Tag Archives: Axel Merk

Meeting with Axel Merk, World Economic Update

As mentioned earlier, Axel Merk, founder of the Merk Funds, a huge complex of currency Mutual funds, was in Dallas last week, and took time to come by the office and catch up.

A Few Interesting Items from Our Conversation

While our visit was brief (thanks again for the time), we were able to catch up on the World Economic situation in great detail.

Let’s start with our back yard, as Axel had recently co-chaired an event with Alan Greenspan in which Greenspan had some rather candid comments.

Greenspan, Federal Reserve, Inflation

  • Federal reserve does what congress asks (this may seem obvious, but recall they are supposedly “independent” …maybe not)
  • Question spawned from the above point, “Does this jeopardize the FED’s independence?” “I never said the Federal Reserve was independent” was Greenspan’s response (hmmm)
  • According to Axel, Greenspan stated inflation will HAVE to rise in the future and Gold will be much higher (our thoughts, bring it on!)

Moving On to Japan; Going all in

  • Axel believes Haruhiko Kuroda went all in recently in announcing huge purchases of securities to lower interest rates, of which we took note here, will be a failure (we are not so sure)
  • Japan will continue to debase its currency as long as possible, according to Merk
  • Interestingly, Sinzo Abe, Japan’s version of the president, if unsuccessful will fade into the sunset leaving very little dust if Axel’s vision come true

European Union; better late than never

  •  Mario Draghi (president of European Union) and company are on more on the right track according to Axel
  • They were very late in this economic cycle of getting started
  • Draghi’s attempt to do an American/Japan version of QE (purchase of assets to lower interest rates) is very difficult because of so many fragmented countries
  • France and Spain, according to Merk are not so good

What does it all mean?

Most interesting for me was the firm conviction of eventual inflation. We have been watching for it for some time and think a sip would be nice.

Time will tell.

Oh…here is a pretty cool chart from Axel’s group. This should make 2015 more interesting as the blue line will no longer be rising.

Merk Fed and S and P

Have a Great Day!

John A. Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225

October 2014 Financial Planning Tip, Capital Market and Economic Review (Video)

Welcome to our monthly Economic, Capital Market, and Financial Planning tip of the month. Once again a special thanks to all of  YOU … the best clients and friends as your experiences have again given us the subject matter for our Financial Planning Tip of the Month.

For those new to our writings, we touch on the most pertinent Economic and Financial “stuff” along with a video of my mug that has even more specialized details of the latest month as well as this post.


You Tube Direct Link   or   Vimeo Direct Link


Financial Planning Tip: Home Stretch 401k/Qualified plan Max time401k

With just a few more contribution periods left, now is a good time to review your 401k contributions to make sure you are contributing the maximum available for your situation.

Also, take a peek to see if your allocations are correct as well. If we have completed your withholdings and allocations, and something has changed, shoot a quick note to us, we will review again to make sure we are all on the correct path to the end of the year.

It’s all about those rates (no treble)

Less bond dealers and a blow up somewhere led to a sharp fall in rates. It will eventually come out who was forced to sell, but as a October boo goes, rates cratered lower mid month with a slight bounce back.

This appears to us more of a situation (someone was forced to sell) than fundamentals and we continue to see higher rates in the nearer future.

10 Year 10-31-14


Quantitative Easing Ends

Several years ago, the Federal Open Market Committee then chaired by Ben Bernanke embarked on a path of asset purchases cleverly name Quantitative Easing (QE).Bernanke Helicopter Merk- 2012-06-05-bernanke-cartoon-qe3

  1. Three continuous rounds of QE (1,2,3)  were completed through monthly purchases of fixed income/bonds via the Federal Reserve
  2. Longer term Interest rates were pushed down
  3. Asset prices were pushed up
  4. The Economy, while slowly, caught its footing

Just as they should, these asset purchases were stopped in the month of October.  Markets should begin more open price discovery (we think higher rates.)

Have a Great Fall!

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225

Wednesday’s with Axel Merk Final Roundup !

