Rare Coin Investor

There’s a mysterious spot about 20 miles off South Carolina where centuries-old gold coins have been found strewn across the ocean floor for decades.

It’s believed to be the final resting place of the SS North Carolina, a steamship that historians say sank in 1840 under bizarre circumstances.

In November — 178 years after the ship went down — an expedition is being launched to “reconfirm with absolute proof” the wreck’s identity and unravel the mystery of why the North Carolina seemingly sank itself by heading straight into the path of another ship.

But make no mistake: It’s the stories of gold coins the are driving the expedition.

Project partners Blue Water Ventures International and Endurance Exploration Group are convinced hundreds of highly prized gold and silver coins are still on the wreck, promising a big pay off.

The SS North Carolina sank so quickly that few of its affluent passengers could gather their belongings before boarding a rescue ship, say the organizers. Among the passengers was a businessman who reportedly lost $20,000 in gold pieces, says Blue Water Ventures International.

“You can imagine what they would be worth now,” said Keith Webb of Blue Water Ventures. “Some of these coins are extremely rare and would help fill in gaps when it comes to the history of American coins. We know of 10 gold pieces that were recovered at the site years ago, and they sold for $70,000 each.”

Artifacts could start coming up in the next few weeks, as divers map the site and do an archaeological survey, Webb said. However, the bulk of the discoveries will likely be in May or June, the traditional diving season, he said.

The site, known among scuba divers as “The Copper Pot Wreck,” sits just over 50 feet down, about 20 miles of Murrells Inlet, Webb said.

For the past year, Blue Water Ventures and Endurance Exploration have been recovering artifacts from another Carolinas shipwreck, The Pulaski, which sank in 1838. Five hundred gold and silver coins have been found on the Pulaski, including some of the “oldest and rarest United States gold coins ever found on a shipwreck,” says Webb.

“The SS North Carolina is of interest because of its similarity to the Pulaski,” he says. “We believe discoveries similar to those being made on the Pulaski will also be found on the North Carolina.”

Divers have been plucking artifacts off the North Carolina for years, leading to widespread tales of buried treasure. In 1996, items found included 18 U.S. gold Quarter Eagles, half dollar denomination coins and two ornate gold pocket watches, reported Blue Water Ventures.

The SS North Carolina was sailing from Wilmington to Charleston when it collided with the Steamship Governor Dudley in July of 1840, according to the North Carolina Shipwrecks Blog.

“The Dudley…(hit) her amidships, between the ladies’ and gentlemen’s cabins with a splintering bow that tore four feet from the Dudley’s bow and cut the Carolina almost in two,” says the blog. “Within 10 minutes, the North Carolina settled to her decks and soon disappeared.”

The passengers were rescued by the Dudley, but all “possessions and the cargo on board were lost,” according to a 1997 report by MAREX International. The 56 passengers included “about a dozen senators and congressmen,” WPDE reported in 2012.

Another mystery waiting to be solved, says Webb, is what became of the large cargo of government mail that went down with the ship. Some of the packages may have held valuables, he says.

“What was in those packages?” Webb wonders. “We don’t know, but we’d like to find out…Maybe it was more than just paper, which would be long gone.”

Click link to video below:

https://www.charlotteobserver.com/latest-news/article196899419.html

https://coinweek.com/coins/coin-collecting-strategies-2/market-strategies-and-asset-allocation-billionaires-buying-rare-coins/

What is motivating ‘smart money’ to turn to numismatics?

http://www.numismaticnews.net/article/rare-pieces-cut-path-ahead-coins

Recent headlines suggest there are a significant number of truly rare collectible coins beginning to enter the market. These coins have not been available for years.

While the value of many of these attractive and historically choice coins is likely beyond the means of most readers, it is interesting to take note of their sudden availability.

Their arrival on the market is important, since one of the reasons fresh material has not been plentiful has been the uncertainties of the collecting market. Owners would rather not face uncertainty. They wait until they are fairly sure they will get the total value out of their heirloom pieces.

While the jury will be out for some time regarding whether these special coins will realize the prices their owners might desire, it does suggest the owners of coins that are held in strong hands may believe the market is finally ready to absorb them at strong prices. That is good news for everybody. Confidence in the marketplace is necessary to build a rising trend line.

It is important to note as well that these coins are appearing in high-profile auctions and not over the counter. This reinforces the impression that auctions are the best means of selling any numismatic item.

