How to measure a currencies valuation or devaluation in relevance to itself
"It's very hard to measure the worth of an abstract concept like money, particularly over long periods of time. In the modern era we have things like the Consumer Price Index (CPI) in the United States, where the Bureau of Labor Statistics literally sends ""shoppers"" out to find prices of things and surveys people to find out what they buy. This results in a variety of ""indexes"" which variously get reported by media outlets as ""inflation"" (or ""deflation"" if the change in value goes the other way). There are also other measurements available like the MIT Billion Prices Project which attempt to make their own reading of the ""worth"" of currencies. Those kinds of things are about the only ways to measure a currency's change in ""value to itself"" because a currency is basically only worth what one can buy with it. While it isn't ""all the world's currencies combined"", there is a concept of the International Monetary Fund's ""Special Drawing Rights (SDR)"", which is a basket of five currencies used by world central banks to help ""back"" each other's currencies, and is (very) occasionally used as a unit of currency for international contracts. One might be able to compare the price of one currency to that of the SDR, or even to any other weighted average of world currencies that one wanted, but I don't think it's done nearly as often as comparing currencies to the basket of goods one can buy to find ""inflation"". Even though one might think what would be important to measure would be overall Money Supply Inflation, much more often people care more about measuring Price Inflation. (Occasionally people worry about Wage Inflation, but generally that's considered a result of high Price Inflation.) In order to try to keep this on topic as a ""personal finance"" thing rather than an ""economics"" thing, I guess the question is: Why do you want to know? If you have some assets in a particular currency, you probably care most about what you'll be able to buy with them in the future when you want or need to spend them. In that sense, it's inflation that you're likely caring about the most. If you're trying to figure out which currency to keep your assets in, it largely depends on what currency your future expenses are likely to be in, though I can imagine that one might want to move out of a particular currency if there's a lot of political instability that you're expecting to lead to high inflation in a currency for a time." The measure of change of value of a currency in relation to itself is inflation (or deflation). As the value of a currency declines, commodities, priced in that currency, will rise. The two best commodities to see a change in would be oil and gold.
It's very simple.  Use USDSGD.  Here's why: Presenting profits/losses in other currencies or denominations can be useful if you want to sketch out the profit/loss you made due to foreign currency exposure but depending on the audience of your app this may sometimes confuse people (like yourself). If you look at the value as a composite, as Graham seems to, then look at its constituent parts (which you can get off any financials sheet they file with the SEC): For example, if you have a fictitious company with: Compared to the US GDP (~$15T) you have approximately: Now, scale those numbers to a region with a GDP of, say, $500B (like Belgium), the resultant numbers would be: "We measure the value of gold by comparing it to other things. Sorry, but there is no better answer than that. There is no gold standard (pun intended) by which objects can be measured in value because ""value"" is a subjective term. It would be comparable to asking how funny is an object. Different objects are funny to different people. Even if we gathered all the really ""funny"" object together, there is no guaranty those objects would be funny next year - unless we all agreed they were as part of a social contract. Which is basically what we do with currency. While gold does not need a social contract in order for it to retain its value, this is only because it is has been (1) very useful and (2) rare. If either of these two factors change, the value of gold will change - which it has on several occasions. WARRING: Rant about ""Intrinsic Value"" of gold below. Gold has no ""intrinsic"" value. None whatsoever.  ""Intrinsic value"" makes just as much sense as a ""cat dog"" animal. ""Dog"" and ""cat"" are referring to two mutually exclusive animals, therefore a ""cat dog"" is a nonsensical term. Intrinsic Value: ""The actual value of a company or an asset based on an underlying perception of its true value ..."" Intrinsic value is perceived, which means it is worth whatever you, or a group of people, think it is. Intrinsic value has nothing, I repeat, absolutely nothing, to do with reality.  The most obvious example of this is the purchase of a copy-right. You are assigning an intrinsic value to a copy-right by purchasing it. However, when you purchase a copy-right you are not buying ink on a page, you are purchasing an idea. Someone's imaginings that, for all intensive purposes, doesn't even exist in reality! By definition, things that do not exist do not have ""intrinsic"" properties - because things that don't exist, don't have any natural properties at all. ""Intrinsic"" according to Websters Dictionary:  ""Belonging to the essential nature or constitution of a thing ... (the intrinsic brightness of a star)."" An intrinsic property of an object is something we know that exists because it is a natural property of that object. Suns emit light, we know this because we can measure the light coming from it. It is not subjective. ""Intrinsic Value"" by definition is the OPPOSITE of ""Intrinsic""" When we speak about a product or service, we generally refer to its value. Currency, while neither a product or service, has its own value. As the value of currency goes down, the price of products bought by that currency will go up. You could consider the price of a product or service the value of the product multiplied