Investors who trade actively and are closely in touch with the ebb and flow of opinion on Wall Street have one enormous barrier to good investment performance: They will often be seduced by what’s fashionable – whether it be in terms of sectors, countries or individual stocks.

But in this market, as in all markets, it’s best to look at the unfashionable – sectors that are scorned or ignored by the market and countries whose stock markets have been beaten down by adversity. Of course, it’s difficult to do this if you constantly have an ear to Wall Street. Perhaps that’s why Warren Buffett bases his investment business in Omaha, Neb., not New York.

Since sinking to a 12-year low of 676.53 on March 9, the Standard and Poor’s 500 Index had risen 24% — the best such short-term rally since 1933. But this isn’t 1933 and you shouldn’t trust the rally. Happy Days are NOT here again, at least not yet.

The 1933 rally came after a record-breaking decline. Real gross domestic product (GDP) fell by 25% during the Great Depression and the Dow Jones Industrial Index fell by almost 90%.

One of the most accurate forecasters of the global economic crisis, Nouriel Roubini, said last week that last September’s spree of bank takeovers deepened the crisis because it made the already-too-big banks even bigger.

He may well be right; more interesting is what this tells us about the U.S. banking system going forward.

Endless reports in the media have pointed out that this global recession is “worse than anything since the Great Depression.”

To be fair, it’s not even certain yet that this nasty downturn has beaten the mid-1970s downturn, though it probably will. But even if that does happen, by focusing exclusively on the 25% unemployment of the 1930s and the “Grapes of Wrath” Joad family as our inevitable future, we’re ignoring another equally unpleasant potential scenario: The Weimar German hyperinflation of 1923.

Chilean President Michelle Bachelet rebuked British Prime Minister Gordon Brown last weekend, saying the British economy would have more room for fiscal stimulus now if he had pursued responsible budget policies previously, as Chile has.

It makes you sit up and take notice when you see a Latin American political leader rebuking a British one for financial irresponsibility, but in this case, Bachelet was completely justified. Great Britain, even more so than the United States, was running big budget deficits well before the crash hit.

U.S. President Barack Obama’s firing of General Motors Corp. (GM) Chief Executive Officer G. Richard Wagoner Jr. may be the beginning of the final act of a long and sad drama - the slow death of GM. The company nameplate may soldier on in some form, but it seems increasingly likely that unless Ford Motor Co. (F) can forever avoid government intervention, the once-unique capabilities of the U.S. automotive industry will be forever lost.

In 1970, GM had nearly 60% of the U.S. automobile market, and imports’ share was below 10%. Today, GM’s market share is little more than 20%, and imports and domestically produced automobiles of foreign brands dominate the market.

Anyone who has ever visited Japan knows it to be a country where everything works beautifully - and with great efficiency. Right now, however, it’s clear that something has gone horribly wrong there. Japan’s exports for February were down a shocking 49.4% on a year-over-year basis. The Japanese economy suffered a fourth-quarter decline of 3.2% - twice the decline of its U.S. counterpart - and is expected to drop by a similar amount during the current quarter.

What went wrong? And, for us investors, are the low current prices of Japanese stocks a buying opportunity or a trap?

For lawmakers who believe that 90% tax rates would be an effective way of punishing the financial malefactors who continue to flourish as the rest of us founder, take careful note: Not only will you punish the innocent as well as the guilty, you could also extinguish the innovative spark we’ll need to eventually make this moribund economy catch fire.

The U.S. House of Representatives voted Thursday to impose a tax rate of 90% on bonuses earned by wage earners of $250,000 or more who are working at banks that received more than $5 billion from the Troubled Assets Relief Program (TARP). The Senate is expected to vote this week on similar legislation, possibly extending the tax to institutions that have received more than $100 million under TARP.

I have written a number of times in the last few months that gold and mining shares look attractive. While the metal had a big run-up in price during the three-month stretch that ended in late February, the yellow metal has subsequently dropped back a bit, as have the prices of the leading mining shares. If anything, however, the reasons for gold bullishness have intensified.

The U.S. Federal Reserve had been expanding the money supply more rapidly than output for more than a decade, since a policy change in early 1995. That’s why the U.S. economy underwent a series of bubbles, from stocks in 1996-2000 to housing in 2002-2007 to commodities in 2006-2008. Then, when the inevitable crisis hit in September 2008, the Fed began expanding the money supply even more rapidly.

Although we’re still in the middle of the worst financial crisis in decades, a few select banks are positioned to make a boatload of profits. And if you pick the right ones, gains of 100% or more are easily within reach.

