodicals like newspapers. It pains me as a newspaper reporter to think about this, but at the end of the day, people throw newspapers away. It hurts. Apparently, all the other news copies of the paper were thrown away except one. This stamp was printed and sold and then forgotten for 16 years. In 1873, a 12-year-old boy, who was all caught up in this really cool, really new fad of stamp collecting, goes to his uncle’s house. His uncle had moved away, but he’d left some stuff. The house apparently was almost a mess. He goes over there to help clean it out. Somewhere, the basement, in the attic, a bookshelf, there are papers that have stamps on them. He thinks, “Wow, this is great.”
Steve Pomeranz: A treasure trove.
James Barron: “I’ve got stuff I can take home and bolster my collection.” One of the stamps is this one on a newspaper. He doesn’t think much of it. He doesn’t think it’s particularly attractive and it’s not. I mean it was a quick and dirty solution, even smudged, to the problem of we’re running out of stamps. He takes it home and after a while, he trades it for some other stamps from London. That’s the worst stamp deal ever. For a few shillings, he traded away the one thing everybody I know who’s ever collected stamps dreams of. You find the thing nobody has. You find a real rarity. Everybody dreams of that. I dreamed of it when I was a boy and for the year or so that I collected stamps and never found it.
Steve Pomeranz: You’re looking for the silver dollar that has a mistake on it or the dollar bill.
James Barron: That’s right. In this country, you’re hoping for an Inverted Jenny when you know that there were only 100 of them that came out. 97 of them, I think it is, we know where most of them are. There were several that were stolen back in the 50s. One of them came back last year. I wrote about that when it came back.
Steve Pomeranz: The Inverted Jenny, it’s a stamp of a Curtiss-Wright airplane. Right?
James Barron: That’s right.
Steve Pomeranz: It was upside down, so it’s inverted. That’s what gave it value.
James Barron: It’s a two-color thing. The border and the little frame is red and the plane was supposed to be blue, so it had to go through the press, I guess, twice. Somehow when they put it through the second time, something was upside down. It got to a post office in Washington and someone who collected first day stamps, stamps on the first day they were issued, went to the post office to buy some. Bought a sheet of the stamps, a 100 of them, and got out of the post office realizing what he had before the post office got to him. He wouldn’t give them back, wouldn’t trade them for a sheet the way they were supposed to be. He sold it-
Steve Pomeranz: There’s a 100 of them out there, still makes some very valuable, but not as valuable as this One-Cent Magenta, as it’s called because it’s singular, there’s only one in the world.
James Barron: There is only the one. I mean there are stories about what owners have done. What one owner, in particular, supposedly did to make sure this was the only one. In the 20s, the stamp was bought by a man named Arthur Hine, he owned fabric mills in upstate New York. He’d become a stamp guy and he had a lot of money. In pre-depression dollars, he’d spent some huge amount of money, like $1 million, on stamps over time in pre-depression dollars.
Supposedly, so the story goes, in the late 20s, he gets a call from someone who says, “I heard about you and that One-Cent Magenta and I have one too.” Hine says, “Come on up.” The guy goes to see Hine, takes out his stamp. Hine goes to the safe in his house and gets the One Cent Magenta, and they put them down next to each other. The two stamps are essentially alike. The second one, the signature is a little bigger. The postmaster made the clerk put his initials on them as he sold them. It’s the same initial supposedly, but there are little more of a flourish on the second one. Otherwise, the two stamps are alike.
Hine agrees to buy the second stamp. Even though, Hine’s very rich, he says, “I don’t have that much cash in the safe, come back tomorrow, I’ll give you cash.” Guy goes away. He comes back the next day. He walks in, he gives Hine the stamp. Hine gives him the cash. Hine smokes cigars so he takes out two cigars and strikes a match and lights one. Then with that match, Hine burns the second One-Cent Magenta. He burns the one he’d just bought. The guy is-
Steve Pomeranz: Let me stop you there. Oh, he did it in front of the guy?
James Barron: In front of the guy. The guy is standing there. He must’ve been apoplectic. This is not what he saw coming. As it burns, it didn’t take long, Hine says, “Now there’s only one One Cent Magenta.” If you’re worried about preserving uniqueness and if this story is true, which it may not be, that’s how Arthur Hine did it.
Steve Pomeranz: I wonder how many of us would’ve looked at two stamps and said, “Now we have twice the value.” I mean because two stamps is not a 100, it’s not millions, it’s just two. That’s pretty singular, pretty special, and yet the real value, the reason, it went from one penny to sell for nearly $9.5 million is the fact that there is only one. This collector was pretty brilliant. What happened after that?
James Barron: Hine died thinking the stamp was in the bank fault in Utica, but it wasn’t. It was there in the house and this became an issue. Apparently, Hine and his wife had some friction. Hine had rewritten his will so that she was to inherit the house and the cars and the contents of the house, but not his stamp collection. His stamp collection was to go to relatives back in England. He had come over from there. Well, she challenged the will and she ended up with the stamp because Hine had apparently not paid attention and the stamp was there in the house. He’d never sent it off to the bank to put in the vault with the rest of the collection. On the grounds that it was in the house-
Steve Pomeranz: It was hers.