One question yet to be answered is whether buyers will be dealers looking for inventory or top-shelf coin collectors. Let’s watch as this drama unfolds.

The balance of the scarce to rare market segment is currently flat lined, while any coin whose primary value is based on its precious metal content has once again declined, although modestly, as gold and silver failed to rally despite recent stock and bond market uncertainty.

https://coinweek.com/us-coins/the-rare-coin-market-is-looking-up/

Nearly everyone who is deeply involved with numismatics can attest to the fact that the rare coin market has been soft or depressed in the last few years. Coin prices for many series have drifted downward, some to historic lows. There are a lot of coins that can be purchased for prices last seen in the 1980s. I have highlighted a few of these series in recent months, and plan to discuss several more in the coming weeks and months.

Despite the lower prices for many series and issues, the prices for extreme rarities and grades have been solid, if not higher. In the last five years, a lot of great coins brought record prices at auction. The demand for mega coins far outstripped the limited supply. A few big payers have had a tremendous impact, competing with each other to build registry sets of the finest known coins.

Other collectible fields have seen similar demand for the top end of the market. The extreme wealth of some Americans has greatly benefited everything from fine art to vintage automobiles.

These mega coins have very little impact on the average collector or dealer. I would love to sell million-dollar coins, but they seldom are offered privately, and usually sell at auction. Coins in this price range are only fantasies for most collectors. They can be fun to read about, but owning them would be impossible for all but a handful of well-heeled collectors.

I have been following rare coin trends for decades, starting in the mid-1970s. Until recent years, the rare coin market has been much more volatile. In January of 1980, a Gem Proof Three Cent Nickel sold for about $2,500 USD. A few months later, they had crashed to under $500. This up-and-down cycle for rare coins played out many times over the next 30 years. The lowest point in the rare coin market that I have personally experienced was in the summer of 1982. Nearly every major rare coin dealer was broke or nearly so. By 1989, the market had roared back.

Starting around the year 2000, the prices and the market for rare coins seemed to stabilize a great deal. I believe the invention of the internet had much to do with this. The market for rare coins was spread out significantly due to access, and the supply of rare coins didn’t overwhelm demand, as it had in the past. The access to numismatic information also greatly helped the hobby. Today’s collectors have far more tools than collectors of the past to make purchase decisions.

The current market malady started several years ago after the financial crisis. Simply put, the supply of rare coins outpaced the demand. A lot of great collections entered the market, with mega sales of the Newman and Gardner collections being just a couple of examples. The stock market also performed amazingly well during this time period and a lot of money was allocated to that asset instead of to numismatics.

The point of this article is that I feel we may have seen the worst of the recent downturn in rare coin prices. There are quite a few indicators than have given me hope that the lows of this recent market downturn are behind us:

Coin show activity: I attend almost every mid-size and major coin show in the country. I have been doing this for decades, and this has given me great insight on the pulse of the market. Nearly every coin show I have attended in recent months has been much busier. There is an actual buzz on the bourse floor that anyone who frequents the coin show circuit would recognize. Sales are much stronger across the board for everything, with the exception of unattractive material.

Rare coins are harder to find: There are considerably fewer exciting coins to be found on the bourse floors than in previous months. Everyone is complaining about the lack of fresh material.

Demand has increased: Nearly every large retail company in the country is scrambling to find coins for their operations. All of these web retail sites and telemarketing operations are having a hard time acquiring coins for the increased sales.
Collectors have become more active: The stock market slide in recent months may have convinced a lot of people that it’s a good idea to diversify. There is clearly a lot of fresh money coming into the market.
Auction prices have been strong: Recent auctions have been very strong for attractive collector’s coins. A few specialty sales, such as the recent Heritage auction of $10 Dollar Liberties, have seen astounding prices.
Generic gold coins have finally hit rock bottom: Prices could not have gone down much more, with lower-grade $20 Double Eagle gold coins finally ending up in the melting pot. In recent weeks, there has been a smattering of increased premiums and attention to this decimated part of the market.
ANA membership has increased: While President of the ANA from 2016-2017, I tried everything in my power to increase membership. Sadly, it would not budge. I took stabilization as a victory. In the last several months, membership has increased about 5%!
Young people have discovered the hobby: Contrary to what you may read from some pessimists, there are actually a lot of young people who love rare coins. Many very talented young folks have chosen numismatics as a career in the last few years. A lot of them love the combination of numismatics and modern technology. You old guys reading this had better watch out!
Modern mint product sales have fallen: The US Mint sales of its bullion and commemorative programs have fallen for the last few years. A lot of the attention given to this part of the market by large rare coin companies is now being diverted to vintage numismatics.
Numismatics has discovered social media: Several months ago, I wrote an article about the Facebook group Coin Dealers Helping Coin Dealers. The group has continued to grow and is now the largest dealer network in the United States with about 800 members. A lot of business is being conducted by the group every day. It turns out that mobile devices and social media could be a major driving force in the hobby in coming years.

