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Investment Idea: Big Mac Index
03-30-2005, 10:20 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Investment Idea: Big Mac Index
Every year, The Economist publishes the Big Mac Index. It is a snapshot of relative values of different currencyies based on the cost of a Big Mac in USD terms in different countries. Over time it has a good track record of showing the most over and under valued currencies in the world. How about a very simple investment strategy: every year, we buy a 1 year CD at everbank.com denominated in the cheapest currency according to the index.
Thoughts? (Yes, I had some wine with lunch).
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Ezekiel 23:20
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Re: Investment Idea: Big Mac Index
03-30-2005, 10:25 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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Re: Investment Idea: Big Mac Index
I might suggest the "fidelity select hamburgers" fund...
http://news.morningstar.com/doc/arti...130089,00.html
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: Investment Idea: Big Mac Index
03-30-2005, 10:38 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,339
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Re: Investment Idea: Big Mac Index
IMHO the Economist index is always right on about the relative valuation of curriencies. However, they do not suggest they know when a correction will occur. So how you use this information is up to you. Anyone in international business has even more detailed information, what makes this index so neat is that is easy enough for anyone to understand.
My only use of it is to figure out what place is underpriced for vacation purposes and purchases on such trips. My son chose to go to China over Italy last year in part because of the currency valuations reflected in something like the Big Mac Index. For investing it is not as useful as you have to worry about more variables like local vs export markets, raw material costs as well as exchange rates.
Yakers, who loves reading The Economist for 27 years now, but not as much as kayaking...
__________________
T.S. Eliot:
Old men ought to be explorers
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Re: Investment Idea: Big Mac Index
03-30-2005, 01:50 PM
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#4
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Recycles dryer sheets
Join Date: Mar 2005
Posts: 90
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Re: Investment Idea: Big Mac Index
Quote:
Thoughts? (Yes, I had some wine with lunch).
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Wasn’t McD’s in financial and consumer trouble a year or two ago? Like the simplicity, but prefer to see a better staple, cost of a Beatles CD or something maybe. Anyway now they’ve sunk to recruiting gansta rappers to write songs incorporating their sludge . .
http://www.mtv.com/news/articles/149...headlines=true
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1.Convert Euro assets to US$ now or not?<br />2.Tax haven work, anyone ventured?<br />3.ER income from Real-Estate or Equities?<br />4.ER to Canada or US?<br />5.Lifesavings secure in Funds after Worldcon/Enrot/Equitable Life?<br />6.House price correction risk as rates go up?<br />7.Prop arbitrage i.e. CA > 20% IL<8%?
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Re: Investment Idea: Big Mac Index
03-30-2005, 02:52 PM
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#5
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 108
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Re: Investment Idea: Big Mac Index
Quote:
Yeah this was classic! I especially liked the "Whatever" fund for teenagers.
Petey
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Re: Investment Idea: Big Mac Index
03-30-2005, 02:54 PM
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#6
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Recycles dryer sheets
Join Date: Sep 2004
Posts: 108
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Re: Investment Idea: Big Mac Index
Quote:
Every year, The Economist publishes the Big Mac Index. *It is a snapshot of relative values of different currencyies based on the cost of a Big Mac in USD terms in different countries. *Over time it has a good track record of showing the most over and under valued currencies in the world. *How about a very simple investment strategy: every year, we buy a 1 year CD at everbank.com denominated in the cheapest currency according to the index.
Thoughts? (Yes, I had some wine with lunch).
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I had a look at it from the perspective of FIRE abroad and general living costs. At first I thought it was a bit of a joke but true to form the costs matched what I knew about Thailand costs, and other countries I had numbers on. It also matched what the Terhorsts have lived affordably since FIREd 20 years ago. So ultimately it seemed to be a useful barometer but obviously go and build a a full budget on-the-road. Nothing replaces that.
Petey
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