BEIJING, PEOPLE’S REPUBLIC OF CHINA - From my vantage point here in Beijing this week, I find my mind drifting this Tuesday morning closer to home and specifically back to Citigroup Inc. (C).

Shares are under pressure for reasons that most investors, particularly those who were looking for a repeat of Goldman Sachs (GS) - don’t understand - especially after a “favorable” conference call and results that were widely interpreted as positive. Others are taking it a step further and suggesting there’s a massive capitalist “conspiracy” at play in the financial sector - especially now that the government is so heavily involved.

One of the single biggest fallacies foisted upon the investing public is the notion of an “efficient market.”

Academics love it, which is why the “efficient-market hypothesis,” or EMH, as it’s known, is taught at all the leading B-schools. The broadest version of this theory holds that securities prices already reflect all known information; EMH proponents believe it’s impossible to outperform the markets over time - except by luck.

If you’re like many investors, you are probably sitting on the sidelines right now, unsure of what to do. If you want to buy, you may be thinking “let’s wait a little longer.” If you want to sell, you might be concerned about “missing out.”

Either way (and even if you don’t plan on making either move anytime soon), having a sense of what got us here can keep you from repeating the same mistakes and even help you make smarter financial decisions - particularly when it comes to repairing your portfolio and even growing it in the years ahead.

For many investors, the last 12 months have felt like a cross between Dante’s “Ninth Circle of Hell” and Mr. Toad’s Wild Ride.

Even so, after Tuesday’s market action - which saw the Standard & Poor’s 500 Index rebound from a 12-year low to gain 6.4%, and the Dow Jones Industrial Average jump 5.8% - many investors are no doubt wondering if it’s time to pile in.

Historically speaking, the Japanese yen has proved to be a safe haven against global turmoil. Right now, however, Japan’s economy is among the worst hit of all the global powers. It is ill prepared to weather the global storm and it’s falling like a rock.

That’s why, this time around, as Japan’s economy falls away, I think there’s a very good chance the yen could drop as well.

Commodities may be down, but they’re not out – and they shouldn’t be out of your portfolio, either.

As the investment director for Money Morning, I’m invited to a large number of speaking engagements each year. It’s something I enjoy, and it’s quite useful, too, for the questions that I get tell me a great deal about investor sentiment and the general tenor of the financial markets. The same is true for the questions I receive daily from our readers.

Despite what you might be hearing about a global recession, consumer capitalism is alive and well in China.

And it’s still fueling growth.

Many investors have given up on oil, fearing that a fall from grace precludes a rise in price from the ashes. But it’s worth noting that the oil markets are right now in a rare state of ’super contango,’ which suggests that the markets expect far higher prices by next year.

Here’s what you need to know.

With the way stocks are being whipsawed, investors often ask me how to tell when the market is ready for a rebound. While there’s no way to ever be 100% certain, I usually just let history be my guide.

And history has a very interesting story to tell right now.

Judging from recent reports that JP Morgan Chase & Co. (JPM) Chief Executive Jamie Dimon and Citigroup Inc. (C) board member Robert W. Rubin will forgo bonuses this year, it appears that at least some U.S. executives are starting to change their habits, as we’ve long suggested they should.

Just Monday, in fact, U.S. heavy-equipment giant Caterpillar Inc. (CAT) announced it was cutting executive compensation by as much as 50%, because of weakening global demand.

Many of my neighbors here in Oregon are enjoying the big decline in gasoline prices, particularly those who still own SUVs, pickup trucks or any of the other fire-breathing, piston-clanking monstrosities I’ve seen on the road recently.

And no wonder. Gasoline prices in our neck of the woods have fallen between 60% and 70% since July, when oil closed at a peak price of $145.29 a barrel. Here in Oregon, that means that my wife and I don’t feel like we’ve been mugged every time we fill up.

"Have we seen the worst from the financial sector?"

The question - a very good one - came from an audience member following my global investing presentation at the Agora Wealth Symposium in Vancouver, British Columbia.

I don’t know about you, but I could only pick my mouth up off the floor when I watched the Big Three’s CEOs beg for a taxpayer-funded bailout this week. Never mind the fact that they’re now asking for $34 billion (up 36% from $25 billion two weeks ago), or that they drove to DC in a caravan of new hybrids that would make the Keystone Cops proud.

What got my attention was that Ford’s (F) CEO Alan Mulally, after admitting "big mistakes," attempted to sway Congressional members by saying "we’re really focused now."

If you were counting on gold to boost your returns this year, chances are you’ve been cruelly disappointed. In fact, when it comes to gold-related investments, virtually every category is down, making this one of the worst years in history for gold investors.

So, why is it that the largest of the large futures traders have some of the lowest net short positions in years? And what does this tell us about gold prices in the near future?

It’s easy to be gloomy when it comes to the financial markets.

It’s even easier to write off China.

Value funds have long been viewed as conservative investments. So why are they down an average of 42% during the past 12 months, and what’s wrong with them?

No question, such numbers are scary, especially for large-cap value fund investors who have experienced that 42% drop. And the fact that some of the biggest names in value investing have taken such big beatings has to be especially disconcerting for investors who already have had their confidence badly shaken and their portfolios eviscerated.

With the whipsaw trading we’ve seen of late, it appears that the U.S. financial markets are already chewing through the post-election honeymoon. I have to say that I, for one, am relieved that’s the case because it signals that the markets are already returning to normal.

I realize it may not feel that way, but there’s one very important thing to remember: We nearly always seem to receive the best news near, or at, market tops, and the worst news near, or at, market bottoms. Although that seems contradictory, it actually makes sense. And investors can take some solace in the fact that the mounting tide of bad news is an important part of the bottoming process.

In the 20 years I’ve been creating stock market forecasts, I’ve never seen such a contradictory set of forces at work in the markets all at one time. I could just as easily make the case that we’re finally nearing a bottom, as I could that we’re in for a protracted downturn punctuated by sharp, quick drops.

The only question in my mind is what shape an eventual recovery will take, for I see three possibilities:

Although the ongoing financial crisis has introduced a new word – bailout – into the lexicon of most investors, a quick tour of history shows us that these big-ticket financial rescue plans are actually nothing new.

And that raises the question: Do they work?

Nut job. Alarmist. Fear monger. Dr. Doom.

I’ve heard them all. When you make your living as a financial analyst and commentator, as I do, you aren’t going to get a lot of invitations to the ol’ country club - especially if you spend a lot of time spotlighting the problems that are created by greedy Wall Streeters, sleepwalking regulators, or indentured elected officials.