Episode #58: Axel Merk, Merk Investments, “Is Your Portfolio Robust Enough For Whatever Might Be Coming Your Way?”
Guest: Axel Merk is the President and Chief Investment Officer of Merk Investments, manager of the Merk Funds. Founder of the firm bearing his name, Merk is an expert on macro trends.
Date Recorded: 6/14/17 | Run-Time: 1:02:44
Summary: 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).
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Links from the Episode:
- 1:50 – Sustainable Wealth – Merk
- 10:04 – “Ultra-low Volatility #ThisTimeisDifferent” – Merk
- 13:29 – “We posted a chart on Twitter today of price to cash flow” – Faber
- 23:38 – “Axel’s site has a lot of great info on currencies”
- 40:54 – “Best Investment Practices” – Merk
- 46:32 – Axel’s Gold ETF
- 1:00:38 – Axel Merk on Twitter
- Axel’s newsletter – Merk Insights
- 1:00:47 – Merk Investments Website
Transcript of Episode 58:
Welcome Message: Welcome to the Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information visit cambriainvestments.com.
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Meb: Welcome back, listeners today we have a special guest he’s the president and CIO of Merk Investments author of the book, Sustainable Wealth, and all around good guy. Today welcome, Axel Merk.
Axel: Great to be with you.
Meb: Axel, it’s great to catch up, again. We’ve interacted over the years in all sorts of different conferences and stuff. And you’ve got a pretty interesting background. I know starting Merk Investments and having grown it into a pretty successful advisory, but lots of other things. You know, a marathon runner, a pilot now based out of San Francisco. Got a handful kids running around. Why don’t you give us a quick kind of walk through of your background before we dive cannonball deep into the world of investing?
Axel: Sure, and I just signed up for another marathon this summer, so I can still brag about being a marathon runner now. Signing up is the easy part.
Meb: Which one do you gonna do this summer?
Axel: Actually I’m gonna do the Santa Rosa one which is a flat one, and the key thing about it is the flat ones, people are very competitive about it. I do it because my son wants to qualify for the Boston marathon I’m just tagging along.
Usually, I do the more fun ones like the Big Sur one which has 22 hills in it, if you count the mole hills as well. And there it’s not about the speed. That said, the reason I do run and do exercise is so I can handle my business trips and do this job. Because you got to keep your sanity. You keep your mind off things and the same of course, with sometimes doing a few other fun things.
And that maybe, if you wanna hear a little bit of my background, I live in Palo Alto, I work in San Francisco and I did a startup before it was fashionable to do startups. Meaning, I was a dropout out of a PhD program, and I’d always kind of combined the economics and finance side with the quantitative computer-science side.
And at some point, I had a fight with my professor that said, “How can you model changing objective functions?” Meaning when the problem you’re trying to solve is changing all the time, and he had no sympathy for that. And he’s saying, “Well you just change the formula.”
And eventually, I decided that if you’re not a genius, I better move on. And I had started managing some friend’s money in college, I’d structured that as a business while I was a PhD student, as indicated I never finished the PhD.
Eventually, I went into the mutual fund business. And part of the reason we did that…most people know me as a currency guy, we actually do kind of everything. Global macro these days we’re known for. But the reason we veered into these other areas is because in the second part of the ’90s, “Everything went high up.” Something that is a completely new theme to anybody who’s listening today, I suppose. And we wanted diversification and around 2000, we didn’t find anything anymore.
So we went to more cash management, global cash management, precious metals management, and through that our emphasis on currency has evolved because that’s the one area where one can generate uncorrelated returns.
And then we got more sophisticated into long-short [SP] currencies. We do deep dives into Central Bank. And through that, of course, we generate a lot of ideas and that’s why we comment about everything and anything in global markets.
Ultimately, what I see my role as, I try to get people thinking. I try to get people thinking, “Is your portfolio robust enough for whatever might be coming your way?” And we do that through some of our products on the, kind of, the retail advisory end, but in the family office institutions, if they wanna have their portfolio looked at, we’ll be glad to look at that and do that more specifically.
Ultimately, it is about, “is the traditional way of looking at your portfolio valid?” And in some form or fashion, that theme has applied many times throughout my career. And so I’ve always been a bit of a renegade taking contrarian views not because I tend to disagree, but because I’ve never worked for one of the big shops [SP].
I’m literally a drop out. I’ve had some summer jobs with some of the other shops. But everything we publish is really homebred and I may not always be right, but we tend to be opinionated and provide some food for thought.
Meb: Good. You and me both. So why don’t we just jump right in, you know, I saw that you were active on Twitter today talking about a handful of things. There was a little meeting and then some announcements out of our friends at the Fed. Maybe, why don’t we start there? And then we’ll start to jump into some different areas of the macro world. But, kinda, what’s the world look like to you today?
I mean I know a lot’s changed since writing your book back in 2010. But what are, kind of, the general thoughts and maybe share what you were talking about on Twitter today?
Axel: Yeah, so let me start with Twitter maybe. For those who embrace it, I don’t need to tell them anything but anybody who is not on Twitter, get on there. Today news isn’t breaking on CNBC anymore, news is breaking on Twitter.
And journalists love calling folks like me because we provide an instantaneous interpretation of the news, provide some flavor to it. Getting a newsletter published, and we do write a newsletter, has to go through layouts and compliance and whatnot, and we are able to tweet quite instantaneously.
And for example, as we speak here, there was an FOMC meeting. Rather than jotting down notes and sharing that with my team, I sent it out on Twitter. And that, for me, achieves much of the same thing. But, at the same time, I can help the entire public do it.
Now, as far as substance is concerned, by the time that you start listening to it the dust will have settled. But I tend to get pretty wrapped [SP] up when I hear certain things. Obviously, the Fed has announced their, “normalization of the balance sheet.” And the sort of pace they wanna get there. But they’ve left out a whole bunch of things. And one of the things I’ve said is, it’s like driving into a tunnel with the lights off.
