The Economist's Big Mac index seeks to make exchange-rate theory more digestible. They say it is arguably the world's most accurate financial indicator to be based on a fast-food item.
The Big Mac index is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalize the price of a basket of goods and services around the world. For them, the basket is a burger … a McDonald’s Big Mac.
According to this measure, the most undervalued currency is the Chinese yuan, at 40% below its PPP rate. In China, a McDonald’s Big Mac costs just 14.5 yuan on average, the equivalent of $2.18 at market exchange rates. In America, the same burger averages $3.71.
The tensions caused by currency misalignments prompted Brazil’s finance minister to complain last month that his country was a potential casualty of a “currency war”. The Swiss, who avoid most wars, are in the thick of this one. Their franc is the most expensive currency on our list.
The table below shows by how much, in Big Mac PPP terms, selected currencies were over- or undervalued.
The index is supposed to give a guide to the direction in which currencies should, in theory, head in the long run. It is only a rough guide, because its price reflects non-tradable elements such as rent and labor. For that reason, it is probably least rough when comparing countries at roughly the same stage of development.
Which Currencies Are Beating-Up On the Dollar?
You know the dollar has been in freefall since the middle of the summer. BusinessInsider posted a chart, from Morgan Stanley, showing which currencies have appreciated the most since then.
The big winner? The Swedish Krona. Note that the much-hyped yen is just in the middle of the pack.
Short, blue and furry could be the next tall, dark and handsome.
Once again proving it's not just a show for kids, Sesame Street spoofs the wildly popular Old Spice ad.
Grover preaches the importance of smelling like a monster and of using the word "on" correctly in the parody of the "Man Your Man Could Smell Like" ad featuring Isaiah Mustafa.
Have a look at the spoof, and the commercial that inspired it.
Short, blue and furry could be the next tall, dark and handsome.
Once again proving it's not just a show for kids, Sesame Street spoofs the wildly popular Old Spice ad.
Grover preaches the importance of smelling like a monster and of using the word "on" correctly in the parody of the "Man Your Man Could Smell Like" ad featuring Isaiah Mustafa.
Have a look at the spoof, and the commercial that inspired it.
The markets continue higher despite concerns about the economy. Remember, the markets do not reflect what is happening in the economy (nor are they supposed to). Markets reflect the expectations and speculations about the markets themselves.
There is a lot of money sitting on the sidelines, and if we don't get selling pressure — then it doesn't take much to push things higher.
The S&P 500 Has Risen Back to Its Down-Trend Line.
The bigger picture shows that the S&P 500 Index has rallied back up to the trend-line from its 2007 highs. Bulls will likely feel more confident if price can stay above this level.
How high can it go? This is a likely area for Bears to try to sell. Not only are we at overhead resistance, but the market is getting overbought.
How Can You Measure Whether the Market Is Overbought?
More than 88% of all stocks traded on the NYSE are above their 50-day moving average. We have seen similar levels three times in 2010, all resulted in large sell-offs.
The push higher will continue until sellers get more bold.
The markets continue higher despite concerns about the economy. Remember, the markets do not reflect what is happening in the economy (nor are they supposed to). Markets reflect the expectations and speculations about the markets themselves.
There is a lot of money sitting on the sidelines, and if we don't get selling pressure — then it doesn't take much to push things higher.
The S&P 500 Has Risen Back to Its Down-Trend Line.
The bigger picture shows that the S&P 500 Index has rallied back up to the trend-line from its 2007 highs. Bulls will likely feel more confident if price can stay above this level.
How high can it go? This is a likely area for Bears to try to sell. Not only are we at overhead resistance, but the market is getting overbought.
How Can You Measure Whether the Market Is Overbought?
More than 88% of all stocks traded on the NYSE are above their 50-day moving average. We have seen similar levels three times in 2010, all resulted in large sell-offs.
The push higher will continue until sellers get more bold.
What does it mean when the President's chief enforcer bails?
Rahm Emanuel, President Obama's chief of staff, quit to run for Chicago mayor. Peter Rouse, a senior aide, takes Emanuel's position. Rouse, was Obama's chief of staff when he was a U.S. senator from Illinois. Saturday Night Live wasted no time putting its spin on the situation.
Likewise, Obama's finance guru and Treasury Secretary, Larry Summers, recently resigned. Do you think either of these moves will materially affect the market?
Market Commentary
The Dow Jones Industrial Average is experiencing a "golden cross". That means the 50-day moving average crosses above the 200-day moving average at the same time that both moving averages are rising. This will be the first "golden cross" that the Dow has seen since December 1st, 2005.
