Protect and Build Your Wealth —
Learn Why Alternative Assets Are Outperforming Stocks and Bonds.
To know which asset class will appreciate in value, you have to only
follow the money. Right now, alternative assets are providing investors
with better returns than the bearish stock market.
There have been numerous articles in the financial press that have
talked about the resemblances between 1987 and 2007. The topic is of
interest to us because of the absolute explosion of the rare coin market
that took place after the stock market crash of 1987. The crash
precipitated a stampede to alternative assets like rare coins and, in a
little over two years, the market in investment grade rare coins went up
several hundred percent even as the price of gold fell from $500 to
$360.
Financial conditions today lead us to believe that the rare coin
market is poised to duplicate the bull market experienced 20 years ago.
Today, we’re hearing much of the same language that we heard in
1987, when Alan Greenspan said that the world was on the edge of a
global financial collapse. In fact, Greenspan said that the current
market turmoil is “identical” in many ways to that which
occurred in 1987.
“Redemptions from domestic stock funds have exceeded purchases
for ten consecutive months, the longest period on record.”
–“Quarterly Investment Perspective” by Bessemer Trust,
April 2008
The stock market crash in 1987 and the credit market crisis in 2007
both served to reverse the flow of funds into stock mutual funds.
According to the Presidential Task Force on Market Mechanisms appointed
by President Ronald Reagan to investigate the October 1987 market crash,
skittish fund shareholders withdrew billions of dollars from stock
mutual funds and added to the market's fall. In fact, in October 1987,
fund shareholders made net withdrawals amounting to 3% of domestic
equity fund assets - the largest monthly outflow as a percentage of fund
assets to date. The withdrawals continued for 15 of the next 17 months
- even as the market started to recover - and totaled 12% of the assets
in stock funds before the crash.
"Investors are withdrawing funds from stocks and stock mutual funds
and investing in alternative assets - just as they did in 1987. Rare
coin indices, from the broadest to the most esoteric, show results."
–Donald W. Doyle, Jr., CEO of Blanchard and Company, Inc.
Today, investors have been putting far less money into U. S. stocks,
in large part because the S&P 500 has been the worst performing of
nine different vehicles tracked by Morningstar, including commodities,
real estate investment trusts, gold and foreign stocks. The last
quarter of 2007 marked the worst period for stocks in 52 years, with
equities off 15.5% from their October highs. In response, investors
took more money out of stock mutual funds than they put in - a net
outflow of $46.4 billion.
Where is all of that money going? In 1987, much of it went into
alternative assets - rare coins went ballistic.
We appear to be seeing the exact same phenomenon today, with the
classic U.S. coin Key Dates and Rarities Index up by 31.9% in 2007,
despite the fact that the Index was actually down from the first half of
the year. Since August 2007, this index, and the two Coin Universe
indices set forth herein, shows that we are at the beginning of a
powerful bull market!