As the conclusion to our Private Client Round table event with Axel Merk we wanted to review of our articles over the past month and briefly update our thoughts. Click on any of the headlines to go to the original article.

Axel Final

China Steps on the Gas

Recall Axel favored China as he stated candidly “China is not as bad as many may think” Shortly thereafter, China lowered lending requirements across the board, stepping on the accelerator, hard! UPDATE-Recent China economic reports have been better. Good Call Axel!

Japan, is the US similar?

Only time will tell, however it appears the infinity stimulus of asset purchases are about to slow via taper later this month. If a positive outcome, it may well become apparent that Japan and the US are NOT so similar.

Inflation or Deflation

With inflation as the most viable way out according to Axel, future higher interest rates, tangible assets and an avoidance of Deflation may be in the cards. So far this looks to be true, however this is a longer term journey.


As Axel’s steadfast holding, gold remains a core investment that Axel said may “Never sell gold” while too optimistic for us, we certainly agree with the current possibilities.

Austerity Choosers

According to Axel there is a hard/shorter term way out “Austerity” and there is an easier/inflation way out.  While pulling the Band-Aid off fast hurts more, it hurts for a shorter time and will heal quicker, according to Axel. With this one, we punt, as there are so many dynamics even after the book is written (story plays out) the reasons for success may not be clear. Bottom line, MAYBE SO!

Bubble Indicator

Axel repeated several times one of his favorite ways to find a bubble was “Complacency” On this we TOTALLY agree, we have long felt many market participants are being at best careless and in some cases reckless, leading to complacency. We like Axel’s analysis and will continue to remind ourselves of this in the future.

Well, there you have it. A Private Client Event and review that some thought would  never go away…haha…Kidding of course.

We really enjoyed the event, the review, and again a special thanks to all that attended and the terrific questions that spurred us on during and after the event.

Thanks Very Much!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

Wednesday’s With Axel…”Bubble Indicator”

While it has been fun reviewing our Private Client Event with the founder of the Merk Funds, Axel Merk, as we set sights on fall, we are nearing the end of our discussion for now. We still have more to talk about in the future, and of course we are not finished just yet!

Axel Merks’ Favorite Bubble Indicator

Complacency, as simple of a word, it has great meaning in the capital markets, as described by Axel. When certain areas of the capital markets begin to ….let’s say, “take things for granted” or become complacent, Axel and his team take notice. Axel Merk IV

We agree, while it may seem like a miser at times to throw the cold water of reality on the great feelings of a never-ending upward capital asset market, the reality is they do not go in a straight line, ANYWHERE!

Axel and his team think that overall much of the markets have taken government intervention too casually along with the debt many countries have been accruing.

Have a plan for Crisis

On a very positive note, which we agree with, Axel and his team think that having a plan for crisis resolution helps resolve when the inevitable complacency turns to fear and overreaction.

While this may seem silly, it is not clear in many cases what the punishment will be and what penalty may ensue given certain world country actions. Just as my 5-year-old asks “So what happens if I do?” All parties need to know what lies ahead if they get out-of-bounds.

We hope you have enjoyed our review and next week we will wrap our event with a fun summary of our writings.

Have a Great Wednesday!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesdays with Axel” …. Hard fast Austerity Choosers

In our continued series from our Private Client Roundtable event held earlier in the year, and our special guest speaker Axel Merk, we note a few countries that are making the hard choices, according to Merk.

Downward trending line = Hard Choice (Austerity)

Merk Central Banks Balance Sheet

Downward trending austerity driven line:

  • Bank of England
  • Sweedish Riksbank (Huge early adopters, 2010)
  • Europ0ean Central Bank

Note the upward, non austerity, possible “inflation way out” of the USA. Also worth noting, while Japan is all the rage, they have only begun the process of inflation and can go much farther by increasing their banks balance sheets.

Austerity Versus Inflation

Clearly, according to Axel, there are differing policy decisions on how to recover from the great world slow down. Those that are leading today, USA, Japan may not be the leaders tomorrow, as others are taking their medicine today through austerity measures, again according to Axel.

Time will tell if the easy way out or the hard way works…no matter the outcome, keeping a watchful eye is very important. Thanks for bringing this to our attention Axel!

