Fiat, Quant, and “Why Now” with Charles Ashley, Ep #62

Today's episode is for anyone interested in learning about the intricacies of investing in the financial markets. Are you wondering what the fiat currency system is, or are you curious about how financial analysis works?

We explore perspectives on the currency market and how it impacts investment strategies. We discuss the complex relationships between financial concepts that influence the value of currency. We discuss quantitative analysis and how leveraging it can help maximize investment portfolios.

Charles Ashley, a portfolio manager at Catalyst Funds, holds a Bachelor of Arts degree from Michigan State University and an MBA from the University of Michigan, Ross School of Business. In this episode, he breaks down abstract financial concepts with real-world market applications.

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LISTEN IF YOU ARE INTERESTED IN…

[1:40] How does the currency market work?
[4:15] The strength of the dollar is a matter of perspective
[6:15] How the balance of trade influences the value of the dollar
[10:20] The relationship between currency yield and inflation
[16:30] What the currency carry trade is, and how it affects the market
[31:00] How does quantitative analysis compare to mutual funds
[36:20] The need for human logic in quantitative analysis
[43:40] Quantitative analysis investing strategies

The Currency Market Defined by Perception

While currency is unique to each country, it has a significant relationship with the currencies of other nations. Charles explains that developed markets tend to be more stable than emerging markets. A domestic view of currency is largely conceptual—it's about recognizing how much local goods or services your dollar can buy. Understanding this can help you gauge whether your currency is strong or weak.

Globally, people often assess the strength of their currency by comparing it to that of another country. For example, a U.S. traveler in Europe might feel that the dollar is strong if it buys more goods and services than the Euro.

The Delicate Balance of Influential Financial Relationships

It's not just the purchasing power of the dollar that determines its strength. The currency market is also influenced by factors such as inflation, the money supply, and geopolitical stability.

The value of a currency is shaped by the interplay of these factors. For instance, when the value of the dollar rises, interest rates often follow suit.

Countries also value their currencies based on their role in international trade. An exporting nation may prefer a weaker currency relative to its trading partners, while a consumer-driven country would favor a stronger currency to purchase more goods and services.

Strategies of Quantitative Analysis on Investing

Quantitative analysis uses statistical methods to analyze large data sets, identifying patterns that can guide investment decisions. As financial markets become more sophisticated, there are more ways to invest.

Charles explains that quantitative analysis can help select the most productive stocks to maximize returns. Additionally, some quant strategies focus on diversifying return streams to achieve better risk-adjusted returns, often by taking a non-traditional investment approach.

Charles Ashley is not affiliated with or endorsed by LPL Financial or Capital Investment Advisers.

Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.

The financial professionals associated with LPL Financial may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

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RESOURCES MENTIONED

Twenty-One Lessons from Financial History for the Way We Live Now: https://www.youtube.com/watch?v=S5NA0nS2o-8

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CONNECT WITH CHARLES ASHLEY

Charles Ashley - Catalyst Funds: https://catalystmf.com/team/charles-ashley/

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CONNECT WITH EMERSON:

Website: www.CIAdvisers.com