by Axel Merk
Reviewed by: Gary W. Silverman, CFP®
Gary Silverman owns a fee-only financial planning firm in Wichita Falls, Texas. He is the editor of the financial newsletter Personal Money Planning, writes the newspaper columns Your Money and Biz2Biz, and hosts the cable talk show, Money Cent$. Contact him at www.PersonalMoneyPlanning.com.
Axel Merk is, according to his bio, a pioneer in the use of strategic currency investing. He's the president of Merk Investments and is the manager of the Merk Absolute Return Currency, Asian Currency, and Hard Currency funds. Given that background, it is natural that he would have written a book on currency trading strategies. Nothing could be further from the truth.
Merk's new book, Sustainable Wealth, is not written to Wall Street's money managers or to students of the currency exchanges. It is written to the normal Joe and Judy on Main Street.
Some people seem wealthy, but instead are living a life of excess that is not sustainable. Others of more modest means may not be rich, but have developed a life that allows them to achieve their desired goals. They've created a lifestyle that can handle the ups and downs of life and still progress forward. They are the ones who have achieved "sustainable wealth."
To that end, Axel Merk begins the book discussing the world we live in and the dynamics that drive it. In this first part, Merk discusses the external dynamics that affect your finances. Here, he skillfully covers the temptations and vices of the modern economic system: credit, consumption, policy change, and complacency.
These are not temptations of the individual (though there are parallels), rather, they are temptations given into by the government and society as a whole. Credit might be used too much or for the wrong things. Consumption might take more than is produced and plunder any savings. Policies can be changed to meet short-term or political goals. As Merk says:
"Government intervention, specifically central bank intervention, has through history made the boom portion of the cycle more pronounced and extended the busts. While government policies are intended to cushion the impact of the bust, what can happen is that all the well-intended efforts only extend the day of reckoning ... ."
Complacency manifests in many ways. We can become complacent by a false prosperity-a prosperity lived through the false asset of debt. This can create a standard of living that leads to more complacency. That is, until the standard can no longer be sustained. Complacency might be due to the legacy of a business or personality that is long past its prime. Or, and one that Merk tends to harp on a lot given his expertise in currency trading, a complacency of relying on having the world's reserve currency that allows the U.S. to get away with stuff other countries can't.
In Part II of Sustainable Wealth, the reader learns how to apply these lessons to their own finances. You see, the temptations were introduced first as they are the forces that might otherwise wreck your planning to creates sustainable wealth. And, as I'm sure you gathered, all of the temptations in one form or another can tempt the individual as well.
He talks though the advantages of using an adviser, developing meaningful objectives, and determining any constraints involved. The importance of protecting from low-probability, high-risk events (think Black Swan) is also discussed. He is very consistent with his admonition for the reader to stay engaged in the world, constantly learning, and adjusting as necessary.
The key, of course, to sustainable wealth is to control your standard of living and lifestyle. He leads the reader through a discussion of what they control versus what they influence, so it is understand that they are the prime determinants of their own financial lives. And while he readily admits that some things are beyond influence or control, the results can be mitigated.
While not an investment book, Merk does deal with investing, and given current happenings, spends some time dealing with investing during a crisis. He even talks to the subject of gold. (Interestingly, their family's entire college savings is in physical gold. Don't worry...he's not advocating the reader do the same.)
I don't consider this a detailed how-to book (though there are a lot of how-tos). Rather, I'd describe it as a book of fiscally rational living philosophy. As the author puts it, "Sustainable Wealth is about learning a lifestyle." Those people wanting a checklist that leads to a life of prosperity will be disappointed. Those who want a framework with which to establish and accomplish their financial objectives while understanding the fiscal world around them will be pleased.
I'll leave you with one of Merk's better admonitions:
"Take prudent risks when you feel strongly about an opportunity, but do not jeopardize your long-term savings priorities."
And now a footnote:
As I stated at the first, this seems like a strange book for Axel Merk to write. So what the heck is he doing writing this book? It's not about currencies (though it is mentioned now and then), nor is it written to the type of folk who would normally be in the market for his services. My guess is that it is because he takes a break from his early morning work schedule to go back home, fix the kids' lunches, and has breakfast with them. He, like most parents, wants a world where he and his kids can grow up being able to sleep at night without worrying about what's happening to their investment portfolios; a world where you can take time to smell the waffles.
John Wiley & Sons (2009)