Have a great Wednesday!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesday’s with Axel” Short Sighted (Quarter End) ….. GOLD

In our continued series of “Wednesday’s with Axel” from our Private Client Roundtable, where we discussed your great questions from the field, and many other world economic events, this week we discuss Gold, as the timing our meeting coincided with the end of the quarter.

End of the Quarter, So What?

Gold 8-16-13

Take a look at this chart. It is very easy to see when the most recent bottom was put in for the shiny metal of Gold. The end of the second quarter just so happens to also coincide. Coincidence?? We do not think so. There were many rumors of large money management firms not wanting to show they owned Gold at the end of the quarter.

Gold as a fear gauge

Axel casually stated that Gold’s movement often is associated with fear. Fear rises, gold up and visa versa. We agree and hold gold just for this diversification reason.

Gold as a defense mechanism, Inflation

Axel believes inflation is the way out as we reviewed in our Inflation/Deflation post. Inflation puts the jets under Gold and other real assets as its tangibility becomes more important during inflationary monetary declines.

Gold Forever

In closing, Axel said he thought Gold could and should be owned forever. In this point we disagree, while Gold looks like a good asset class at the current time, we never say forever!!

Have a Great Wednesday!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesday’s with Axel” Inflation or Deflation?

In our continued series from our Private Client Round Table with Axel Merk, founder of the Merk funds, this week we discuss Inflation or Deflation as a possible path to repair, growth, and prosperity.  This question was presented from you in advance (here for complete list of questions) and also discussed in great length.


According to Axel, the people want deflation as a way out from much of the debt the world has accrued. (Especially speaking of the Greece and Cyprus’ of the world.) Deflation means a severe belt-tightening, most likely an economic recession/depression but is essentially hitting the reset button and wiping the slate clean.


The governments of the world, want inflation as it is the smoother way out of debt and throws much of the burden on each country’s trading partner. Inflation will extend the problem for years if not decades, according to Axel, but will be the easier path to follow.

So what will it be?Axel Merk JK Financial Rountable Event III

Axel, admitting that no one knows for certain and any curve ball could change the outcome, his very strong belief is that inflation will win out. Read Japan! (Japan is attempting to inflate their way out of a two decade slowdown) Since the governments want inflation and it is the easier, but longer way out, this high road so to speak will be the winner, again according to Axel (If correct….Gold or hard assets anyone?)

So there you have it, another Wednesday with Axel!

Hope your week is going great!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesday with Axel” … Japan? …. Is the US similar?

As we continue our Wednesday tour with Axel from our afore-mentioned Private Client Round Table event, this week we address, Japan.

Is Japan doomed?

According to Axel, in a word yes, and if they are not, they are going to have serious troubles reversing the slide of their currency and many of the policies they have set in motion. According to Axel, Japan is setting up for the great devaluation of currency in order to compete internationally via trading (lower currency makes you more competitive in the short run) but over the longer term, demographics (aging country) and personal characteristics (huge savers) will be a very formidable headwind for the foreseeable future.

Is the US Similar to Japan?

Again according to Axel, yes and no. Many of the policies set in motion over the last decade and magnified over the latest great recession (07-09) have the potential to drive the US to a similar place, however we are not there yet.  Most notable the US currency is the world reserve currency and this will not change for many decades. (As a side comment, Axel felt strongly on this point and made note that as China grows they will become more viable, but due to their current restrictive system they will not garner international currency  confidence.)

Axel Merk JK Financial Rountable Event IIMany policies, such as low-interest rates, high borrowings are putting downward pressure on the US dollar, a large similarity to Japan. Of course the US consumer has no similarity to Japan in that our national savings rate is low and US are spenders, for the good or the bad.

Lastly, on a question from the field if Japan could cause a global disconnect or collapse, while anything is possible according to Axel, his thoughts were not that dramatically negative, differing from many of the doom and gloom crowd today.