The future is never guaranteed for any hobby or business, but from my observations, numismatics is poised for greatness in the next few years!

click below for movie:

http://www.pbs.org/video/gold-fever-and-bechtler-mint-gold-fever-and-bechtler-mint/

During the Colonial Era gold in North Carolina was only found in trace amounts.  It wasn’t until the year 1799 that substantial success was achieved, by accident, in Cabarrus County.  The first substantial piece was found by twelve year old Conrad Reed who was fishing in Meadow Creek with his brother and sister.  He withdrew from the small stream a shiny yellow substance that he assumed to be some type of metal.  He brought the nugget home to his father, John Reed, who upon examination declared it as an unknown metal and put it to use as a door stop for two years.  In 1802 he took the nugget to a jeweler in town who immediately recognized the “metal” and its value.  The jeweler converted the nugget into a gold bar measuring roughly 8 inches long and asked Mr. Reed if he would sell it.  Mr. Reed, not knowing the value of the gold bar, sold it to the jeweler for $3.50.  In time Mr. Reed found several pieces of gold along the creek bed and in 1803 he found a piece weighing in at twenty-eight pounds.  The creek was rich in gold and in the year 1831 the veins of the mine were discovered.  In 1848 a sketch of the mine was made by a miner, Colonel George Barnhardt, and he declared the Reed Gold Mine to be the first in the United States.

Meanwhile in 1825 several mines were opened within a twenty mile radius of Charlotte. Two of the more significant mines were the Rudisill Mine of Count Ravafanoli, which brought experienced miners from Italy and other parts of Europe and the St. Catherine Mine opened by Samual McComb. These two mines were the most profitable with assays ranging from $24.80 to $72.41 per ton. Being rich in ore, the Rudisill mine was still in operation by the end of the Civil War.

It soon became essential that the miners have a local facility for processing the substantial quantities of gold flowing through North Carolina. Unfortunately the U.S. Mint was opposed to the idea and it was several years before a branch mint was established; this delay provided and excellent opportunity for private minters.

In 1829 German born Christopher Bechtler, Sr., arrived in New York City with his son August and his nephew, Christopher. A year later they bought a tract of land in Rutherford County establishing themselves in the local community as jewelers and watchmakers. In 1831 the miners’ plight brought enough business to the Bechtler’s that it resulted in a private mint and assay office. The Bechtler mint cast dies for $1.00, $2.50 and $5.00 pieces. The coins were noted for being 20 carats fine, or 2 carats below the US standard. Bechtler coinage of 1831 bore the words “South Carolina” and “gold”. Coins appearing later than 1834 bore the words “North Carolina Gold”, “Carolina Gold”, and “Georgia Gold”. Bechtler soon had a reputation as a “man of competent science and skill to assay and bring the gold of the mines to a standard value, in the form of coin…he is a man of the strictest honesty and singleness of purpose.” His popularity and reputation allowed for almost ten years of coinage.

Bechtler, Sr. operated the mint until his death in 1842 and was succeeded by his son August who was later succeeded by his nephew Christopher. Unfortunately neither August or Christopher had the pristine reputation of Sr., as their coins were often underweight or of dubious fineness.

Bechtler gold coins were minted eighteen years before the first striking at Philadelphia in 1849 and were so well accepted for commerce that they became a standard for currency. During the Civil War the monetary obligations of the Confederacy were specified as payable in “Bechtler gold” rather than Union, Confederate, or State currency.

Today, Bechtler coins are rare and command high prices, especially those minted prior to the Coinage Act of 1834 which increased the value of gold by more than six percent which resulting in a massive melting of gold coins, Bechtler’s included.

