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October 24, 2008

Merk Economic Calendar: Week Ahead in U.S. Financial Markets (October 27-31 2008)
by Joseph Brusuelas

Financial Markets Summary For The Week of October 27-31 2008

After the heaviest week of Fed talk and macro data releases in recent memory, the calendar will see a very light week of rhetoric and economic releases. Monday, will see the publication of the Conference Board's index of leading economic indicators, Thursday the weekly jobless claims data and the week will conclude with the publication of the September existing home sales.

Fed Talk

As is custom the week of the FOMC meeting on 29 October there will be no Fed talk.

Corporate Earnings

The week will see a heavy slate of earnings announcements that will feature a large quantity of releases from financial firms. Monday will see announcements from American Express and Caterpillar. The following day will feature, United Healthcare, US Bancorp and M&T Bancorp. After market releases on Tuesday will see Yahoo, Black Rock, Apple and State Street. Heavyweights on Wednesday announcing earnings will be Boeing, Wachovia, McDonalds and Merck. Thursday will see Microsoft, Altria, UPS, Eli Lilly and Jet Blue all release earnings. The week will conclude with AMBAC and MBIA providing information on their bottom lines to the public.

New Home Sales (September) Monday 10:00 PM

Sales of new homes have lagged those of existing homes as individuals that are in a position to meet the rigorous standards required by banks appear to be more interested in purchasing foreclosures at distressed priced from the banking community. While credit conditions in September remained tight, the market will not observe the full impact of the recent intensification of the credit crisis on the purchase of new homes until the October sampling period. Our forecast implies that 440K homes were purchased during the month.

Consumer Confidence (October) Tuesday 10:00 AM

Despite the recent decline in the cost of gasoline, we anticipate that the Conference Board's estimate of consumer confidence will decline to 49.7 in October. The seizing up of the credit markets and the ensuing decline in the Dow should provide the trigger for consumer confidence to fall back to a multi-year low in the headline.

Durable Goods (September) Wednesday 08:30 AM

Weakness in orders from abroad and on a domestic basis should be on vivid display as the market readies itself for another set of dismal data from the industrial sector. The combined impact of the Gulf Coast hurricanes, the strike at Boeing and diminished demand from the external sector should facilitate a decline in the headline of -2.9% and a fall in the ex-transportation estimate of -3.1%, with risk to the downside.

FOMC Meeting Wednesday 2:15 PM

GDP Thursday 08:30 AM

-0.3

Jobless Claims (Week Ending October 18) Thursday 08:30 AM

470

Personal Income/Spending (September) Friday 08:30 AM

A deteriorating labor sector and a consumer clearly in the process of retrenchment should provide a -0.3% decline in personal income and a -0.4% fall in individual consumption. The declining trend in overall consumption, which has been observed in the September retail sales and same store sales data was already in decline, before the recent turbulence in the financial system and freezing up of the credit market. More importantly, real consumption should see its third negative posting in the past three months and set the stage for what will be a very difficult final quarter of the year.

Personal Consumption Deflator (September) Friday 08:30 AM

The Fed's preferred measure of inflation, the PCE deflator should see some significant improvement in headline inflation and a modest advance in the core. We expect see the headline increase 4.0% vs. the 4.5% recorded in July, while the core should observe an increase of 0.1% m/m and 2.5% y/y. The decline in headline costs and reduction in demand for services should provide the conditions for the core rate to begin seeing further declines in the core year over year rate later this year.

Chicago PMI (October) Friday 9:45 AM

The lack of new orders being filled in the auto and civilian aircraft industry should continue to plague regional and national manufacturing surveys for the month of October. We suspect that the sharp downturn in the September data will spillover into the following month and offset whatever confidence in the industrial sector that might have otherwise developed due to the sharp adjustment downward in the cost of basic inputs. We anticipate that the Chicago PMI will see a decline to 47.1 for the month.

University of Michigan Consumer Sentiment (October-Final) Friday 10:00 AM

We expect that the outsized decline in the preliminary estimate of consumer sentiment will hold at 57.5. Normally, the market observes a modest increase after a large decline in the headline number, but it is quite clear when looking at the wide array of consumer sentiment data, that individuals are feeling quite insecure about the economy and their own personal situations at the moment. The risk for the final estimate is to the downside.

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.

Copyright © 2008 Merk Investments LLC

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