And part of the reason I say that is a few weeks ago I was at a conference at Stanford, at the Hoover Institute. There was this big debate going on about what does a normalized balance sheet look like? And obviously, you’ve got to be a bit of a monetary policy buff to get enjoyment out of it. But the Fed doesn’t know where it wants to go.
So how can you say, “I’m gonna sell this amount of securities every month.” And say, “This is gonna be not my primary policy tool, I’m gonna use interest rates.” But they don’t know what the end point is. And, part of the reason I have such difficulty with what the Fed wants to do is odds are that the economy is gonna turn down before they can, “normalize the balance sheet,” especially if they haven’t defined what that really means.
And so at some point, they have to reverse course. Well, what does it mean? They’re gonna lower rates again? Or they’re gonna stop selling securities? And then they’re gonna be at zero again, the interest rates? Well, what are they gonna do? Are they gonna continue selling securities and then buy it again?
Now, all that said, the positive spin on it is, this is better than what we had before. At least they’re starting to get rid of some of the stuff and everything else, is a problem they worry about later. What I see, to the take a step back here is, I see a Fed tightening into a flattening yield curve. Meaning that, as the economy is slowing down or inflation is coming down, interest rates are moving higher, and they do what they do every time. They tighten, probably too much. They’re gonna have a weakened economy, they’ll have to reverse course.
In the meantime, we’ve got Europe where we’re printing a whole bunch a month. And, by the way, we were told at this press conference that if you add it all up, they might be selling up to $50 billion a month. Well the Europeans are currently buying 60 billion, euros, that is, a month. And we’re told by the Fed it’s paint drying on the wall and Draghi [SP] in Europe tells us that this is extremely easy policy.
So pardon me if I’m confused. Pardon me if at some point the market is gonna not know how to interpret this. And all of this, of course, in the backdrop Janet Yellen [SP] almost certainly losing her job early next year. So we’re being told a bunch of things, we’re being told to just be patient and they’re gonna do everything right. Whereas my take is that the Fed is really hostage of the markets. Early this year the market delivered this rate hike on a silver platter, now they similarly [SP] did and now the Fed thinks they’re the boss. Well, I don’t think they’re the boss, and I think the market is gonna tell them sooner rather than later.
Meb: You know, you wrote another recent piece on our blog, and listeners, Axel’s got a lot of great series of posts on his site called Insight Series. And then there was one that just came out, where you were talking about the historically low level of market volatility. Maybe you could talk about that for a second, because that kind of segue, is that, in your opinion, something that’s kind of Fed induced? Or, what’s the reasoning for that, and, kinda, implications in general?
Axel: In my career, and I’ve been doing this for a couple of decades, the best bubble indicator there is, is low volatility. Or, as I call it, cause and [SP] complacency. When volatility is low, investors perceive risk to be low that means they pile in onto things that they shouldn’t. And not just investors, businesses might do the same thing.
And we had that with tech stocks in the ’90s, we had that in the housing boom, and I think we have it right now. And there were all kinds of theories out there, including new theories as to where that might be coming from, that low volatility. Some of that might be structural because information flow is more efficient in an electronic age.
But the main driver, in my view, are central banks. When central banks keep interest rates low, so-called risk premia are being compressed. And that sounds fancy, but it means that junk bonds don’t yield much in relation to treasuries. But it also means that volatility is lower what and it also means that volatility in stocks is lower. And when that happens, just, if you take any valuation model, it means valuation should be higher.
And so volatility is being compressed by central banks. In the summer when the Fed started it, it had its big taper tantrum, it was like the pressure cooker getting its lid raised. And right now it seems, to some people, that there isn’t so much pressure. But, I would dispute that, I think there is plenty of pressure around. And one example where you don’t see the pressure, maybe China for example, and we can talk about China later, where the government is trying to make it appear everything is fine.
And so similarly, we have elevated valuations in just about any asset class in the U.S. and in many parts [SP] around the world. And the key driver here is central banks keeping it low. And as the Fed is now trying to normalize its balance sheet, I have no doubt that risk premia have to rise. That also means though that asset prices have to come down. Everything else equal.
Now, if you tell me that earnings are gonna shoot through the roof, or there may be some other reasons why asset prices should be so much higher, that may be the case. That can still happen. But if I’m not mistaken, we have instead, we have this notion and it’s becoming a, kind of, a self-fulfilling dynamics, where people are just piling into risk asset, piling into securities. They go higher and higher and higher because, what can possibly go wrong? Asset prices never go down again, you buy the dips. And a lot of that 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: So, you know, let’s maybe kind of segue a little bit into, you talk a little bit about equities, and how you mentioned that equities in the U.S. are a little expensive. And we talk a lot, I mean we actually posted a chart on Twitter today on price-to-cash flow of U.S. stocks, and it’s a Leuthold chart, so going back to, I believe, the ’70s but, you know, it is historically pretty high, but like most valuation charts.
So what do you see really is the opportunity set in equities? Is it the entire globe is expensive? Do you see pockets that are more interesting? What’s kind of the framework and lens that you look at equities in general?
Axel: So let me first say, anybody who is negative on the markets has being wrong, right? And so similarly, if you wanna take a negative view on risk assets which is, kind of, the general term for equities, high-yield bonds and other things that are correlated to equities, you’re going to have a, “negative carry.” Meaning it’s gonna cost you to take a negative position.
Now, my view is negative, so how do I express that? I have decided that it is just too expensive to continue to be negative, and that you just gonna lose, lose, lose. And yes, one of these days you might be right, but instead I think a more productive approach is to say, “Well, if equities are expensive, and if that — I’d call it a bubble — is widely spread, then you wanna be in something that isn’t correlated to that.” And there are different ways of doing it, we can talk about some in the short term, but thinking and within the equities space, you probably wanna do it in the long-short space.
And let me put there [SP] this isn’t specific investment advice and anything you do short, you can, of course, lose your shirt quite quickly and you can be wrong on both legs of this. But the short of it is that I happen to think that the U.S. markets, in particular the high-tech market, is very, very over valued and at the same time there are some pockets elsewhere in the world, that I happen to think are valuable. And so what you can do is, you can take a long-short position. You can buy some markets in the rest of the world, and take out as much of your equity risk as you can.
