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July 25, 2008

Merk Economic Calendar: Week Ahead In US Financial Markets (July 28-August 1 2008)
by Joseph Brusuelas

Financial Markets Summary For The Week of July 28-August 1

The week of July 28-August 1 will see a fairly significant amount of US macro data. The major releases will be clustered near the end of the week on Thursday and Friday. Thursday will see the publication of the preliminary GDP for Q2, jobless claims, Chicago PMI and the employment cost index for Q2. The week will be capped by the release of the July non-farm payrolls report and the estimate of the ISM of national manufacturing conditions for that same month. Tuesday will see the release of July consumer confidence survey by the Conference Board and Wednesday will see the ADP estimate of payrolls for July. The week will see another heavy five days of earnings statements with heavyweights such as Disney, Starbucks, Chevron and Berkshire-Hathaway reporting near the end of the week.

Fed Talk

The only Fed speaker scheduled for the week is FOMC Gov. Mishkin who will give an address titled "Whither Federal Reserve Communication," on Monday. As is custom one week ahead of an FOMC meeting beginning Tuesday, there will be a blackout on Fed speak.

Consumer Confidence (July) Tuesday 10:00 AM

Consumer confidence for the month of July should see another 30 days of sagging sentiment among individuals subject to an increasingly difficult job environment. We expect that headline will decline to 49.2 on the back of continued stress among consumers. With the rebate checks spent, there is precious little to offset the real reduction in purchasing power among consumers due to a weak dollar and rising inflation. The aforementioned factors should combine to press the headline estimate of consumer confidence to decade long lows.

GDP Q1 Preliminary Thursday 08:30 AM

The combination of a 1.0% increase in personal consumption and a 1.9% increase in net exports should provide a decent rate of economic expansion during the initial estimate of output for Q2'08. However, the data elsewhere is still relatively weak. Firms carefully managed the purchase of stock and it does appear that inventories contracted at a rate of 0.5% for the quarter. More importantly, due to data suggesting that expenditures on fixed business investment remain absolutely flat and the ongoing contraction in residential investment, we do expect that overall investment should again provide a net drag on overall growth. Thus we expect to see an increase of 2.1% in the preliminary estimate of GDP for the second quarter of 2008.

Employment Cost Index (Q2) Thursday 08:30 AM

Although inflation has continued to work its way through economy, there has been scant evidence that it has yet to put upward pressure on wages. We expect that to be the case again in Q2 when our forecast implies that employment costs will increase 0.8%. Due to a relative lack of bargaining power, labor is in no position to demand higher wages among a weak job market and uncertain economic prospects going forward.

Initial Jobless Claims (Week ending July 26) Thursday 08:30 AM

Initial claims for the week ending 26 July should see a slow and steady uptick back towards 380K. With the four week moving average trending in that direction after a bout of holiday induced data, the weak labor market does not at this time have the capacity to stimulate a move lower for the foreseeable future.

Chicago PMI (July) Thursday 09:45 AM

We expect that a month of weak orders and economic weakness in the upper Midwest should combine to drag down the headline estimate of the July Chicago PMI to 48.6. Our forecast implies that new orders should decline to 49.1 and prices paid should increase to 86.3 for the month. Although, the cost of imported oil eased during the month, the greater concern on a regional basis is the latest round of planned cutbacks in auto assembly schedules in Detroit that should further depress manufacturing activity in the area.

Total Vehicle Sales (July) Thursday-Throughout Day

Hope in the auto sector that rebate checks would provide a modicum of support for domestic sales did not materialize in June and sales took a sharp turn south. On the back of some very pessimistic forecasts out of Detroit we do not anticipate a recovery in demand for new cars anytime soon. Our forecast implies a modest bounce back in July with the sale of domestic autos arriving at 10.1mln units and demand for foreign fuel efficient autos modestly advancing to 13.9mln.

Non-Farm Payrolls (July) Friday 08:30 AM

The labor sector continues to see a steady downward drift and our forecast implies that the market will observe a net loss of -93k jobs in July. We expect that the service sector will see the second negative print in the past three months and further losses in the goods production and manufacturing sector should by the primary catalyst driving employment losses throughout the economy. Given some of the interesting adjustments at the Bureau of Labor Statistics regarding assumptions of job creation in the leisure and hospitality industries in June, we think that the report is ripe for downward revisions over the past two months and this should set the stage for what is shaping up to be another month of negative data from the labor sector.

ISM (July) Friday 10:00 AM

We have grown quite bearish on manufacturing conditions domestically, regardless of the still relatively strong demand from the external sector. Lackluster domestic demand has dragged down the headline reading below 50.0 four times during the first six months of the year. Our forecast indicates that this will be the case again in July when the headline falls to 49.3. We expect new orders to decline to 49.0 and prices paid to increase to 89.5.

Joseph Brusuelas
Chief Economist
VP Global Strategy
Merk Investments LLC

Bridging academic rigor and communications, Joe Brusuelas provides the Merk team with significant experience in advanced research and analysis of macro-economic factors, as well as in identifying how economic trends impact investors. As Chief Economist and Global Strategist, he is responsible for heading Merk research and analysis and communicating the Merk Perspective to the markets.

Mr. Brusuelas holds an M.A and a B.A. in Political Science from San Diego State and is a PhD candidate at the University of Southern California, Los Angeles.

Before joining Merk, Mr. Brusuelas was the chief US Economist at IDEAglobal in New York. Before that he spent 8 years in academia as a researcher and lecturer covering themes spanning macro- and microeconomics, money, banking and financial markets. In addition, he has worked at Citibank/Salomon Smith Barney, First Fidelity Bank and Great Western Investment Management.

Mr. Brusuelas lives in Connecticut with his wife and St. Bernard.

Merk Investments LLC is the manager of Merk Mutual Funds, including the Merk Asian Currency Fund and the Merk Hard Currency Fund. The Merk Asian Currency Fund invests in a basket of Asian currencies. Asian currencies the Fund may invest in include, but are not limited to, the currencies of China, Hong Kong, Japan, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.

The Merk Hard Currency Fund invests in a basket of hard currencies. Hard currencies are currencies backed by sound monetary policy; sound monetary policy focuses on price stability.

The Funds may be appropriate for you if you are pursuing a long-term goal with a hard or Asian currency component to your portfolio; are willing to tolerate the risks associated with investments in foreign currencies; or are looking for a way to potentially mitigate downside risk in or profit from a secular bear market. For more information on the Funds and to download a prospectus, please visit www.merkfund.com.

Investors should consider the investment objectives, risks and charges and expenses of the Merk Funds carefully before investing. This and other information is in the prospectus, a copy of which may be obtained by visiting the Funds' website at www.merkfund.com or calling 866-MERK FUND. Please read the prospectus carefully before you invest.

The Funds primarily invest in foreign currencies and as such, changes in currency exchange rates will affect the value of what the Funds own and the price of the Funds' shares. Investing in foreign instruments bears a greater risk than investing in domestic instruments for reasons such as volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. The Funds are subject to interest rate risk which is the risk that debt securities in the Funds' portfolio will decline in value because of increases in market interest rates. The Funds may also invest in derivative securities which can be volatile and involve various types and degrees of risk. As a non-diversified fund, the Merk Hard Currency Fund will be subject to more investment risk and potential for volatility than a diversified fund because its portfolio may, at times, focus on a limited number of issuers. For a more complete discussion of these and other Fund risks please refer to the Funds' prospectuses.

This report was prepared by Merk Investments LLC, and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute investment advise nor a solicitation or an offer to buy or sell any products or services. Foreside Fund Services, LLC, distributor.

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