Nov 14, 2012|
Axel Merk, Merk Funds, on Europe and Gold.
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Right now we're joined by Axel Merck from the Merck funds -- welcome to the show -- this morning morning very well. -- trying to make a forecast on the value of the Euro relative to the US dollar during the next five years what are your expectations -- currency expert what do you think the Euro value will be relative to the US dollar. In the next five years. Well couple things figured might festival we have to -- a printing press stand the Europeans to daylight to -- old and and -- to we'd like to print money and live happily so that would favor a week -- Second thing is we have a current account deficit Europeans don't that means we actually need to attract money from -- brought Europeans haven't met some but the -- -- -- -- Fairly strong. And a third one is that the reason why the Europeans are trying to engage in reform not that working very well is because the bond market is giving them encouragement. We don't have that encouragement and if you look ideas out we'll either get more growth -- we get more inflation. Both obese and -- out that put the bond market. That means the bond market will turn into bear market when that happens point has a less inclined to buy an adult so you can give me by the outlook I'm -- minicamp that -- been. In Europe that might be amiss but does better value in the Euro dentist in the post. So you think you -- now I believe the euro's at about 12720. Air went 270 dollar 27 to say Euro. You'd think that that is more likely five years from now. To be higher UEVD could go back to 15160. -- of ideas is it a long period so it. It it's like in a stock market always go up 10% if you optical forecasters -- it and -- you revise it went to be hit that target but I do and and that again. If and when that the bond market dust Tokyo's policy makers to get their act together but then all bets off you just don't know where that might be heading. And it made any product couldn't all the case scenario will be muddling through but at the same time. That we have discussed with pop on extended period we have extreme monetary policy. We we we have always it has declared quote I don't think there's so many ways this can play out to me it's more important we had a risks that balance of risks. Is that the dollar might weaken over time. And as such I'll take into account. I can't tell you -- a -- -- -- 415160. Or two to. What do it why should our listeners be concerned. About the value of the US dollar you know it somebody's driving to work today and they hear you saying it the US dollars can be worth less than say the Euro. That is the average guy care. Precisely because they're driving because they fill up the tank and price of the few public probably clearest indication yet -- what is the cost of input may make a -- historically when a dollar weakens what has. Just squeeze the margins continue doing business what has changed. Is that nowadays we put everything from China and I want you is that the Chinese have pricing -- -- -- on the -- export and lo and consumer goods date that they act but I patent law most sophisticated -- and and we have outsourced everything already we need to also have -- more complex process -- that means the folks that sell that stuff. Act that will have pricing to as the dollar weakens our -- is -- power is at risk. And even if it is directly and weaker dollar has not -- -- -- -- I inflation I would not bet my house and. All right no actual let me ask you about gold if I may. I had an analyst on a gold analyst on within the last couple weeks he told me gold was going to 1525. And then it became a by. It went if and when it gets to 1525 announce. What's your pricing perspective on gold you'd buy and now it's at 1727. Or do you wouldn't -- wait until it gets set to a lower price. Well that people had always went to wait people wanna wait to sell the dollar until it weakens they wanna wait to worry about inflation when it happened they wanna wait too. -- -- housing when -- housing bubble pops. It's very difficult to two timepiece things and it made it you'll like eight. Rocket and at a boiling pot angle has -- -- to affect about dissent and on about when you wanna stop buying it now of course at some point it might be too expensive but given what I just laid out I don't think it will be think about it and we have too much debt in the world in the developed countries if you take them altogether the debt to GDP ratio as Obama percent. Has never happened before it in peace talks. On top of that inflation is the path of least resistance unless you think congress is going to be how. Happily get together and engage in -- entitlement reform will just try to. Get it weighed by nominally living up -- -- promises. But eroding the purchasing power of what what we have to. -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Out and and and that but it was -- cannot mop up liquidity because we cannot afford the debt and high interest rates and government debt. And so we have to keep interest rates low -- took it very difficult. He should be very good for gold at bat for inflation I think is what you're telling us right usually you're telling us I believe I just heard you say. We'll keep low interest rates and we'll have a high rates of inflation simply because the US government will not be able to afford to finance our debt. Just think about am what what happens and Europe -- screaming at 6% at that it's impossible in the US equipment -- -- -- -- very difficult to -- is that all these budget deficit -- -- -- out the -- window interest rates -- payments -- -- and so we -- Have to keep interest rates low and and conversely debt that's something that's that's pretty -- for gold and and not so great news for the US so. All right well thank you very much -- we appreciate your time thank you -- that's axle -- joining us today from the Merck funds giving us an update on. What's going on me -- anticipating June is high rates of inflation but continued low interest rates that's a scary scenario and it sounds like he is also concerned about that not dealing with and anything until it's too late we all scenario hunter. That's we can thank congress for eight there is the a plant in. Wilmington Massachusetts it's gonna be closing in the next six to nine months 250. Jobs at stake you're gonna talk about that next on the financial exchange.