CORNISH, NH — A complete set of historic U.S. Double Eagle $20 gold coins designed by famed sculptor and Cornish resident Augustus Saint-Gaudens minted between 1907 and 1932 are currently up for auction online and expected to fetch “north of $7 million,” said coin dealer Barry Stuppler.

Stuppler’s California-based firm Mint State Gold by Stuppler and Co. is representing the collection owner in the auction that began Thursday on e-Bay, he said Tuesday.

The collection owner spent 15 years bringing the collection together so that each coin in the collection is of the highest quality in terms of its condition.

In all his years in numismatics — the study or collection of currency — “I’ve never seen a set like this come on the market,” Stuppler said.

He said the auction is expected to end Sunday and already has 53 bidders and a high bid of $2.1 million, though he predicts that by Sunday the bids will reach “north of $7 million.”

“A number of these people are numismatists, many of them are not. Many of them are just looking for an interesting collection with investment potential,” Stuppler said.

One of the reasons these coins are so rare is that President Franklin Delano Roosevelt ended the production of all gold coins in the United States because of the Great Depression, ordering the collection of the coins by the banks so they could be melted down.

“That’s how we got Fort Knox,” Stuppler said.

The ban on gold coins in the U.S. continued well into the 1960s, he added. “American citizens in the U.S. weren’t able to own gold coins until 1968.”

Before that, $5, $10 and $20 gold coins were used interchangeably with paper currency, Stuppler said.

One of America’s foremost sculptors, Saint-Gaudens was living and working in Cornish when he designed the coin in 1907, the last year of his life, said Henry Duffy, curator of the Saint-Gaudens National Historic Site in Cornish.

“He was designing it in the last year of his life. He had started, of course, earlier than that, but he was working on it at the time of his death,” Duffy said. “He had done small works when he had started off when he was a child designing, making jewelry, making cameos, so he was familiar working in small scale and he had also done medals. So he did know about small objects, but designing coins was something new and that was the idea of President Roosevelt, who wanted to redesign American coins, and he was familiar with Saint-Gaudens’ work. Saint-Gaudens had made an inaugural medal for him when he became President.”

Now a museum and National Park, the former home, gardens and studios of Saint-Gaudens is home to more than 100 pieces of art made by the sculptor as well as a complete set of the Double Eagle coins, Duffy said.

Stuppler said people interested in learning more about the set and how to make a bid can find out online at http://www.saintsets.com.

https://finance.yahoo.com/news/inflation-heats-stocks-tumble-134723028.html

Consumer prices rose more than expected in January, sending Treasury yields higher and stock futures lower on Wednesday morning.

In January, consumer prices rose 0.5% over the prior month and 0.3% over last month on a “core” basis, which excludes the more volatile costs of food and gas, according to the latest numbers from the Bureau of Labor Statistics. Wall Street was looking for a 0.3% and 0.2% increase in these figures, respectively.

Compared to last year, the core consumer price index (CPI) was up 1.8%, more than the 1.7% increase that was expected by economists.

Markets on Wednesday were taking this as a sign that inflation pressures may indeed be perking up in the economy, re-kindling market worries that surfaced earlier this month about an overheating economy. Fears over inflation pressures, and in turn more aggressive interest rate hikes from the Federal Reserve, was seen as the initial impetus for the stock market sell-off that roiled markets last week.

Following Wednesday’s inflation data, stock futures were sharply lower with Dow futures down as many as 330 points, or 1.3%, with S&P 500 and Nasdaq futures also down more than 1.2%.

Treasury yields were also higher, with the 10-year hitting 2.87% and the 2-year hitting 2.14% as bond markets anticipate potentially more aggressive action on interest rate hikes from the Federal Reserve this year. As of December, the Fed expected it will raise interest rates three times this year.

Including all items, CPI rose 2.1% over the prior year in January, more than the 1.9% that was expected by economists. Markets more closely track the “core” numbers as the Federal Reserve prefers to strip out the more volatile costs of food and gas.

Torsten Sløk, chief international economist at Deutsche Bank, noted in an email on Tuesday that economists surveyed by Bloomberg expect core inflation to average 1.8% in the second quarter of the year, up from 1.5% in the first quarter. Wednesday’s report will likely pull forward expectations for faster inflation even more.

“I currently spend significant amounts of time on the phone, emails, and in meetings explaining this coming jump in the March and April inflation data,” Sløk said. “And I have come to the conclusion that this is not priced in to rates at all.”

