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Investment Idea: Big Mac Index
Old 03-30-2005, 11:20 AM   #1
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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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Re: Investment Idea: Big Mac Index
Old 03-30-2005, 11:25 AM   #2
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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
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Re: Investment Idea: Big Mac Index
Old 03-30-2005, 11:38 AM   #3
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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...
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Re: Investment Idea: Big Mac Index
Old 03-30-2005, 02:50 PM   #4
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Re: Investment Idea: Big Mac Index

Quote:
Thoughts? (Yes, I had some wine with lunch).
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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Re: Investment Idea: Big Mac Index
Old 03-30-2005, 03:52 PM   #5
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Re: Investment Idea: Big Mac Index

Quote:
I might suggest the "fidelity select hamburgers" fund...

http://news.morningstar.com/doc/arti...130089,00.html
Yeah this was classic! I especially liked the "Whatever" fund for teenagers.

Petey
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Re: Investment Idea: Big Mac Index
Old 03-30-2005, 03:54 PM   #6
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Re: Investment Idea: Big Mac Index

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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).
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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