Financial Sense Blog

Benchmarking. It is how everything is compared, from grades in school to your local money manager. But in an interesting twist, benchmarking can also put rose colored glasses on an otherwise poor situation. Let’s look at benchmarking in general and how it can color views on the world.

Crises beget Opportunities. Thus Deepcaster outlines the Main Financial Ongoing and Prospective Crises, and Opportunities.

This week Mr. Treece discusses the increasing likelihood of a coming wave of inflation, the markets recent response to a better business climate, and investors' affinity for bonds. Finally, Mr. Treece cites an over-abundance of information as one cause for investor confusion.

Last February, we presented the Crash of 1987 chart. Specifically, we compared our current market to that of the October peak. Even with the Flash Crash in May, the market is still acting like it wants to crash. While bear markets can be extremely volatile, we continue to expect a Second Flash Crash.

Buying power is defined by its exchange rate value and inside the U.S. relates to the inflation rate. A prime task of the Federal Reserve is to maintain price stability, i.e. buying power stability. So when China expressed concern over the value of the Dollar we all became concerned. There are many reasons to be concerned about the future of the Dollar. We shall look at some of these in this article.

In today’s shaky economy and jittery investment markets, investors may well find that their best moves are not discovering the next big thing or a fantastic value, but simply avoiding serious, and costly, mistakes.

There are many concepts and theories regarding economics and investing that come and go, but few have stood the test of time like mean reversion. The basic premise is that when a system moves too far in one direction it tends to be pulled back to its average or trend, much like stretching a rubber band that eventually snaps back to its resting phase. Mean reversion has fundamental applications in terms of company valuation (overvalued and undervalued) and profitability measures and technical analysis applications in terms of distance from key moving averages (overbought or oversold).

All indications are that China will see a GDP growth slowdown through the end of 2010 as the Beijing government works to take some of the heat out of property prices in the country’s key cities.

The economic news just keeps getting worse and worse (and worse), validating the view we spiraling down in another recession within a larger depression. Of course the effect this is having on an ever-decreasing population of traders (only the pros are left and their numbers are shrinking too as the trade patterns become increasingly bizarre) is to become even more bearish and keep on buying puts, because at some point stocks will turn lower to reflect the fundamentals, right?

In their understandably concerned state of mind in the present day, investors may have lost sight of the longer-term drivers of asset prices. Bonds, especially U.S. Treasuries, have merit presently as high levels of debt have sparked concerns about deflation. However, in the long-run, the case for stocks, commodities, commodity-related currencies, and precious metals looks quite a bit stronger than the case for bonds.