by the value of the currency. For your first example, we compare two cars, one bought in 1990, and one bought in 2015. Each car has the same features (AC, radio, ABS, etc). We can say that, when these products were new, each had the same value. However, we can deduce that since the 1990 car cost $100, and the 2015 car cost $400, that there has been 75% inflation over 25 years. Comparing prices over time helps identify the inflation (or devaluation of currency) that an economy is experiencing. In regards to your second question, you can say that there was 7% inflation over five years (total). Keep in mind that these are absolute cumulative values. It doesn't mean that there was a 7% increase year over year (that would be 35% inflation over five years), but simply that the absolute value of the dollar has changed 7% over those five years. The sum of the percentages over those five years will be less than 7%, because inflation is measured yearly, but the total cumulative change is 7% from the original value. To put that in perspective, say that you have $100 in 2010, with an expected 7% inflation by 2015, which means that your $100 will be worth $93 in 2015. This means that the yearly inflation would be about 1.5% for five years, resulting in a total of 7% inflation over five years. Note that you still have a hundred dollar bill in your pocket that you've saved for five years, but now that money can buy less product. For example, if you say that $100 buys 50 gallons of gasoline ($2/gallon) in 2010, you will only be able to afford 46.5 gallons with that same bill in 2015 ($2.15/gallon). As you can see, the 7% inflation caused a 7% increase in gasoline prices. In other words, if the value of the car remained the same, its actual price would go up, because the value stayed the same. However, it's more likely that the car's value will decrease significantly in those five years (perhaps as much as 50% or more in some cases), but its price would be higher than it would have been without inflation. If the car's value had dropped 50% (so $50 in original year prices), then it would have a higher price (50 value * 1.07 currency ratio = $53.50). Note that even though its value has decreased by half, its price has not decreased by 50%, because it was hoisted up by inflation. For your final question, the purpose of a loan is so that the loaner will make a profit from the transaction. Consider your prior example where there was 7% inflation over five years. That means that a loan for $100 in 2010 would only be worth $93 in 2015. Interest is how loans combat this loss of value (as well as to earn some profit), so if the loaner expects 7% inflation over five years, they'll charge some higher interest (say 8-10%, or even more), so that when you pay them back on time, they'll come out ahead, or they might use more advanced schemes, like adjustable rates, etc. So, interest rates will naturally be lower when forecasted inflation is lower, and higher when forecasted inflation is higher. The best time to get a loan is when interest rates are low-- if you get locked into a high interest loan and inflation stalls, they will make more money off of you (because the currency has more value), while if inflation skyrockets, your loan will be worth less to loaner. However, they're usually really good about predicting inflation, so it would take an incredible amount of inflation to actually come out on top of a loan. Other metrics like Price/Book Value or Price/Sales can be used to determine if a company has above average valuations and would be classified as growth or below average valuations and be classified as value. Fama and French's 3 Factor model would be one example that was studied a great deal using an inverse of Price/Book I believe. "I hate to be the guy that says this but if you are indeed competing in the CFAI Research Challenge it is probably important. Remember you cannot use CFA as a noun (CFA's) you can only use it as an adjective ie a CFA charterholder.  As far as you question, what was provided below is pretty much all you need. Security Analysis, anything from the NYU professor and Greenwald stuff (although Greenwald, like someone already mentioned, is balance sheet focused) will get you where you need to go.  I am not sure what you mean by ""exotic valuation"" methods. As far as I know, the three most accepted and used valuation models by practitioners are the DCF model, the multiple model and the residual income model.  DCF uses short term cash flows and a terminal value discounted to today at some discount rate. The multiple model puts some multiple on earnings, book value, cash flow to arrive at a fair value. The residual model is the opposite of the DCF. One starts with the assets book value, then accrues all income generated in excess of WACC from all future periods.  Find some CFAI Level 2 books on equity and bond valuation. They pretty much cover it all.  And for a closing note, to perform well in investing and valuing companies it is not about what valuation model you use. Focus on WHY an asset should be worth what you think it is worth, not HOW you get to some valuation of that asset. Just my two cents." The closest thing that you are looking for would be FOREX exchanges. Currency value is affected by the relative growth of economies among other things, and the arbritrage of currencies would enable you to speculate on the relative growth of an individual economy. Yes - it's called the rate of inflation. The rate of return over the rate of inflation is called the real rate of return.   So if a currency experiences a 2% rate of inflation, and your investment makes a 3% rate of return, your real rate of return is only 1%. One problem is that inflation is always backwards-looking, while investment returns are always forward-looking. There are ways to calculate an expected rate of inflation from foreign exchange futures and other market instruments, though. That said, when comparing investments, typically all investments are in the same currency, so the effect of inflation is the same, and inflation makes  no difference in a comparative analysis.  