All about fundamental analysis

hubsonwolfe1 — Wed, 20 Oct 2010 06:58:16 +0000

Fundamental analysis is hard because the importance of different factors changes with the passage of time. For example, during an economic expansion, fundamental analysts are likely to focus on growth rates, but during recession, on the safety of dividends. A dividend may seem like a quaint relic in a go-go bull market, but when the chips are down the ultimate test of a stock is how much income it generates. A fundamental analyst must keep an eye on the crowd, as it shifts its attention from market share to technological innovation to whatever else preoccupies it at them moment. Fundamental analysts study values, but the relationship between values and prices is not direct. It is that mile-long rubber bank all over again.

The job of a fundamental analyst in the futures market is not much easier. How do you read the actions of the Federal Reserve, with its great power over interest rates and the economy? How do you analyze weather reports during the critical growing seasons in the grain markets? How do you estimate carryover stocks and weather prospects in the Southern versus the Northern Hemispheres which are six months apart in their weather cycles? You can spend a lifetime learning the fundamentals, or you can look for capable people who sell their research.

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All about fundamental analysis