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Wednesday, May 18, 2005

New Fund Bets Against Dollar

by: Sean Hanna, Editor in Chief

Merk Investments (not to be confused with Merck the drug maker) is opening a new fund that will specialize in hard currency investments. The fund is intended as a hedge for the dollar and will invest in a basket of hard currencies and gold.

The fund will operate under the straight-forward label of the Merk Hard Currency Fund and carries a $2,500 initial investment. The fund is the first registered by the Palo Alto-based investment advisor.

Axel Merk, president of Merk Investments, said that the fund is a reaction to "global imbalances" that are "evidenced by the US current account deficit" and his prediction that the current monetary policies are "likely to remain consistent" leading to a continued decline in the value of the dollar.

"A fund that invests in a diversified basket of hard currencies is looking smarter and smarter," added Merk. "Key economic factors, such as recent unemployment statistics and new signs of inflation have increased economic uncertainties. In addition, the US trade deficit recently reached an annualized $727 billion, or over 6 percent of gross domestic product (GDP). All of this weighs heavily on the dollar, stock and bond markets. While slowly rising interest rates give some short-term relief to the dollar, the decline that began in late 2001 appears to be firmly established. For the long-term investor, the most prudent approach to seeking preservation of capital against the decline of the dollar may be to consider a portfolio consisting of a basket of hard currencies."  

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