When comparing investments in different currencies, then the rate of inflation may become important. Speaking from stock market point of view, superficially, TA is similarly applicable to day trading, short term, medium term and long term. You may use different indicators in FX compared to the stock market, but I would expect they are largely the same types of things - direction indicators, momentum indicators, spread indicators, divergence indicators. The key thing with TA or even when trading anything, is that when you have developed a system, that you back test it, to prove that it will work in bear, bull and stagnant markets. I have simple systems that are fine in strong bull markets but really poor in stagnant markets. Also have a trading plan. Know when you are going to exit and enter your trades, what criteria and what position size. Understand how much you are risking on each trade and actively manage your risk. I urge caution over your statement ... one weakened by parting the political union but ought to bounce back ... We (my UK based IT business) have already lost two potential clients due to Brexit. These companies are in FinServ and have no idea of what is going to happen, so I would respectfully suggest that you may have less knowledge than professionals, who deal in currency and property ... but one premise of TA is that you let the chart tell you what is happening. In any case trade well, and with a plan! At any instant, three currencies will have exchange rates so if I know the rate between A and B, and B to C, the A to C rate is easily calculated. You need X pounds, so at that moment, you are subject to the exchange rate right then. It's not a deal or bargain, although it may look better in hindsight if the currencies move after some time has passed. But if a currency is going to depreciate, and you have the foresight to know such things, you'd already be wealthy and not visiting here. "Other things equal is sometimes referred to as ""ceteris paribus"" - the scenario where you compare two currencies (or things) under the assumption that all other factors that could effect those currencies (earthquakes, revolutions, currency crises ect) are not ocurring. Its like using a control group in a lab. ""Real interest rates"" means the rate of that countries interest rate, accounting for inflation. ""Proportional to the strength of its home currency"" is referring to how countries with higher rates of interest tend to have stronger currencies (relative to other currencies) because foreign investment/capital will flood into the country seeking those higher rates of return - excess demand for the currency will cause it to appreciate. So this is also true in reverse, as capital will tend to leave a country will ultra-low interest rates." How you use the metric is super important.   Because it subtracts cash, it does not represent 'value'.  It represents the ongoing financing that will be necessary if both the equity plus debt is bought by one person, who then pays himself a dividend with that free cash.   So if you are Private Equity, this measures your net investment at t=0.5, not the price you pay at t=0.  If you are a retail investor, who a) won't be buying the debt, b) won't have any control over things like tax jurisdictions, c) won't be receiving any cash dividend, etc etc .... the metric is pointless. "Isn't this effectively saying that the market responds principally to itself, and not to either economic fundamentals, or the profitability of the underlying companies.  If so, the market as a ""price discovery mechanism"" is broken, and investors would be wise to do their own research." I'm sorry for adding another answer @MatthewFlaschen but it is too long for a comment. It depends on the situation. Say you buy shares of the Apple Inc. and want to know what is the lost opportunity cost. You need to find out what other opportunities are. In other words what are the other possible types of investments you consider. For example in theory you could try to invest in any company from S&P 500, but is it really possible (I don’t mean investing directly in index) . Are you really capable of researching each company.  So in your case you would consider only a few companies as alternative solutions. Also after different time period each choice may be your lost opportunity cost.  To measure the risk you have to: In conclusion I want to say that my goal was to picture in general how the process looks. Also this is just an exemplary answer. All is about in what finance field you are interested. For example in one field you use Internal Rate of Return and in other Value at Risk. Opportunity cost is to vague to exactly tell how measure its risk of wrong anticipation. It connects in every finance field and in every field you have different ways do deal with it. If you specify your question more, maybe someone will provide a better answer. "I'd agree with maybe a concept of ""situational value"" being negative while accepting ""intrinsic value"" means ""what use a person can expect to get out of it"", but again, both ultimately are subjective. That said, there can be benefits from drawing a distinction between the two.  Going back to Bitcoin, it does have an ""intrinsic value"", because the value of Bitcoin itself is that it can be divided up easily, transferred easily, and etc, all the things that make a currency valuable. Traditionally, we value things as money if they meet many of the following criteria:  1. Medium of exchange 2. Unit of account 3. Store of value 4. Standard of deferred payment 5. Measure of Value  Gold meets some of these better than others, dollars meet some of these better than others, and so on, but Bitcoin meets all of these very well, which means (at least to me) that Bitcoin has intrinsic value in that it meets the definition of what we value the most in a *currency*.  So maybe as long as we agree that there is a difference between subjective value and intrinsic value, and agree that subjective value can, in fact, be negative, there may be something to go on here."