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Financial Markets
Summary For The Week of September 22-26
The week of
September 22-26 will see a modest week of US macro data. However, given the
dislocation in the markets, the upcoming week will provide a test to see if
recent steps taken by global central banks and the immanent mergers of large
financials can inject a measure of confidence and stability into markets. The
major data releases for the week will be the publication of the existing
homes sales and new home sales data for August on Tuesday and Thursday
respectively. The durable goods report will be released on Wednesday and the
weekly jobless claims report will be published on Thursday. The week will
conclude with the final estimate of Q2'08 GDP and the consumer sentiment
report from the University of Michigan.
Fed Talk
In light of the
recent upset in financial markets caused by the collapse of Lehman and the
problems at AIG the market will observe the most important week of Fed Talk
in some time. The major event for the week will be the testimony of Fed Chair
Ben Bernanke and U.S. Treasury Secretary Paulson on the takeover of Fannie
and Freddie on Thursday before a House panel. Dallas Fed President Richard
Fisher will speak on the economy and financial industry on Monday. Fed
Governor Warsh will give the keynote speech at the Chicago Fed's annual
international banking conference on Thursday. St. Louis Fed President Hank
Bullard will speak on the economic outlook Friday.
 
Existing Home Sales
(August) Tuesday 10:00 AM
Sales of existing
homes during the month of August should see a modest increase on the back of
the sale of foreclosed properties selling at distressed prices and slight
decrease in the cost of a 30 year fixed mortgage. Our forecast implies that
sales of existing homes should come in at 5.09 million for the month of
August. However, with the stock of existing homes still standing at 11.2
months the rate of sales needs to pick up to adequately address the number of
homes currently on the market and those on the way through foreclosure or
normal cyclical activity. The seizure of Fannie Mae and Freddie Mac by the
U.S. Treasury has been the primary catalyst behind the recent decline in the
30yr fixed mortgage rate that should be partially captured by the September
report which will be impacted by the seizing up of short term credit markets
in the aftermath of the failure at Lehman.
Durable Goods Orders
(August) Wednesday 08:30 AM
After three straight
months of growth, we anticipate that the durable goods orders for the month
of August should decline by -1.3%. on the back of a month of weak orders of
civilian aircraft and a moderation in global demand. The core ex-transportation
estimate should come in flat as the demand for machinery, primary and basic
metals continue to be solid.
Initial Jobless
Claims (Week ending Sep 20) Thursday 08:30 AM
Jobless claims
should see a slight moderation to 450K for the week ending September 20. According
to the Department of Labor, for the week ending 13 September if it were not
for the increase in claims in Louisiana due to hurricane Gustav, the headline
would have declined for the week. However, continuing claims should move
higher to 3.501mln.
New Home Sales
(August) Thursday 08:30 AM
New home sales
should see a second straight month of improvement on the back of a modest
decline in the cost of a 30yr fixed mortgage. The flexibility to attract new
consumers on the part of the development community has pushed the inventory
rate down to 10.1 months, down from the peak of 11.2 months seen in March
2008. However, going forward the recent decline in the cost of long-term
mortgage rates may be partially offset by the disturbance in domestic credit
markets following the bankruptcy of Lehman.
U.S. GDP
Final Estimate (Q'2 2008) Friday 08:30 AM
The final estimate
of economic output during the second quarter of 2008 should see the rate of
growth hold steady at 3.3%. Given the events of recent days, whatever
positive momentum from the increase in growth inspired by the combination of
the fiscal stimulus and demand from the external sector should wither. We
anticipate that the market will look at the rate of growth as one decisively
located in the rearview mirror and not have any substantial reaction to it.
University of Michigan
Consumer Sentiment (September-Final) Thursday 10:00 AM
The decline in the
cost of gasoline prices throughout much of the country and the fall in the
price of imported oil were the primary catalysts behind the above
expectations increase in the preliminary release. Of interest to the market
will be the reaction among consumers to the recent upset in the market in the
aftermath of the bankruptcy at Lehman. We think that this will serve as a
factor in causing consumer sentiment to retreat to 63.9 for the month of
September.
Joseph Brusuelas
Chief Economist
VP Global Strategy
Merk Investments LLC
Merk Investments LLC is the manager
of Merk Mutual Funds, including the Merk Asian Currency Fund and the Merk
Hard Currency Fund. The Merk Asian Currency Fund invests in a basket of Asian
currencies. Asian currencies the Fund may invest in include, but are not
limited to, the currencies of China, Hong Kong, Japan, India, Indonesia,
Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
The Merk Hard Currency Fund invests
in a basket of hard currencies. Hard currencies are currencies backed by
sound monetary policy; sound monetary policy focuses on price stability.
The Funds may be appropriate for you
if you are pursuing a long-term goal with a hard or Asian currency component
to your portfolio; are willing to tolerate the risks associated with
investments in foreign currencies; or are looking for a way to potentially
mitigate downside risk in or profit from a secular bear market. For more
information on the Funds and to download a prospectus, please visit www.merkfund.com.
Investors should consider the
investment objectives, risks and charges and expenses of the Merk Funds
carefully before investing. This and other information is in the prospectus,
a copy of which may be obtained by visiting the Funds' website at www.merkfund.com or calling 866-MERK
FUND. Please read the prospectus carefully before you invest.
The Funds primarily invest in
foreign currencies and as such, changes in currency exchange rates will
affect the value of what the Funds own and the price of the Funds' shares.
Investing in foreign instruments bears a greater risk than investing in
domestic instruments for reasons such as volatility of currency exchange
rates and, in some cases, limited geographic focus, political and economic
instability, and relatively illiquid markets. The Funds are subject to interest
rate risk which is the risk that debt securities in the Funds' portfolio will
decline in value because of increases in market interest rates. The Funds may
also invest in derivative securities which can be volatile and involve
various types and degrees of risk. As a non-diversified fund, the Merk Hard
Currency Fund will be subject to more investment risk and potential for
volatility than a diversified fund because its portfolio may, at times, focus
on a limited number of issuers. For a more complete discussion of these and
other Fund risks please refer to the Funds' prospectuses.
This report was prepared by Merk
Investments LLC, and reflects the current opinion of the authors. It is based
upon sources and data believed to be accurate and reliable. Opinions and
forward-looking statements expressed are subject to change without notice.
This information does not constitute investment advise nor a solicitation or
an offer to buy or sell any products or services. Foreside Fund Services,
LLC, distributor.
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