Last week, I wrote about various “indicators” for markets that just don’t make sense — like the Superbowl Indicator. The lesson from those indicators is that we crave order and look for signs that make markets seem a little bit more predictable, even where there are none. This is especially true in complex systems like the stock market, where so many variables and factors are at play that it can be difficult to predict or explain why things happen.
Now, it doesn't mean there aren't patterns - and benefits to watching them. Warren Buffet has proven that. In order to improve your understanding of "markets" you can focus on the fundamentals of individual companies and industries rather than broader market trends. By conducting thorough research and analysis of financials, management, and competitive landscapes of companies, you can make informed decisions about which stocks to buy or sell. Another way to improve your understanding of the market is to focus on long-term trends and avoid getting caught up in short-term fluctuations. It's about focusing on what doesn't change - instead of what does. But, ultimately, you should realize that if you don't know what your edge is ... you don't have one. And, market movements are getting faster, more automated, and harder to predict over time, not less.
With that said, Wall Street is still inundated with theories that attempt to predict the performance of the stock market and the economy. More people than you would hope, or guess, attempt to forecast the market based on gut instinct, ancient wisdom, and prayers.
While hope and prayer are good things ... they aren’t good trading strategies.
It’s true that there are many indices and economic indicators that can provide valuable insights into the workings of economies and markets. While some of these indices may seem “out there,” or even frivolous, they can often shed light on underlying economic trends and realities.
One example of this is the Big Mac Index, which is published annually by The Economist. This index is based on the idea of purchasing power parity, which suggests that exchange rates should adjust to ensure that the price of a basket of goods is the same in different countries. The Big Mac Index uses the price of a McDonald’s Big Mac burger as a proxy for this basket of goods. It compares the price of a Big Mac in different countries to determine whether currencies are overvalued or undervalued.
While the Big Mac Index is not a perfect measure of purchasing power parity, it can provide valuable insights into the relative value of different currencies and the economic factors that influence exchange rates. By looking beyond the headline numbers, and digging into the underlying data and trends, investors and economists can gain a deeper understanding of the forces shaping the global economy.
Ultimately, the key to using economic indicators like the Big Mac Index is to approach them with a critical eye and a willingness to dig deeper. By looking beyond the surface level and using data-driven analysis to understand the underlying trends and drivers of economic performance, we can gain a more accurate picture of the economic realities shaping the world around us.
In 2020, when I last talked about the Big Mac Index, the Swiss Franc was 20.9% overvalued based on the PPP rate. That math was based on the idea that, in Switzerland, a Big Mac costs 6.50 francs. In the U.S., it costs $5.71. The implied exchange rate was 1.14, and the actual exchange rate was 0.94 - thus, 20.9 was overvalued. At the time, the most undervalued was South Africa.
As of the end of 2022, The Swiss Franc is still the most overvalued but has now increased to a whopping 35.4%. Meanwhile, the South African rand has “increased” to only 45.9% undervalued, making the Egyptian Pound the most undervalued currency at 65.6%.
Click the image below to see the interactive graphic.

via The Economist
Obviously, there are more factors at play if something can be significantly overvalued or undervalued for multiple years without significant consequences.
It is not meant to be the most precise gauge, but it works as a global standard because Big Macs are global and have consistent ingredients and production methods. It’s lighthearted enough to be a good introduction for college students learning more about economics.
You can read more about the Big Mac index here or read the methodology behind the index here.
Do You Think the U.S. Has Aliens?
I'll admit to being fascinated by the idea of aliens. Growing up in the 60s and 70s, there was no shortage of science fiction fantasies imagining what a space-faring civilization would look like and, more importantly, what would we, the Earthlings, do when they made contact.
Last year, there was a U.S. congressional hearing on Unidentified Flying Objects. While there wasn't any proof of aliens, they did admit to phenomena they couldn't explain with their current information.
Now, we have multiple former military officials testifying in a House of Representatives meeting that the U.S. has recovered not only spacecraft but alien biological matter for decades. While I do believe in the possibility of aliens, I remain skeptical.
There are many stories (or theories) about how we had encountered aliens before and just kept them secret. For example, in 2020, a former senior Israeli military official proclaimed that Aliens from a Galactic Federation had contacted us - and that not only is our government aware of this, but they are working together.
In contrast, I have found it more realistic and thought-provoking to consider theories about why we haven't seen aliens until now.
For example, the Fermi Paradox considers the apparent contradiction between the lack of evidence for extraterrestrial civilizations and the various high probability estimates for their existence.
Let's simplify the issues and arguments in the Fermi Paradox. There are billions of stars in the Milky Way galaxy (which is only one of many galaxies). Each of these stars is similar to our Sun. Consequently, there must be some probability of some of them having Earth-like planets. Further, it isn't hard to conceive that some of those planets should be older than ours, and thus some fraction should be more technologically advanced than ours. Even if you assume they're only looking at evolutions of our current technologies - interstellar travel isn't absurd. Thus, based on the law of really large numbers (both in terms of the number of planets and the length of time we are talking about) ... it makes the silence all the more deafening and curious.
If you are interested in the topic "Where are all the aliens?" Stephen Webb (who is a particle physicist) tackles that in his book and in this TED Talk.
via TED
In the TED talk, Stephen Webb covers a couple of key factors necessary for communicative space-faring life.
But he also acknowledges the numerous confounding variables, including things like imperialism, war, bioterrorism, fear, moons' effect on climate, etc.
Essentially, his thesis is that there are numerous roadblocks to intelligent life - and it's entirely possible we are the only planet that has gotten past those roadblocks - or that there might have been others in the past, or others may develop in the distant future.
What do you think?
Here's another article I wrote on the subject, titled "Are We Alone In The Universe?"
Finally, here are some other links I liked on this topic. There is some interesting stuff you don't have to be a rocket scientist to understand or enjoy.
To Infinity and Beyond!
Posted at 07:10 PM in Business, Current Affairs, Gadgets, Healthy Lifestyle, Ideas, Just for Fun, Market Commentary, Personal Development, Religion, Science, Travel, Web/Tech | Permalink | Comments (0)
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