#58 - Axel Merk - “Is Your Portfolio Robust Enough for Whatever Might Be Coming Your Way?"

63 minutes

In Episode 58, we welcome Axel Merk from Merk Investments. After a bit on Axel's background, the guys jump in, discussing the Fed's decision to raise interest rates today (recorded on Wed 6/14/17).

Axel discusses how the Fed has announced the normalization of its balance sheet and the pace at which it would like to do so - but they've left out lots of details. He likens it to driving into a tunnel with no lights on. In essence, the Fed doesn't know where it wants to go.

Axel's response touches upon our current low volatility. Meb hones in on this, asking if the low volatility is in part due to actions from the Fed.

Axel believes this to be the case (central banks in general, not just the Fed). Yet there's plenty more, involving how central bank activity has fueled this up, up, up market, with investors piling into risk assets. But Axel thinks asset prices are likely to come down from here. He says "A lot of that (rising asset prices) has been induced by central banks. The unwinding of that is going to be, at the very least, let's put it in quotes "'interesting.'"

Meb then focuses the conversation on equities. He says how here in the U.S. they're expensive. So what does Axel see as the opportunity set in equities around the globe?

You'll need to listen for the details, but Axel likes a pairs trade, going long France and short the S&P. Of course, he is quick to say he could be wrong on both legs.

Meb segues to China, as Axel had mentioned it earlier. If you're a regular Meb Faber Show listener who heard Steve Sjuggerud and Jason Hsu's thoughts on China, you'll want to hear Axel's thoughts for a different take. He's not nearly as bullish. He concludes by saying "I happen to think that if you want to be looking at the one risk event that's out there, that's going to get people's attention, China is certainly at the very top of the list."

Since Axel is a currency guy, Meb then brings currencies into the conversation, asking how investors might think about them in a broader portfolio context.

Axel gives us a great overview of different currency markets, with additional detail on the Dollar vs Euro. Overall, he sees the Dollar toward the top of its cycle, and the Euro toward its bottom. He concludes by predicting that the Euro will be substantially stronger a year from now.

There's a great deal more in this episode: whether retail investors should be following an endowment allocation... how holding cash is not necessarily a bad investment choice... a great discussion on gold, and how it fits into a portfolio... even Axel's thoughts on cryptocurrencies and Bitcoin.

And of course, we get Axel's one piece of investment advice for listeners, as well as his most memorable trade (Hint - he bought Apple early).

Find out all the details in Episode 58.

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