Now, for me personally, I try to have a slight negative bias. And so net, I’m slightly negative but I don’t want to be paying [SP] through the nose and so to make it a little bit less abstract, everybody says that Europe is a big mess. A lot of people have said France is a big mess.
Well, I happen to think, and I said this before Macron was elected and is winning with what appears to be a landslide victory. As we tape this was the second round of the French elections hasn’t happened yet. But my view was that the French are ready for reform. And, by the way, I though even if Le Pen were to win, she probably couldn’t do as much harm as some people feared.
But I happen to think that the French market is one of those markets that’s going to outperform other markets because the French need to do reform. And that doesn’t suggest they’ll do things perfectly. Nobody, no politician in the world can ever implement exactly what they want to do. Just look here at home, it’s much more difficult in practice than in theory. But the French are ready for reform and as reform takes place, valuation should improve on a relative basis.
And so, taking a position, I’m just giving it as an example rather than specific investment advice, you can buy France and sell the SMP and that might be profitable if that is right. Now, as indicated you could be wrong on both ends, and you also have to decide whether you want to currency risk or not. But that’s the sort of thing that I like to do. I like specific areas around the world, but in general, I don’t wanna have returns that are correlated with equities because I am spooked, where the equity market might be heading.
Meb: Yeah, and one of the challenges that you’ve touched on is that, and a lot of people ask us because we’ve been talking about this for a long time, where we say foreign markets are a lot cheaper than the U.S., and certain ones are certainly much cheaper, and some are, you know, on the expensive side. There’s a whole spectrum. And so, you know, people always say, you know, why wouldn’t you just do a long-short or a market neutral?
And Axel touched on it, I think, pretty accurately, is the sense that the world, particularly with evaluation, plays out over such a long time frame. And, you know, in any given year, certainly we’ve seen it in the late ’90s, you know, the U.S. stocks hit a long-term valuation ratio of 45. So even though they’re expensive at 30 now, they still could go much higher and it’s always the challenge.
Now, we certainly agree with you and a couple years ago until, like, right around 2015 and even more so the summer of probably 2016, we saw the world, kinda, shift to foreign equities performing much better than the U.S. has, and that’s continued. Even though the U.S. is still going up, a lot of the foreign shares are doing better.
You mentioned China, briefly, why don’t we talk a little bit about that? There’s a few of our prior guests have talked quite a bit about China and people seem to have a lot of interest and a lot of disagreement. What’s, kinda, your thesis on China, and how do you see that part of the world?
Axel: Sure. Let me just round up the previous thought you had to complete that. I agree with what you say, I’d just like to add that in addition, no matter what analysis you do, be aware that correlations are not stable. And so you have this wonderful model that, as your U.S. market moves X%, the French market is going to move this. So whatever it is that you might be comparing, and on the currency space, or this, or that, or the best carry trade in the world, well these sort of correlations are morphing. And it is something to be keenly aware, especially if one does something more sophisticated than just being plain buy and hold, anything. And it comes hugely into effect when you A), when you do any sort of back-testing of any strategy, even a simple equity strategy, or in terms of risk management as well.
And so bridging that to China, and China superficially looks fine, and everybody tells you everything is good. And indeed, until — I’d have to look it up, I think about two years ago, we were actually positive on China when others had already turned negative.
We used to have a mutual fund that was de facto a play on a rising renminbi when others were already saying, “Oh, my God you got to short it.” And our timing was actually not so bad. We then shut it down because I didn’t believe in the product anymore, and then we wanted to short the renminbi, and I didn’t feel comfortable shorting renminbi myself, while having it long in a mutual fund.
But the reason why we used to be positive, and I used to be positive on China, was because I thought you can fix China. And the biggest problem I see in China is that for small and medium-sized enterprises, there is no market-based efficient access to credit.
The state on enterprises have done [SP] an access to credit but if you’re a small or medium-sized enterprise, you have to go to a loan shark. And if the banks learn to provide credit more efficiently to small and medium-sized enterprise, I believe you could have an entrepreneurial boom. You just would need to have some propaganda of the government that they should invest in themselves, and you can do a lot of things.
One of the reasons the Chinese are chasing any one investment at any one time, be that real estate, be that bitcoin, be that gold, be that something else, is because they don’t have many investment choices. And of course, then they try to take the money out of the country.
And if you allowed the market to mature, that would be good. And until the IMF said that Chinese should be allowed into the SDR, into the Special Drawing Rights, they suddenly started to promise reform, after reform, after reform. But ever since they got the, kind of, the nod of approval, they’ve back pedaled on a lot of these reforms.
In the meantime, of course, they have done all the things that, I’m sure other guests of yours have pointed out, they have had this breathtaking credit growth, doing it the old-fashioned way. And part of the reason they do that is because the Congress in China has probably more billionaires than the Trump administration.
The vested interests in China are just so strong that it’s so difficult to institute reforms. And in the meantime, it’s bursting at its seams. And so, you can only do that for a certain amount of time. At some point, something has to give.
We happen to think that one of the key valves [SP] is then going to be the currency and so these days we’re negative on the currency. But it’s one of these things. There’s a negative carry. As I look here on my Bloomberg the negative carry on the 12-month offshore forward is about 3%. So that’s currently comparatively cheap. But it’s going to cost you, and the question is, how long do you have to wait until that sort of thing is gonna come to fruition? And is the currency going to weaken?
And, by the way, the European Central Bank just announced that since the beginning of the year, they sold about €500 million worth of dollars to buy renminbi, to diversify their own foreign currency reserves. And that’s, of course, not a huge amount in the scheme of the foreign exchange markets. But a bubble never busts when you think it will.
I happen to think that if you wanna be looking at the one risk event that’s out there, that’s gonna to get people’s attention, China is certainly at the very top of the list. But at the same time, nobody knows when exactly that risk event is gonna smack you in the face.
Meb: China has been an interesting example over the past couple of decades of, you know, pretty interesting, kinda, boom and bust, sort of, behavior, and particularly even in the U.S. you know.