The U.S. Federal Reserve’s actions in cutting short-term interest rates to almost zero - together with a gentle rise in U.S. Treasury bond yields since the start of the year - have given us a steeply sloping yield curve, where long-term rates are about 3% above short-term rates.

When the finance ministers of the G20 group of leading world economies – including the so-called “BRIC” (Brazil, Russia, India, China) group of emerging-market nations – meet in London this weekend, you can bet that there will be only one topic: To figure out what the hell their governments should do about the global economic crisis.

Presumably, if any really good ideas emerge, the London Summit of the G20 Heads of Government can try to implement them in two weeks’ time.

Last week’s economic data told us two things. First, this recession is almost certainly going to be the worst since World War II. Second, the pit isn’t bottomless; there are faint signs of a landing - although it is still some considerable way further down.

For investors, the prospect of a not-quite-bottomless pit in the United States is unexciting, to say the least, so it’s worth looking internationally for areas where the news is rather better.

When Goldman Sachs Group Inc. coined the term “BRICs” in 2003 to cover Brazil, Russia, India and China, this group of four countries was supposed to represent the enormous potential of the emerging markets, as their populations would provide most of the world’s growth in the decades ahead. For a year or two, Goldman’s theory seemed to work and the “BRIC” acronym became immensely fashionable.

But now that the global downturn has hit, the four countries have diverged, and it is no longer clear what they have significantly in common. Money Morning actually raised some of these concerns in a two-part series that ran in August – back even before the downturn reached crisis proportions, or analysts began questioning the BRIC concept. So let’s revisit the four countries again right now, take a look at each one, and see for ourselves whether there’s still any merit to the BRIC concept.

When it comes to naming a winner in the competition for “the worst product ever invented by Wall Street,” there is quite a list of worthy candidates. With just the current financial crisis alone there are such “inventions” as subprime mortgages, auction rate preferred stock and asset-backed commercial paper, which all have a good claim to this title.

There’s also the credit default swap (CDS).

It’s a tough time to be a bank shareholder. You’re not just worrying about whether the ongoing recession or a further lurch downwards in housing prices is going to decimate the value of your bank’s loan portfolio. You’re also worrying about whether some government “stress test” or – worse still – nationalization is going to destroy most or all of your investment’s remaining value.

And finally, if you’re smart, you’re worrying about whether some cockamamie government loan scheme is going to artificially force down the nice juicy interest margins your bank is earning on the new loans it makes.

U.S. President Barack Obama’s speech to the joint session of Congress late Tuesday was a beautiful performance. His language was exquisite, his delivery was superb, his rhetoric - at times - truly uplifting. It no doubt reflects a fault in my makeup that I found it not entirely convincing - but then I’m a math major and a former banker.

The speech - which took the place of the State of the Union address since it’s Obama’s first year in office - concentrated almost entirely on economics, and in particular on the financial and economic crisis currently facing the United States. President Obama’s comments were least convincing when they focused on the financial aspects of the crisis.

Following my report on the viability of the top 12 U.S. banks, a number of readers have suggested that I missed Fifth Third Bancorp (FITB).

I’m happy to report that it wasn’t an oversight: The reality is that Fifth Third – with $120 billion in assets – didn’t quite make the cut, since it’s actually not one of the top 12 U.S. banks. But given the high level of reader interest in our report (which ran Wednesday), I thought it was worth a look.

U.S. Treasury Secretary Timothy Geithner last week proposed a series of programs, totaling $1.5 trillion, to bail out the U.S. banking system. Of course, Geithner hasn’t told us precisely how he plans to spend the money, or identified which banks require such an enormous outlay.

So I thought it was worth looking at the United States’ 12 largest banks to see where the problems might be and identify which banks might need big infusions of government cash. I perused the financial statements of all 12 banks, and also looked at their market valuations.

By revamping the banking sector’s compensation system, and creating a salary cap of $500,000 for the top executives at institutions that accepted federal bailout money, new U.S. President Barack Obama could be launching a reform movement that helps make the American financial system worthwhile to invest in again.

For the last 30 years, Wall Street has had a problem with its remuneration system. Base pay was only around $150,000 even for a partner/managing director - not enough to live on for senior Wall Street bankers with a Manhattan lifestyle - while bonuses were 10, 20 or even 100 times that amount.

As I watch the $900 billion stimulus bill wind its way through Congress, knowing this will be piled atop the estimated 2009 deficit of $1.19 trillion, the longtime banker in me keeps asking the same worrisome question: How the devil are they going to finance all this rubbish?

A report released Wednesday by the U.S. Treasury Department’s Borrowing Advisory Committee on the government’s borrowing plans gave me the answer I expected: With great difficulty.