Bernanke - On the Road to Disaster?
Ben Bernanke, current chairman of the administration's council of economic advisors, is President Bush's nominee to succeed Alan Greenspan as chairman of the Federal Reserve. We believe will see more fine tuning of monetary policy with potentially negative implications for the dollar. We have extensively commented on Bernanke for over a year:
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Bernanke is on record as a supporter of policy that seeks to manage the entire yield curve. See Is a Dollar Crisis Looming? (October 10, 2005); see also The Modern Command Economy: the 30-Year Bond is Returning (August 4, 2005)
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Bernanke is a supply side economist. See Greenspan: "We can guarantee Cash, but we cannot guarantee purchasing power!" (February 16, 2005)
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In my view, Bernanke uses communication seeking to manage expectations in lieu of transparency. See The Fed Embraces Public Perception in Place of Sound Monetary Policy (April 18, 2005)
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We comment on how Ben Bernanke is getting more influential in The Emperor's New Clothes (October 6, 2004), and forecast that he will succeed Greenspan in Fed May Not Stop Inflation (August 18, 2005)
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We believe Bernanke promoted the plan to hand out $2,000 to hurricane victims. It is an indication of more micro-management to come. See China Is Open for Business: Will China's growth eliminate inflation? (September 21, 2005)
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Let us not wrap up a discussion about "Helicopter Ben" without a reference to his infamous comments about throwing money out of helicopters. See China's Basket of Currencies (July 26, 2005).
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Author: Axel Merk
Axel Merk
Manager of the Merk Hard, Asian and Absolute Return Currency Funds, www.merkfunds.com
Axel Merk wrote the book on Sustainable Wealth; peek inside or order your copy today.
Axel Merk, President & CIO of Merk Investments, LLC, is an expert on hard money, macro trends and international investing. He is considered an authority on currencies.
The Merk Absolute Return Currency Fund seeks to generate positive absolute returns by investing in currencies. The Fund is a pure-play on currencies, aiming to profit regardless of the direction of the U.S. dollar or traditional asset classes.
The Merk Asian Currency Fund seeks to profit from a rise in Asian currencies versus the U.S. dollar. The Fund typically invests in a basket of Asian currencies that may 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 seeks to profit from a rise in hard currencies versus the U.S. dollar. 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 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.merkfunds.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.merkfunds.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 advice. Foreside Fund Services, LLC, distributor.
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