I know you and I both attend and participate in a lot of institutional conferences and even our institutional friends aren’t immune from, kinda, this excitement and cycles of interest. I remember back in the mid-2000s, you know, everyone interested in the bricks and everything, and China’s market just, you know, such huge swings and has, at least on the equity side, been you know, pretty interesting over the past few years. It will be fun to watch over the next decade to see how it develops.
You know, you mentioned a couple of times the topic of currencies. And I know this is an area of particular interest for both you and I, and an area of extreme confusion, I think, for most investors. And so podcast listeners, Axel’s site has a lot of great educational info on currencies.
But why don’t you talk a little bit about currencies, and your framework for thinking about them? And even just, kinda, start from the beginning and then we can kinda get into currency-investing strategies, and what works, what might not work. Why don’t you just start there? And give us a little insight into how Merck and everyone at your crew thinks about the currencies.
Axel: Well the first thing, and [SP], what I’m gonna tell you applies to every market, not just to currencies. The first thing is that it would be good for people to be humble because, in the end, we all cook with salt, and all these markets were wrong in 2008. Sure, we were one of the few warning about it, but that doesn’t mean we got all the details right.
And a lot of people just don’t trust these markets anymore because they have been wrong. And by the way, passive management and doing nothing for [inaudible 00:24:26] is more profitable anyway. Now, that said, you can approach the currency space like any other space. You can do fundamental analysis, you can do technical analysis, just like in the equity space.
Just because they’re good earnings, doesn’t mean the company goes up. Now, a lot of people don’t look at currencies every day and don’t study them in depth. And so the difference to other markets is that people tend to believe what they see written by a journalist.
Now, if you take journalism, what do journalists do? And I talk a lot to journalists, and I greatly respect them. But they got to write a story based on the day’s move. If you have a Central Bank meeting, say the ECB is meeting and the euro, let’s have it go up, well, they’re gonna find a quote that justifies why the euro went up that day. Is that really the reason?
And so what we try to do is, we actually come from it, from completely different directions. We come from it from both the qualitative side and the quantitative side. And I mentioned to you in the introduction that I, kind of, have this computer science background. So I used to be all gung ho about quantitative analysis and then I discovered many of the weaknesses become very qualitative, and these days I’m trying to embrace, kind of, both sides.
So on the quantitative side, we do deep dives into central banks. One of the views we have is that in most of the developed world, we’ve made promises that we can’t keep. So we have to somehow pedal back on the promises we’ve made on entitlements. And depending on the culture on different countries, that’s gonna take different dynamics. So in the U.S., we got a great printing press, we don’t need to worry about it, at least for a while.
The Germans love austerity. And so that creates other, sort of, dynamics in different countries. And obviously, when you have a [inaudible 00:26:24] as the Head of the European Central Bank, it’s gonna be different than if you were to have a German as the head of the Central Bank. As Merkel is saying, “The next central bank president in Europe has to be a German.” Right? And so then it’s gonna create a different flavor. Abenomics creates a different flavor.
There are lots of myths out there in the currency space. So, one of them is that you need to have economic growth to have a strong currency. And it’s because it’s written in the paper, it has to be right. Well, look at the Yen, the worst growth is in Japan, the better the currency appears to be. And the best example I tried to bring up, is a couple of years ago, we had this massive earthquake in Japan and the currency soared, but a few weeks later you had the earthquake in New Zealand, and the currency tanked.
The difference is, Japan has a currency account surplus and New Zealand has a significant current account deficit. And while I don’t think the current account balance is a direct predictor of exchange rate, it helps explain a little bit about the dynamics.
So, in Japan when you have a shock to the economy, people are saving more. Well, everything else equal, people saving more is a positive for the currency. Whereas in New Zealand with a significant deficit, while in the immediate aftermath less economic activity is gonna take place, fewer people are gonna invest in New Zealand, currency is gonna plunge, and then the economy might overheat in the rebuilding effort. And so they are slightly different dynamics happening in different countries.
The one biggest frustration for a lot of investors has been the euro, where people say, “Europe is a mess. How on Earth is it possible that the euro hasn’t broken through parity,” that the Europeans are, similar to the Japanese, becoming more Japanese. In fact, the euro, I would claim, has become a funding currency for carry trades meaning that people borrow money in euros. Warren Buffett issues debt in euros these days.
Interest rates are incredibly negative. And so it makes sense to borrow money in euros, to buy other assets. And you do that when you feel good, when risk is on. But it also means when risk is off, when markets come crashing down, you’ve got to reduce your leverage, you got to pay back your debt and that provides upward momentum on the euro. So we look at fundamental factors like that and I can go on this for hours. But let me just switch here, to the more technical side.
One thing that’s unique about the currency space, is that you have a lot of profit participants…a lot of market participants that are not profit maximizers. Meaning you have corporate hedgers, that you have in a commodity space as well. But you have central banks as well, very active. You have tourists that use their credit card abroad.
When you are a tourist, using your credit card abroad, you’re not a profit maximizer otherwise you wouldn’t be paying the 3% fee you have to pay to your credit card company. And so, if you differentiate between those guys and the pros, and with pros, I consider the folks in the options market, for example.
We think, and we’ve written a white paper about it, that there is an information advantage that the option writers have. They…if you wanna buy an insurance against the decline, you go to the options writer. And so you can see how much they charge for insurance, just like you can look at the option market in other spaces as well.
And one of the things you can do, for example, is you can see how fear is moving around the world when there’s a shock. And you can devise actually a strategy on that. So there are some unique opportunities on that, that you use risk-sentiment indicators on that. Then one of the things we have done, for example, is we have said, just like in any other space, that the same strategy doesn’t work all the time.
And so one of the things we found out in the currency space, and I think it applies to other spaces as well, is that depending on the sort of environment you’re in, different types of strategies work. And so, to give an example. In a calm environment, your traditional investment allocation would work. In the currency space that would be based on a macro analysis, qualitative analysis, you can make money. And if you dissect the world into how volatile it is on the one axis, and how fragile the world is, how highly correlated asset prices are, on the other axis, the calm market, kind of, would be at the bottom at the lower corner.