So, how bullish is that pattern? While the "golden cross" is thought of as a positive technical indicator, the historical numbers tell a different story.
Also dampening bullish spirits, the market indices put in a classic bearish outside reversal day last week. That means price starts high, but closes near the low of the day. This pattern is often seen near market tops. It occurred right at the resistance level from the May highs, with the market relatively overbought. While MACD shows waning momentum, don't let a pop higher here surprise you.
Have You Looked at the U.S. Dollar Recently?
The third quarter was a boon for stocks, but it was a bust for the US dollar. Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%. Here is a chart.
Meanwhile, the price of Gold is soaring. And gold is arguably the least biased form of money. Consequently, many consider it to be the ultimate store of wealth (and hence, a good measure of relative value).
So, When Is Up Not Really Up?
Why isn't the world beating a path to our markets, driving-up prices and volume? Perhaps because they don't see our market the same way we do. This next chart caught my eye because it shows our big rally (since early 2009) is less than a 10% rally (when it is measured in Gold instead of Dollars).
The Dow/Gold Ratio chart shows the ratio of the price of the Dow to the price of gold. Another way to look at it is the number of ounces of gold it takes to buy one share of the Dow. For example, with the Dow at 10,000 and gold at $1,000, it would require 10 ounces of gold to buy one share of the Dow; so the ratio would be 10. The chart shows that at the recent market lows it took 7.5 ounces, and now it takes 8.21 ounces of gold to buy the Dow.
This chart highlights one reason that a weak dollar matters. While the Dow is much higher in dollar terms, it is still declining when priced in Gold. This indicates that the strength we have seen is more a function of a weaker dollar rather than a real increase from real demand.
What does it mean when the President's chief enforcer bails?
Rahm Emanuel, President Obama's chief of staff, quit to run for Chicago mayor. Peter Rouse, a senior aide, takes Emanuel's position. Rouse, was Obama's chief of staff when he was a U.S. senator from Illinois. Saturday Night Live wasted no time putting its spin on the situation.
Likewise, Obama's finance guru and Treasury Secretary, Larry Summers, recently resigned. Do you think either of these moves will materially affect the market?
Market Commentary
The Dow Jones Industrial Average is experiencing a "golden cross". That means the 50-day moving average crosses above the 200-day moving average at the same time that both moving averages are rising. This will be the first "golden cross" that the Dow has seen since December 1st, 2005.
So, how bullish is that pattern? While the "golden cross" is thought of as a positive technical indicator, the historical numbers tell a different story.
Also dampening bullish spirits, the market indices put in a classic bearish outside reversal day last week. That means price starts high, but closes near the low of the day. This pattern is often seen near market tops. It occurred right at the resistance level from the May highs, with the market relatively overbought. While MACD shows waning momentum, don't let a pop higher here surprise you.
Have You Looked at the U.S. Dollar Recently?
The third quarter was a boon for stocks, but it was a bust for the US dollar. Since peaking on June 7th, the US Dollar Index has pretty much gone straight down for a decline of 11.62%. Here is a chart.
Meanwhile, the price of Gold is soaring. And gold is arguably the least biased form of money. Consequently, many consider it to be the ultimate store of wealth (and hence, a good measure of relative value).
So, When Is Up Not Really Up?
Why isn't the world beating a path to our markets, driving-up prices and volume? Perhaps because they don't see our market the same way we do. This next chart caught my eye because it shows our big rally (since early 2009) is less than a 10% rally (when it is measured in Gold instead of Dollars).
The Dow/Gold Ratio chart shows the ratio of the price of the Dow to the price of gold. Another way to look at it is the number of ounces of gold it takes to buy one share of the Dow. For example, with the Dow at 10,000 and gold at $1,000, it would require 10 ounces of gold to buy one share of the Dow; so the ratio would be 10. The chart shows that at the recent market lows it took 7.5 ounces, and now it takes 8.21 ounces of gold to buy the Dow.
This chart highlights one reason that a weak dollar matters. While the Dow is much higher in dollar terms, it is still declining when priced in Gold. This indicates that the strength we have seen is more a function of a weaker dollar rather than a real increase from real demand.
Professor Philip Zimbardo explains how our individual perspectives of time affect our work, health and well-being. Zimbardo is talking about psychological time (subjective time), not the objective time dictated by the clocks on our phones. As you might guess, "time" influences how we perceive ourselves, how we view relationships, and how we act in the world.
This short video offers some eye-opening insights.
Below is the illustrated version of "The Secret Powers of Time". The original video of Zimbardo speaking at a podium follows. While it has the same message, the visuals are very different. This side-by-side comparison shows the value of visual synthesis note-taking.
Image by Simon Miller via Flickr
