Investing in Currencies for the Longer Term Provides Less Volatility than Equities: Axel Merk, Founder, President and Chief Investment Officer of Merk Investments, Interviews with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - August 20, 2013 - The Wall Street Transcript has just published its International Investing and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Bottom-Up Stock Selection - Value Oriented Strategy - Value Investing - Deep Value - Exposure to Emerging Markets - High-Quality Companies, Value Investing - Investing in Asia - Longer-Term Investing - Asia Pacific Investment Theses - Investing in China - Equity Investing Strategies - China's Domestic Markets

Companies include: Currencies.

In the following excerpt from the International Investing and Other Strategies Report, an expert portfolio manager discusses his portfolio-construction methodology and his investment philosophy:

TWST: What makes you decide to include a currency in your portfolio?

Mr. Merk: We consider ourselves investors rather than traders or speculators. A lot of what we do is we put our ideas into a monetary context, a monetary framework. We spend a lot of time going to the sources. That means going to the central banks in particular, studying what central bankers might be up to. Bill Poole is our senior economic adviser, the former President of the St. Louis Federal Reserve. He doesn't tell us whether to buy or sell a currency, but he helps us to understand the processes at the Fed or other institutions.

In China, nine months before the Politburo was announced, the new leadership in China, we published a white paper going into the candidates for the Politburo and looking at what that meant. Or in Japan, this year three of the governors, the three top people, last year two governors were replaced. Well, months before that, we started studying how is that going to shape up to impact currency.

Our view is that you may not like what our policy makers are up to, you may not like the money printing we have in many parts of the world, but our policy makers are predictable. If we just do our homework and study what these policy makers are up to in terms of monetary policy, we think we can stay ahead of the game. We have what we believe is a systematic process of projecting our macro analysis on to the currency space.

With that, I think we've done quite well in staying ahead of the game in an environment where policy makers are very actively engaged in the markets. We have some prices that might not be reflecting fundamentals but are more likely to reflect what policy makers are going to do. We think the currency market is the ideal place to express these. Let me just add that currencies are actually less volatile than equity markets, and that when the euro moves a full cent, say from 1.30 to 1.31, on a percentage basis, that's quite a small move.

TWST: That's interesting because the perception is that currency markets are quite volatile. From what you just said, that is not accurate.

Mr. Merk: Absolutely not. The reason people think it's volatile is because...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

View Comments