At the other end of the extreme, you have a panicked environment. High volatility correlation to move to one. Everything is moving to one. Well, in that sort of environment, this sort of risk-sentiment-based strategy works well. And so you can devise your strategy, come integrating qualitative and quantitative approaches in various ways and in the meantime, you can listen to FOMC speeches and either get gray hair and have a good laugh because they are saying things that they might not be able to implement.
Meb: You know, for someone who looks through the lens of currencies today, what are some of the more attractive ones, that you think are interesting from a long perspective, and also on the short side? Is there any that particularly stand out?
Axel: Well, they’re all ugly ducklings, right? I mean and what we’re getting away from, luckily, is this what we’ve had for too long. What everybody and their dog wants to talk down their currency. And so we’re getting a little bit away from that.
And so let me just, kind of, address the big elephant in the room here, and let’s talk about the dollar versus the euro. And the dollar index was rising four years in a row. We’re not technicians, but if you look at standard deviations, we were more than two standard deviations over the long-term moving average.
Now, that gives you a clue that maybe, maybe, the dollar rally has gone too far. And sure enough, at the end of last year, after Trump was elected, the dollar jumped even higher and the people said, “Yup, the dollar is gonna go through the roof. We’re gonna get this Border Adjustment Tax, the dollar is gonna go up [inaudible 00:32:09] 25%.” And guess what, the dollar is weaker, year to date.
And a big part of that is, it’s cool. One is everything is in the context of value and the dollar was just too expensive. The second one is we talk about this FOMC meeting. We talk about how the Fed is gonna sell off the balance sheet. Well, the Fed not only doesn’t know where it’s gonna go, they are fully aware that they probably have to engage in QE again in the next downturn.
We are pricing in as we speak, that there is going to be another, let me just put on my glasses here, we’re gonna put in another half rate hike for this year, and one rate hike for next year, and you are telling me that this is an economy that is supposedly running at a good steam? I happen to think we are tightening into a slowing economy, which means we might be closer to the peak of the rate cycle in the U.S.
Now, go to Europe where the ECB is continuing to buy €60 billion a month worth of securities. They’ve committed to that until December. In September, we’ll probably get an update as to how much we’re gonna get. Well, guess what? And just recently Draghi, head of the ECB said they’re not going to lower interest rates any further. Draghi has said the risk of deflation is gone and gave a bunch of positive things. The only thing he said, “Hey, we need to continue to print the money because we are not at 2% yet.”
But to me that suggests at the ECB, we’re at the bottom of the interest rate cycle and the Fed, we’re closer to the top. And to me, that means the euro is probably gonna get stronger. And so everybody loves to hate the euro, and I’m not suggesting that everything is good in the eurozone, even if I just said something positive about France. Indeed, I’m turning more negative on Germany partially because so many good things are there in Germany that I think that things can get worse there.
But it’s a, to me, this notion that the dollar just has to go up because things are generally better in the U.S., no it’s always in the context of valuation. And so, and the biggest elephant out there I predict that the euro is gonna be substantially stronger a year from now.
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Meb: For the individual practitioners out there, even the professional advisors, how should they implement currencies in their investment program? Should it be something where you say, “Look, just wash your hands of it. You don’t need to hedge or think about currencies,” Or say, “No, no, no. Actually, they need to take a tactical approach,” Or, even consider currency strategies as a separate asset class. What’s the kind of takeaway for most people? Do you have a strong opinion there?
Axel: Well, everybody has currency risk. You just have to choose whether you want to manage it or not. If you have dollar-based investors who only invest in dollar-based assets you have dollar currency risk. You’re fooling yourself if you think you don’t have currency risk.
If you take the price of gold since the early, 1970 or so, it has an annual appreciation, I think, of almost 8% a year. The gold hasn’t changed, but maybe the dollar has gotten weaker. And so you’ve got to manage the currency risk somehow, and there are different ways of doing it. For a while, these currency-hedged emerging market products, or international markets, where buying the Japanese market and hedging the currency risk was very popular.
Well, we don’t do what’s popular, we try to do what’s right. And so you’ve got to be attentive of what risk you wanna take on, and which ones you wanna manage.
When I tell you that I think France is going to outperform the U.S., I think it is in combination with the currency risk. Meaning you don’t have to hedge out your currency risk if you were to play that. And again, I’m not giving specific investment advice here.
At the same time, the power of using currencies on their own, is that you can generate returns that are uncorrelated. So there are two ways. You can obviously buy the equities or fixed income instrument, that’s one way. You can buy money market type [SP] of instruments, so short [SP] of cash instruments abroad, meaning you just spread your cash risk abroad. That was very popular until about four years ago where you have the international exposure, while minimizing your equity and interest-rate risk. I happen to think that may be very prudent right now, but people haven’t embraced it because people are very reluctant to embrace a declining dollar.
The other way to do it is to fully embrace currencies, to do a long-short strategy. So you go long the Swiss Franc and short the euro or vice versa. You can’t guarantee that you make money with that, but the returns you generate are almost certainly going to be uncorrelated with anything else in one’s portfolio.
And that’s where we go back to, kind of, what I said earlier, equity prices are expensive. How would you diversify from expensive equities? And historically, the way you do it is you go through fixed income. But fixed income doesn’t yield anything. So people go to high yield or they don’t call it that. But just about anything that yields anything is high yield, and that also means you’re not getting the diversification you want.
And so what do you diversify to? I mentioned gold earlier and we can talk about gold. Gold is, in my view, the easiest to diversify. It’s not always the best diversifier but it’s the easiest diversifier. But beyond that, it gets complicated.
So you can do long-short equities, we discussed that. We can do a lot long-short currencies. And so my view is, that as an investor, rather that saying, “Hey, you should look at this and this product,” or touting my own products that we might have.” You really have to have a fresh look at your portfolio in the current environment.