James Barron: -the judge in the court system let her have the stamp. Eventually, she took it to the World’s Fair in 1940, showed it there, and then sold it through Macy’s. Macy’s had a stamp department in those days, so did Gimbals. She sold it and the person who bought it was anonymous for nearly 30 years.
Steve Pomeranz: What did she sell it for?
James Barron: Not nearly as much as what we’re selling it for now. That was about $40,000.
Steve Pomeranz: Still a lot of money back then, a lot of money.
James Barron: Relatively speaking in 1940 that was practically a fortune.
Steve Pomeranz: For one stamp, one cent, ugly red stamp, you think you’re doing pretty well.
James Barron: Not bad.
Steve Pomeranz: I want to skip to the story about how a du Pont bought the stamp because it was a movie made of this person. Tell us about the DuPont.
James Barron: This is John E. du Pont in the movie we’re talking about is the Foxcatcher movie that came out a couple of years ago with Steve Carell. Steve Carell played John du Pont. If you remember the movie, you know what another part of John du Pont’s life was about. It was about athletics. He had set up a wrestling team there on his estate. They trained on his estate. They lived on his estate. One day in the 90s, he went and shot Olympic gold medalist Dave Schultz.
Steve Pomeranz: And killed him.
James Barron: Two hours before that, he was in a stamp store. He was buying stamps. He told the person whom he was dealing with in the stamp store, “I’ll be back on Monday.” I talked to that guy when I was doing research on the One-Cent Magenta. He was surprised when he heard about the shooting up with du Pont’s estate; he figured somebody had shot du Pont, not that DuPont was the gunman. Du Pont was this consummate collector. He’d collected birds and shells and had collected so many of them that he set up a museum in Delaware just for that. Even after he sent all of those amazing specimens off, he still had a lot in his mansion in Pennsylvania.
Steve Pomeranz: What did he pay for it?
James Barron: He paid $286,000 for the stamp when he bought it in … He paid $935,000 for it in 1980. He bought in 1980.
Steve Pomeranz: For 935,000, quite a bit money.
James Barron: Just under.
Steve Pomeranz: The current owner is shoe designer Stuart Weitzman. He likes to collect rare things, and he is the one who paid nearly 9.5 million?
James Barron: That’s right.
Steve Pomeranz: What’s his deal?
James Barron: He wants one-of-a-kind things, but there’s a connection to boyhood for him. He collected stamps, especially intensively one year when he had a broken leg. He broke his leg playing baseball in the street, and he was laid up for most of the next year I guess. He collected stamps and he collected coins. He really worked on his collection. There was always a place very close to the beginning of his stamp book, stamp catalog, that had a hole in it that he thought he’d never be able to fill. It was the space for the One-Cent Magenta. When it came on, he thought this is something worth going for, but because it was a one-of-a-kind item, he owns … They’re two-of-a-kind I guess if you think of it this way, he owns a pair of shoes signed by the 1941 New York Yankees. Apparently,-
Steve Pomeranz: And the pair of shoes- Yeah, go ahead.
James Barron: Apparently, they belong to whoever Joe DiMaggio was dating at that point.
Steve Pomeranz: Was dating. Right. Unfortunately, he- Go ahead.
James Barron: DiMaggio said, “Would you like a ball signed by the team?” She takes her shoe off and says, “Sign this.” The shoe was partly made of canvas, it’s a called a spectator pump or so Weitzman told me, but he knows his shoes. There wasn’t enough room on one for all the guys on the team so they had to get her other shoe to finish it out. That’s why I say this is a one-of-a-kind that’s two-of-a-kind, it’s both shoes.
Steve Pomeranz: It’s too bad it wasn’t Marilyn Monroe because I know it was Joe DiMaggio. As an investment advisor, the first thing that I did when I started reading your material, was calculate the actual rate of return of one penny turning into $9.5 million from 1856. As I’m always surprised, but not so surprised anymore, the rate of return isn’t this astronomical number, it’s basically just under 14% a year. But if we’re talking about 158 years, because the purchase was made in 2014, so it’s like that the purchase of Manhattan for trinkets and so on. Compounding that rate of return over time, just about a 14% rate of return. Just as an aside very quickly, when you think about Warren Buffett and you think about the kind of return that he has earned from Berkshire Hathaway, I think it’s over 20% a year, you can see how these rates of return just over a long period of time create these spectacular amounts of money.
James Barron is my guest. The book that he wrote is called The One-Cent Magenta. James, I haven’t had the chance to read it, but I have read some reviews about it. It’s a very good read. It’s highly recommended. I’m going to go out and get it myself.
James, thank you so much for telling us the story of the One-Cent Magenta.
James Barron: Thank you very much, Steve.