Book Review: 'Sustainable Wealth' By Axel Merk

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 |  Includes: EU, EUO, UDN, UDNT, UUP
by: The PolyCapitalist

Axel Merk’s Sustainable Wealth is very readable personal finance guide to today’s increasingly complex investment world. The book contains a wealth of practical information, and it can be particularly useful for novice investors who are interested in learning more about the role of macro forces and currencies, and how they influence markets.

About the Author

Axel was born in Munich, Germany and grew up in a family of investors. It was during college that he first began investing on behalf of clients. His academic training is in finance and computer science, and he has lived in many parts of Europe before relocating to the U.S. He is the founder and CIO of Merk Investments, a Palo Alto, California based mutual fund focused on currencies. In his personal life he is a distance runner and pilot, and he is married with children. Axel Merk also gives regular media interviews and periodically writes for SeekingAlpha.

Sustainable Wealth

With his book, written following the financial crisis in 2008, Merk aimed to reach an audience that is intelligent and interested but not necessarily educated in economics or currencies. While Merk runs a currency mutual fund, the book is not aimed at currency traders. Rather the book primarily targets the man in the street who is concerned with the actions of today’s policymakers. In the book Merk describes the pressures between where the market would like to go and the interference run by policymakers. Understanding this pull-push dynamic is at the heart of Sustainable Wealth.

One of the key themes of the book is the idea that “there is no such thing as a safe asset” and that investors may want to take a diversified approach to something as “mundane as cash”. The book contains a number of helpful, easy to understand explanations about the fundamental nature of the world’s current debt problem, and ways to address it on a personal level.

During an interview, Merk emphasized his independent opinion. That certainly can bee seen with his often seemingly minority view on the euro versus the U.S. dollar over the past 12+ months. Other than the temporary slide in the euro last summer to $1.18, Merk’s view on the euro has more or less proven correct. However, it is worth keeping in mind that Merk runs a currency mutual fund inside the United States, and that one of the ways in which more American investors would take an interest in his fund is if they are concerned about the fate of the U.S. dollar.

Another idea which perhaps Merk can take credit for being an early pioneer on is the notion that the price of college tuition is currently in a bubble. Enrollments at for-profit education institutions, such as the University of Phoenix, recently plummeted as both students and government increasingly question the return on investment offered by such education providers. Representing perhaps the same tip of the spear as sub-prime mortgages were for the broader real estate market downturn, we may be beginning to witness a turn in what has been an inexorable upward rise in the cost of higher education.

Conclusion

Axel Merk is an extremely sophisticated investor, yet Sustainable Wealth is written in such a way as to make it highly accessible to investing newcomers, for whom I can particularly recommend it. While more experienced independent investors may find themselves skipping through some parts, they may also find much to gain from one of the world’s foremost currency experts.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.