Have you been taking chips off the table? If so, have you done something prudent, uncorrelated with it? And I’m almost certain that the majority of your listeners has not done that. And the reason I allege that, is because if you have any professional managed assets [inaudible 00:39:26] the way, unless you embrace alternatives as a huge portion of your portfolio odds are that you have been lagging the SMP 500 on the upside. And when the market has had corrections, the few we’ve had, you’ve still lost money for your clients.
And that means that those advisors, and we know a bunch of them, have lost investors because there’s somebody else in there that says, “Hey, have you just been buying securities? And look at my track record since the spring of 2009. Hey, it cannot possibly go wrong.” Those folks who are prudent have been losing assets.
And so it takes somebody who really…It takes more of an endowment model to their investment portfolio and saying, “Hey, I’m allocating, actually, a very small portion of my portfolio to equities.” And then the entire rest of it, I try to do something that has a low correlation.
And then we can think about, well what is part of that? And currency, we think, is an amazing opportunity that people should consider. But it doesn’t have to be currencies. It should be something that, by design, is not correlated. And by all means, please choose something that’s not hip right now, because otherwise you’re gonna be chasing the MLPs just the Master Limited Partnerships, just at the worst time or the currency-hedged Japanese market at the worst time.
So you got to take a long-term approach to markets, which means you’ve got to take chips off the table, away from the things that are working, to things that might not have been working. As long as, of course, and the investment process is good in whatever people might be doing.
Meb: Okay. You mentioned two things I wanted to touch on there. So first we’ll come back to gold in a minute. But since you mentioned the endowment model you had a good piece titled, Best Investment Practices which we’ll put a link to, on the show notes. But you kinda, outlined the endowment model which historically is a globally-diversified model, it has exposure to real assets and it has a lot exposed to alternatives. And so in your kinda allocation, you talk…They have roughly about a third in these sort of hedged type of strategies.
Talk a little bit about this. Do you think this is an appropriate allocation for investors? And if so, like, what fits into that category? If you were to say, you know, these hedge type of alternatives. Where should investors look? Where’s, kinda, the best diversifiers, the most opportunity?
Axel: Well, obviously, sorry for mentioning it, so many times. We can’t give a specific investment advice on anybody’s allocation but I would encourage anybody to get away from the notion that the SMP is where everybody has to be.
Now, clearly, it’s a difficult discussion to be had because the SMP goes up and up and up and up. The problem is, of course, what can go up can go down. But when things have gone up for so many years and you can buy the dips, and everything goes up, whenever that happens. You think, “Oh, my God I just have to be there.” And let me just give the example here of 2008. Some people are telling folks at the end of 2008, “You should double down and buy the dip”. And I said, “That might be completely irresponsible.”
Now, clearly, it might have been a good time to do that. But the reason I say that is that I have absolutely no problem if somebody, on the way up, has taken chips off the table and then has money to invest when things are bad.
But what happens in practice is that you tend to pile in into what’s working. You go up all the way, you’re overexposed to risk assets. Then the market crashes, you lose half of your net worth. You cannot tell me that you should increase the riskiness of your portfolio when you’ve just lost half of your assets. And so, that happens, unfortunately, in practice.
Now, if you’re somebody that diligently takes chips off the table and tell people, “Hey, I’m increasing my cash bucket.” And, by the way holding cash is not a bad investment choice. “And then, if the market comes down I put a little bit more to work and if it comes down more, that’s fine.”
But if you say, “All right, maybe central banks are going to distort [SP] asset prices for much longer because ultimately this is not a sustainable system.” And so then you’ve got to think about, “Well, how am I gonna navigate this?” And it is not about kind of chasing returns, it is about risk management. And so, “What are the sort of risks I can take and how can I generate different revenue streams?” And so, “Should I be investing in real estate where I get some rental income?” Obviously, considering that maybe real estate prices might be expensive, right?
“Can I do something? Should I be putting money into a hedge fund?” If one is a credit investor?” Well, just for the sake of it, probably not. But if one believes that there is an investment process that somebody has, that makes sense, and is able to generate returns differently without taking excessive risks and has got risk management. By all means, why not spread your eggs?
And so for, kind of, for the more common investor, that means much lower allocation to equities. And then on the fixed income side, yes sacrifice return. And then let’s look at some of these alternatives. And of course, I can embrace the different types of alternatives that are here. They all have their sort of their special sort of risk. But the challenge here is, you’ve got to do your homework on the investment process, much more so than on the historical return.
The reason I say that is that if you…a lot of the strategies that are actively managed have had problems, when risk premia compressed. That means the dispersion of risk is compressed. And that means active management has a difficult time of navigating. But if we’re now going to an era where the central bank is selling off its balance sheet. That means fear might be coming back to the market.
The risk premia are going to be rising. That means active management is going to be profitable again. And so I would not hesitate to allocate to active management in that sort of environment. Now, in practice I can tell you what’s gonna happen, people are gonna continue to buy the dips, they’re gonna be extremely reluctant to do anything, and then let the market really have some carnage. At the end of that carnage, people will start looking at active managers again.
I think the time to evaluate active managers, no matter who it is, is now and it’s not gonna be easy because their returns are going to be lackluster, so you really have to kind of shake it and see whether these guys, whoever you evaluate, has a decent investment process.
Meb: We actually just mentioned on the last podcast. We were talking about $17 million Fin-tech ideas, and we put in parentheses (terrible) because I was admitting that some were probably awful. But one of the ideas I’d love to see is a research boutique or a handful of people writing a little more about public liquid alternative funds, whether it be mutual funds or ETFs, to really give a lot of the investors out there a deep dive into the products and structures and everything else. Because it is a challenge to keep up with all the products and managers and what’s going on. So listeners, if you’re listening, that seems like a good business idea. Axel, I want to touch on a couple more things before we have to wind down.
Let’s get back to gold. So, you know, Axel’s had launched a successful gold ETF that we probably can’t talk much about, but it’s one of the more unique funds out there, and that you can actually take physical delivery, which is really cool. But why don’t you talk to us a little bit about gold. You know, do you see it as a strategic part…it should be a strategic part of everyone’s portfolio? Is there a way you can value it? Are you particularly bullish or bearish or nothingness on it right now? Give us your kind of broad overview.