Wednesday’s post-report reaction shows the market re-pricing these expectations. Quickly.

https://www.marketwatch.com/story/not-chump-change-rare-coins-could-outperform-as-investments-this-year-2017-01-31

Coin collecting isn’t just for nerds anymore.

Coins typically have a higher correlation with inflation than other asset classes.

With inflation expected to rise this year, and a concurrently strengthening U.S. dollar seen eating into any gains that might be made by pure gold, investors may want to consider a niche asset class as a protection against market turbulence: rare coins.

With inflation expected to rise this year, and a concurrently strengthening U.S. dollar seen eating into any gains that might be made by pure gold, investors may want to consider a niche asset class as a protection against market turbulence: rare coins.

While such a strategy may seem akin to putting your money in baseball cards, coins have long been used as an investment, and one that could be particularly beneficial in the current economic climate.

“Rare coins deliver a higher annual return than gold, and they provide an excellent hedge against inflation,” said David Beahm, chief executive officer of Blanchard and Company, a rare coin and precious metal investment firm. “We believe that with President Trump and some of the policies he’s set forth, that we should see inflation, possibly double-digit inflation, in the very near future.”
Trump has proposed massive corporate tax cuts and fiscal stimulus, both of which are expected to stoke inflation this year. That could increase the appeal of gold, which has traditionally been viewed as an inflation hedge.

Investable coins are defined as ones minted between the late 1700s and 1933, when gold ceased to be an ingredient in their construction. Prices are determined both by their scarcity and their condition, and they’re scored on a scale of zero to 70, with Blanchard focusing on the ones graded above 50.

Between 1979 and 2014, the most recent year for which data is available, coins with a minimum score of 65 posted an average annual return of 11.9%, according to a study by Penn State University. That’s near the average annual return of 13% posted by equities SPX, -0.22% and more than twice the 5.5% average annual gain of gold bullion US:GCZ7 Coins with a lower score, between 63 and 65, had an average annual return of 10.1%.

Coins posted a higher correlation with inflation than other asset classes, according to the study, with the relationship about twice as strong as for gold. The correlation between coins and inflation is 0.58 (perfect correlation would be 1.0). It’s 0.27 for gold bullion and 0.15 for stocks. The higher the correlation, the better it works as a hedge.

“The rarity factor builds on the actual value of the gold, increasing its value,” Beahm said.

He added that the more common rare coins, such as Morgan dollars, could be had for as little as $20, while the scarcest ones, including Brasher Doubloons, the first gold coin minted for the U.S., have sold for more than $7 million.

“There’s a wide range, so this is really for everyone,” he said.

http://www.numismaticnews.net/article/buyers-coin-bargains-active-marketplace

Bargain hunting may be the watchword within the scarce to rare segment of the coin market. There are indications a significant number of collectors and perhaps speculators who know what they are doing are purchasing better date and superior condition coins at today’s somewhat depressed price levels.

These buyers do not appear to be willing to pay premiums above current pricing, but they aren’t dragging prices lower, either. Since current price levels are significantly lower than they have been in the not-too-distant-past, this may inadvertently signal a future rally in this important segment of what I will call the “collector coin” market.

The spot price of gold and silver bullion continues to take center stage in the overall business of coins. Currently, the value of the majority of the coins being traded in the business are being impacted by the intrinsic value of what is bought and sold.

The modest appreciation in gold has been a catalyst for the First Spouse coins, with likewise modest price increases, and with sales nearly doubling from one month earlier.

Gold and silver bullion did increase modestly in price when the stock market recently sold off but did not make sufficient gains to grab much attention from potential investors.

Bottom line this week is that the market for coins is healthy, but it is still far from earning a label indicating it is robust.

https://www.cnbc.com/2017/11/27/chance-of-us-stock-market-correction-now-at-70-percent-vanguard.html

There is a 70 percent chance of a US stock market correction, according to research conducted by fund giant Vanguard Group.
Several forces are contributing to the much higher than typical risk, including narrowing of the bond yield curve and stretched U.S. equity valuations.
The trade-off between stocks and bonds, or even stocks and cash, doesn’t look as strong as it did earlier in the bull market, following the financial crash.

Don’t panic, but there is now a 70 percent chance of a U.S. stock market correction, according to research conducted by fund giant Vanguard Group. There is always the risk of a correction in stocks, but the Vanguard research shows that the current probability is 30 percent higher than what has been typical over the past six decades.

