I seem to recall writing about the Merk Hard Currency Fund (MERKX) a few months ago. Gregg Greenberg at TSCM just had an interview with fund manager Axel Merk. According to Morningstar the fund only has $6 million. If this is true, my understanding of mutual fund administration means the fund is not profitable.

The fund's primary purpose is to hedge against declines in the dollar. To that end it owns gold, Swiss bonds and currency from places like Canada, Australia, New Zealand and Euros. Actually, its position in Euros is the largest holding at 42%.

I took the word Hard, in the name, to mean more commodity based but that is not the case.

The chart compares MERKX to the inverse dollar OEFs from Rydex and ProFunds. You can see the correlation is very tight until mid September when gold started to rally. It was the gold position, roughly 20% of the fund, that allowed the fund to outperform.

There is an argument to be made that the other two are purer inverse dollar funds. I'm not sure which is better but an investor interested in this type of protection can control the gold exposure by owning one of the other funds in conjunction with GLD or IAU.

The interview gives Merk's outlook on the dollar (which is of course negative) and what he sees as the drivers for the dollar including a poor savings rate in US. Really, it does not matter what he thinks about the dollar or whether his thoughts are correct. If the fund does what it is supposed to do it will go up when the dollar falls. His opinions could add incremental value if he is right about certain things but this is a top down, counter-strategy fund if ever there was one.

I, for one, hope the fund is wildly successful at attracting assets. It's success could pave the way for other fund companies with innovative ideas to take the risk that Merk Hard Currency Fund is taking.

MERKX is available at Schwab with a $2500 minimum and it is also available at Ameritrade (I queued up an order for $2000 that it would have allowed me to place).

I am probably not a buyer of the fund. I wrote an article about structured products for Real.Money.com that included a reference to a Citigroup Global Markets issued Principal Protected Notes based on Asian currencies that trades as ticker CAQ. After the article ran, I bought CAQ, personally. For the time being this will serve as my falling dollar holding. I am not going to buy it for clients. CAQ is very complex and I'm not sure I could answer client questions about it satisfactorily.

I believe exposure to something that benefits from a falling dollar makes sense in a diversified portfolio but I think the current roster of choices require a lot of ongoing study and maintenance. If you watch almost all six hours of CNBC Asia, apologies to my wife, you might be in good shape.