Axel: Yes. So earlier I indicated gold may be the easiest diversifier and the reason why I say that, there are, kind of, two criteria you want to have when you add something to your portfolio or consider replacing something, you wanna have a positive-return expectation and you want to have a low correlation.
And the correlation part is reasonably straightforward. In the long run, if you take the monthly returns of gold, the correlations to the SMP since 1970 is just about zero. It’s very low if you take daily correlation and what not. But, the price of gold on a daily basis, there may be periods, I indicated earlier correlations are morphing. Sometimes it moves with risk asset, sometimes it’s against it. And so you don’t always get that and you can be caught up in a mania. And so it’s an okay diversifier. I like it a lot. But if you want to have, kind of, the by-design diversifier you’ve got to get to more complex strategies, like a long-shot strategy of any sort.
On the return side, people look at historic returns of gold and say, “Oh, yeah that’s good, but what about tomorrow? How can this thing that is just a brick, a nonproductive asset have a positive return?” And of course, if you shout it as a good, positive return over a longer period and say, “Yeah, that’s an indication it might be over value.”
Well, my take on it is more that the biggest competitor of gold is cash that pays a real rate of return. And so if you think that you’re going to get compensated, holding cash and be able to preserve the real purchasing power of your cash, then cash is going to win, and gold is gonna decline. Of course, not on a daily basis, maybe but that’s, kind of, the medium-term outlook.
I mentioned earlier that much of the developed world, I happen to think we have problem with entitlements. We have made too many promises and we cannot pay them back. And so unless we do a few different things, and in the U.S., I happen to think we are going to address those sort of challenges like debasing the purchasing power of the dollar.
I do not see how in a decade from now, we can have positive real interest rates. And so from that point of view, I don’t really care so much about what rates are gonna be today or tomorrow, I just see the path. I see that the path that the Fed is proposing is not credible. At least they got the appearance of a path right now, but I think they have to do a U-turn. And so I don’t think real interest rates can move substantially higher.
So from that point of view, I think yeah, gold, from a diversification point of view, might work, and then from a return point of view it might work as well. If you put in the context of other asset prices, if you believe that, “almost everything is expensive.” Well, where you go? And again, gold it is just the easiest answer because it’s one of those things, from my point of view, it’s not particularly over or under valued right now. But if we were to have a crash in the markets, I happen to think that gold might shine, quite a bit.
So if you take it from a cash flow point of view, or a discounted cash flow point of view, sure gold doesn’t have cash flow. But if you go back to this model of compressed risk premia, a compressed risk premia means the asset prices are higher and risk premia are going to rise. Meaning that fear is coming back into the market.
Asset prices in general, or equity prices are going to come down. And something like gold, that doesn’t have a cash flow, isn’t as affected by that. And so that’s why gold, in relation to equities, is going to shine [inaudible 00:50:51] the premia, if risk assets go down.
And so, as you might have gathered from my talk, I happen to be negative on equities. It’s also, by the way, a negative carry holding because there is a cost of holding gold. It’s much less negative than many others, such as buying volatility, or whatever else you might come up with. And so from that point of view, gold again, is the easy diversifier, and we see that.
If we look at the flows in the market, increasingly, investors are embracing gold as a diversifier because they are spooked about the devaluations in the markets. But they are too much of a chicken to sell their equity so they’d rather add some gold to it. And so from that kind of view, yes I own gold, and I encourage people to look at it. And I think, as part of a broader diversified portfolio, is it is very worthwhile to consider it as a diversifier.
Meb: Yeah, we agree. I mean there’s a great quote from Ray Dalio who runs the largest hedge fund in the world, Bridgewater. He said something on the lines of, “If you don’t own gold you know neither history nor economics,” and he recommends a pretty good size chunk of gold for strategic allocation.
And I wonder though, you know, we tend to talk to a lot of younger investors as well, you know, at least over the past few years, you started to see exploding interest in this year as well in some of these cryptocurrencies. Is this something you pay any attention to, at all? Or, like me, do you see it as somewhat of a pleasant distraction?
Axel: Well I have to pay attention to it because I keep getting asked about it, and keep getting phone calls about it. I have a computer science degree. In the ’80s a Polish student explained to public key cryptography [SP]. I was born in Germany, so I was a foreigner as well, and so I’ve kept a strong interest in all things encryption throughout my life and I’ve been approached by venture capitalists, lawyers, others.
I love the decentralized ledger technology, and I sincerely hope that it’s going to get substantially more traction in it. That said, I can’t wrap my head around, well I can wrap my head around it, but I’m not going to buy bitcoins myself. Partially because I think it’s in a bubble, and mostly because I think that bitcoins are mostly a delayed debit card, that fluctuates greatly in value. I’m sure now half of your audience is probably gonna hate me.
But there is both a fascinating, and an extremely valuable, technology behind it. The question is, where’s the value proposition? And we’ve had internal discussions and many offers [SP] whether we should buy bitcoin. Not in our public products. But to me, there has to be some sort of valuation framework. And the fact simply that the price has gone up, is not a sufficient condition to me, to play the mania. That doesn’t mean you can’t do that, right?
If you have an investment process does it vary price based, and do you think you can be smarter than the market and get out at the top and before this bubble blows, by all means. But there is a lot of the bitcoin trading is happening in China and there’s a reason for that.
Is A), because they don’t have many other choices and B), for them, it’s an avenue to potentially get money out of the country. It’s a huge pity for me that the bitcoin ETF wasn’t approved in the U.S. And the reason why that’s a pity, is because it solves a huge problem bitcoin has. It’s anything that’s popular will be regulated, and by having it trade on exchange you’re solving the anti-money laundering issue.
And the second one is that an exchange-traded bitcoin would have created a derivatives market which is, in my view, extremely helpful. So I wish the technology the best of luck. I think it’s going to have a future. I just happen to think that the bitcoins themselves are not something that I would want to have in my portfolio.