Vanguard, which manages roughly $5 trillion in assets and is a proponent of long-term investing, isn’t sounding the alarm bells to scare investors out of the market. But according to Vanguard’s chief economist Joe Davis, investors do need to be prepared for a significant downturn.

“It’s about having reasonable expectations,” Davis said of the research, which attempts to provide investors with a view of what can occur in the markets in the next five years. “Having a 10 percent negative return in the U.S. market in a calendar year [within a five-year forward period] has happened 40 percent of the time since 1960. That goes with the territory of being a stock investor.” He added, “It’s unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue.”

In its annual economic and investing outlook published last week, Vanguard told investors to expect no better than 4 percent to 6 percent returns from stocks in the next five years, its least bullish outlook since the post-financial crisis recovery began.

Contributing to that outlook are market indicators that suggest “a little froth” in the market, according to the Vanguard chief economist.

“The risk premium, whether corporate bond spreads or the shape of yield curve, or earnings yields for stocks, have continued to compress,” Davis said. “We’re starting to see, for first time … some measures of expected risk premiums compressed below areas where we think it can be associated with fair value.”

Many market participants have worried in recent months about the flattening in the yield curve — the spread between 2-year note yields and 10-year yields — at the lowest level since before the financial crisis. Meanwhile, the spread between junk bond yields and Treasurys recently has moved closer to the level before the financial crash than the long-term historical average.

For Vanguard the research is a chance to remind investors that overreaching is no better a solution for a lower-return environment than getting out of the market entirely. Davis worries some investors will hear “lower returns” and view it as a catalyst to become more aggressive as a way to generate the returns they have been used to in recent years.

As long as an investor is in a financial situation in which they can cope with a single down year, “you need to stay invested, because of lower expected returns,” Davis said. But he added, “Don’t become overly aggressive. The next five years will be challenging, and investors need to have their eyes wide open.”

For investors who have done well with a U.S.-centric stock portfolio, it’s also past time to consider overseas equities. When international equities are added into a stock portfolio, the Vanguard research shows a drop to a 60 percent correction risk for a stock portfolio.

“It doesn’t drive risk down to zero, but valuations are not neatly as stretched in other parts of the world,” Davis said. Emerging markets stocks, which have roared in 2017, are highly correlated to U.S. stocks, and the Vanguard official said that would hold if U.S. stocks experience a downturn. “The real power is other developed markets,” Davis said.

As part of its forecast that stocks will return no better than 4 percent to 6 percent in the coming years, Vanguard projected that developed markets stocks in the EAFE region will return more than U.S. stocks, at an estimated 5 percent to 7 percent, and emerging markets stocks possibly more, though with greater risk.

The Vanguard research also suggests that an allocation to bonds may prove more important in the coming years. “There is greater risk in the equity market than bond market,” Davis said. “Our projections show that the downside risk in a portfolio with even a 20 percent investment-grade bond allocation is significantly lower.”

Other major financial services firms are more cautious headed into 2018 as well, pointing to the length of the current bull market. Bank of America wrote in a recent note that the current bull market will be the longest in history if it continues to Aug. 22, 2018, while the outperformance of stocks vs. bonds, at seven years running, would be the longest streak since 1929.

Now in the ninth year of an economic recovery, Vanguard’s chief economist said the position of the investor has flipped. Back in 2009 the economic outlook was poor but the investment outlook was very compelling. The progression through the economic recovery, although slow, now includes 80 percent of the world at full employment and an investment environment and outlook that is more muted.

“It’s important to separate what is expected of the global economy from the price being paid for it. In the United States, stock prices have already been bid up based on future business expansion,” Davis said.

Vanguard’s economics team reviewed multiple stock valuation measures in coming to its conclusions, including Yale University professor Robert Shiller’s CAPE ratio. “As markets rise and valuation on the Shiller has risen … [it] doesn’t mean we’re in bubble territory, but we have deviated from where values should be,” Davis said. Historically, low interest rates on bonds help explain why stock valuations have overshot corporate fundamental growth, but still can’t justify the valuation levels.

Vanguard’s bottom line is that the trade-off — the equity risk premium — between stocks and bonds, or even stocks and cash, will be lower going forward than it has been historically, and lower than what it has been in the past five years, specifically.