Have a great day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesdays with Axel” ……China Steps on the Gas….Good Call Mr. Merk

As a fun way to review the Axel Merk Private Client Event over the next few weeks, we have nick named our discussion “Wednesday with Axel” and will use our mid-week post as format for the review of questions you/client’s submitted and a review of the important topics discussed.

So her we go:

Merkism: China is stronger than you think

Axel Merk JK Financial Rountable EventDuring our Roundtable discussion and in answer to several of the terrific questions (click for the whole enchilada of questions) that were presented by you (great job again) Axel said very bluntly that China was much stronger than many thought and that due to their government’s “control of the situation“, they can apply incentives easily to their country to spark growth.

China Gets Jiggy and Steps on the Gas

Very recently, China officials announced that they are allowing much lower lending rates that will be more in line with each borrowers credit. Prior to this announcement there was a higher floor rate across all lenders. Here is a nice Bloomberg/Business week article that explains the details.

So What? This is a BIG DEAL!!!

With the largest population in the world, a soon to be dominant consumer, all countries across the world should desire a healthy China. Remember we are all in this together as capital formation and consumption will find it’s way to the most economical place.  Bottom Line: China is your friend and we all do better with a healthy huge neighbor!!

Hope you enjoyed this first, Wednesday with Axel…..with many more to come!

Have a Great Day!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225

Axel Merk Questions…Great Job From All…Our starting point for analysis

Prior to our recent Axel Merk client roundtable, we shouted out a request for questions for the event. As a thank you and a template for our discussions coming soon, I wanted to post the questions we received…so thank you, and here are your questions:Questions

Regarding Currency markets:

  • What are the Volumes and Size?
  • Are currency markets Efficient?
  • What is the approximate number of tradable currencies?
  • What makes a currency rise and fall?

I’m interested in how the financial industry perceives the ability (or lack thereof) of the United States’ educational system to produce graduates with sufficient math and science skills for the 21st century. 

How is this limitation perceived with respect to our competitive position in the global markets especially as the US continues to slide relative to other emerging competitors such as China.   Most important of course is what can the financial industry do to push the US Education system into action.

What is Japan doing? Will it work? What are possible peripheral effects and damages? How high a probability does the US have of becoming the next Japan?

What is the US doing? Will it work? What are possible peripheral effects and damages? Any idea on the impact Fed’s QE programs has had on 10 year treasury rate? I.e. without their buying so much what would the 10 year rate be right now all else equal? Interest rates, where are they going? Given we have seen how Japan has turned out over the last 15 years, can the US use as a road map to avoid the problems they have faced? What prevents Bernanke from getting it right? Just because it hasn’t happened before why can’t we do it this time?  Is US market further along the progression of economic improvement than other foreign countries?  The Fed indicates it will reduce its bond buying in 2013 and end it in mid 2014.  They forecast growth of 2.6% this year and 3.5% in 2014.  Will growth of 3.5% accelerate corporate profits and therefore the stock market in 2014?  Do you see a DOW 16,000 by the end of 2013?  Unemployment is expected to fall to 6.5% ending 2014.  Will the Fed raise the threshold benchmark lending rates and with what effect on the economy? History indicates the market rises most of the time when interest rates are rising because the economy typically is improving, is that your scenario?

 Are there valuable, applicable lessons to be learned from nations ( such as Norway ) who have sound finances for the United States and other indebted nations, which could enable both to become debt free? If so, what impact would likely occur?

Is it a wise business decision for America to continue to give to other countries when our government must first borrow then owe interest to so give? Also, are there not countries who owe us? If so, does our government seek to recoup these monies and thereby help to reduce our indebtedness?

Which Global Economies are strong, weak and what are the effects? Are we going into or out of a global slowdown/recession?  Expectations for US and Foreign markets through remainder of year? Is Europe running in tandem with the US economy or will foreign trade drag the US recovery?

With a finite amount of gold, can it ever truly be used as a world currency?

Yes…we asked for questions and you all delivered…Well Done pat yourself on the back!! We will address these and others soon.  We have answered a few already in the Q 3 2012 Newsletter, but will dive deeper over the remainder of the summer. Thanks so much again !!

John Kvale

8222 Douglas Ave # 590
Dallas, TX 75225