Meb: Yeah, it kind of echoes our sentiments as well. It’s been a pleasant distraction for us and I don’t know a single person who’s ever transacted in bitcoin, at least in my kind of friends and family circle. I know people around the world that are involved in the business. But…
Axel: I do, I do, I do.
Meb: I mean, the funny thing to me is that it’s like cash, and credit cards, and Apple Pay, and Venmo, and PayPal is perfectly, like, it fulfills all my needs and earns bank interest, and is involved anyway, like you said…
Axel: Let me make one more comment about that though. One of the arguments for a lot of the Fintech movement and Bitcoin is, that it’s so much cheaper to transact than in the banking system. We deal in a currency space, we can move millions, tens of millions, at absolutely minimal cost.
There’s absolutely no reason that it should cost a retail person a fortune, to transfer money abroad. Other than, that regulators have made it so complicated and expensive, and that banks are such huge bureaucracies, that it’s just very difficult for them to move. And so that what I see here is more that Fintech, and including Bitcoin, is more about shaking up this industry. Many of the banks have their lunch eaten here because there are more nimbler organizations there.
Now, what’s gonna happen is, that some Fintech players will be bought by the banks and will be just be integrated. But there’s also a threat to the business model, to big banks that are ultimately just technology providers that provide a financial service. And so, at the same time, if bitcoin, or any other related technology, is gonna get extremely popular, guess what? The regulators will pile in, and also gonna make it very expensive. So transaction costs are again gonna go up in that space.
And so, in many ways it’s good to shake up the industry, but don’t think for a moment that you’re gonna have your or PotCoin was now in the news. With our visitor to North Korea, had this shirt. He had a big PotCoin thing. Don’t think you’re gonna be outside the law because they regulators will find a way to come and get you.
And obviously, we work here in a regulated business, and so we have to respect that, and is all the more reason why finding an interface to work with the established norms, as much as some of the community hates that, it’s gonna be ultimately necessary to make it successful.
Meb: Just stick to laundering money with cabbage patch kids and baseball cards…
Meb: …other prior speculations. Axel, we’re gonna to wind down here. We got a couple questions we usually ask anyone. If you want to give, like, one piece of investing advice for listeners right now. In particular, you know, looking back since you published your book and, kinda, what’s changed in the world and kinda, thinking about this whole episode, kinda, what one takeaway would you like investors to take away from this episode?
Axel: The other day my answer was, go to the gym, stay healthy, so you can get another revenue source as you age. And I was actually quite serious about that. I believe that investors should look at their portfolio much more from a risk point of view, than a return point of view. Stress test portfolio.
When they hear stories from conspiracy theorists or negative folks, we are not always negative on the market but tend to be, embrace that. Not to say necessarily the market is going to do exactly what I predict, or I fear it might do, but stress test your portfolio into that scenario. Because we took such a survivor buys [SP] in this industry that’s the buy, buy, buy, buy the dip mentality, and that’s gonna be wrong at some point. And if that is the case, can you afford to risk? Like any investment, look at it from the point of view, can you afford the risk of having this investment go wrong? If you have to chase an investment because you need to make that return, that’s the wrong investment.
Meb: Yeah. We often say particularly to wealthy individuals, is an old Bernstein quote that says, “Look you’ve already won the game.” And, you know once, particularly if you have some wealth the whole goal was first, you know, do no harm. And a lot of people and a lot of the mistakes we see, are certainly taking on a lot more risk or putting their assets exposed to big draw downs that they don’t necessarily need, or even want.
Axel, if you can think back over your career, over the past few decades, is there any one particular investment or trade that’s been the most memorable one in your career? Now, this can be positive, it can be negative, it can be a money loser, anything. But kind of, when I ask that question, is there anything just pops in your head that has been, kinda, the most memorable investment or trade?
Axel: Well, what would you like me to brag about? Buying Apple stock when Steve Jobs came back to the company. That’s kind of the most memorable one. And I have done that when Louis Gerstner came back to IBM for those who remember Louis Gerstner.
I then sold all my equities including Apple stocks, and Apple always say I sold too early, in 2007 because I was scared, but I’ll not use these words since you might have children listen to this program. So, I then sold all my equities in 2007, and that was a very nice ride.
So part of the reason is because I followed Steve Jobs all his life and I bought one of his computers that he created while he was not at Apple. And so I knew the technology was coming out, when I said, “Hey, this is good as any.” And just to kind of close that loop, I had done IBM, I had done Apple and I says, “Well, why the heck don’t I do it with Yahoo as well?” And just to be safe, I said, “If it works out, I’ll have bragging rights. But just in case it doesn’t work out, I’ll do it in my wife’s retirement account.” And it turns out even if she hasn’t turned out around the company and it wasn’t such a bad trade after all, after she came back to Yahoo.
Meb: Axel, this has been a blast. Where can listeners best follow you? Your work, your publications, everything else?
Axel: Well, as I indicated earlier, following me on Twitter is something, and not just me. Anybody that you find that you like, find a good article look up who the author is, follow him on Twitter. My handle is my name Axel Merk, so please follow me on Twitter.
We do have a newsletter on our website, a free one at merkinvestments.com and look around there what else we do. If we got some products and then if you have a family office or institution and we’ll be glad to stress test your portfolio.
But following me on Twitter is really an excellent start if you wanna be in touch. Be aware, if there is an ECB or Fed meeting I’ll tweet a lot and otherwise I don’t tweet much. But that’s the best way to get really an instantaneous interpretation of what’s happening in the markets.
Meb: Well, great. Look, Axel it’s been a big pleasure, we wish you the best of luck in your marathon this summer, and thanks for coming on today.
Axel: All right. It was a pleasure.
Meb: Listeners, thanks for taking the time to listen. We always welcome feedback and questions for the mailbag at firstname.lastname@example.org. As a reminder, you can always find the show notes. We’ll post links to some of Axel’s papers and other charts we mentioned, and other episodes at mebfaber.com/podcast. You can always subscribe to this show on iTunes. Actually now it’s called Apple podcast. And if you’re enjoying the show, please leave a review. Thanks for listening friends, and good investing.
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