Last week, I shared a couple of videos that attempted to predict the future. As a result, someone sent me a video of Arthur C Clarke's predictions that I thought was worth sharing.
Arthur C. Clarke had a profound impact on the way we imagine the future. Known for his remarkable predictions, Clarke's ideas may have seemed farfetched at times, yet his thoughts on the future and the art of making predictions were grounded in reason.
If a prophet from the 1960s were to describe today's technological advancements in exaggerated terms, their predictions would sound equally ridiculous. The only certainty about the future is that it will be fantastical beyond belief, a sentiment Clarke understood well.
You can be a great futurist even if many of your predictions are off in execution, but correct in direction. For example, Clarke predicted that the advancements in communication would potentially make cities nonexistent. While cities still exist - in much the same way as in the 1960s - people can now work, live, and make a massive difference in their companies from anywhere on the planet, even from a van traveling around the country. Global communication is so easy that it's taken for granted.
As a science fiction author, some of what he wrote about might seem ridiculous today. For example, super-monkey servants creating trade unions. Much of what he wrote about was what could happen (and to provide a way for people to think about the consequences of their actions and inactions). As we discussed last week, humans often recognize big changes on the horizon ... but they rarely correctly anticipate the consequences.
In summary, even though some of Clarke's predictions were farfetched, they were rooted in a deep understanding of human potential and the transformative power of technology. His ability to envision a fantastical future was not only a testament to his imagination, but also served as an inspiration for generations of scientists, engineers, and dreamers. By embracing the unknown and acknowledging the inherent uncertainty of the future, we can continue to push the boundaries of what is possible and strive for a world that is truly beyond belief.
You won't always be 100% correct, but you'll be much closer than if you reject what's coming.
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%.
One of the main limitations of the index is that the price of a Big Mac reflects non-tradable elements such as rent and labor, which can vary widely across different countries and can distort the accuracy of the index. This means that the index is most useful when comparing countries that are at roughly the same stage of development and have similar economic structures and cost of living. Consequently, while it can provide some useful insights into exchange rates and currency values, it is important to recognize that it is only a rough guide and has some limitations when comparing countries.
Another limitation of the index is that it does not consider factors such as taxes, trade barriers, and transportation costs, which can also affect the relative value of currencies. These factors can be especially important in countries highly dependent on imports or exports. They can lead to significant disparities in currency values that are not reflected in the Big Mac Index.
Despite these limitations, the Big Mac Index can still be useful for gaining insights into global economic trends and currency values. By using the index in conjunction with other economic indicators and data sources, investors and economists can achieve a more comprehensive understanding of the forces shaping the global economy and make more informed decisions about how to invest their money.
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.
On New Year's it is a lot easier to celebrate when you have a party to go to ... The trick is finding the celebration in the first place.
It's interesting to think about how many New Year celebrations there are. In addition to Chinese New Year, Muslims have Hari Raya Idul Fitri; Jews have Rosh Hashanah; of course, there is January 1st (and many others).
Which is correct? I think the answer is all of them. Regardless of your chosen New Year, it provides an opportunity to celebrate, share, reflect, plan, and commit to the right actions. If you've already fallen off the wagon of your new year's resolutions, this can be your reason to get back on them.
As I think about it, the same principle applies to trading. It's all a matter of perspective.
At some level, there really isn't a correct answer as to which trading style is best. The best technique is the one that works. Trading styles go in and out of phase, and if you get too attached to a particular technique, you can too easily get detached from profit. As any experienced trader can tell you, edges decay, people catch on, and trends change.
As businesses increasingly adopt Artificial Intelligence, the way forward is becoming evident. This involves utilizing AI to selectively activate and deactivate specific capabilities based on their effectiveness.
In trading or business, while no single method is guaranteed to succeed, there is always a method that can be effective. You just have to be flexible enough to know what you want and still be willing to accept something better.
I have always believed that you can predict a lot about your future based on the quality of the people you spend the present with.
That is why I think participation in quality peer groups is critical.
Over the years, I joined several business-leader peer groups like Strategic Coach, Abundance 360, and Genius Network. These groups are a great way to meet people and learn things ... and they also provide you with access to the benefits of feedback from a group of trusted advisors, perspectives you might otherwise get from a counselor, and a flow of ideas and opportunities that wouldn't have crossed your mind or your desk. They allow participants to see, hear, and discuss things they don't usually think about, talk about, or even notice.
Peer groups are also great at bringing blind spots to your attention and connecting you to trends transforming industries and the world.
In these meetings, you often find a "nugget" in the discussion. Sometimes it stems from what is happening in the world. Sometimes it alerts you to potentially valuable relationships, opportunities, or gadgets. And sometimes, the nugget comes from discussing a common problem or constraint (like the pandemic) with your peers.
This week, several of these groups prompted me to think about time (e.g., not wanting to sell time for money, wanting to live past 100, the "strangeness" of time during the past year, etc.).
Time is funny. Sometimes it seems to fly by ... other times, it seems to stand still. Dan Sullivan uses the example of 10 minutes with a dying loved one compared to holding your hand on a stove for 10 minutes. One seems excruciatingly short, and the other seems excruciatingly long.
The average life expectancy for men in the U.S. is 76.
How many amazing vacations do you have left? How many jaw-dropping moments? How many fantastic meals? How many Super Bowls?
What about time with your parents or older relatives? It's easy to forget to call or miss an important event because "life happens" – but if you realize you may have already used 95% of your in-person time with that person ... doesn't it become more special?
For contrast:
Would you rather spend that time dwelling on a mistake?
What about being angry at something out of your control?
What about doing work that drains you mentally and emotionally?
In my TEDx talk, I mentioned "living like you only have a year left" and how much more "life" we got out of the last part of my dad's life.
That is just an example, but clearly, it is worth taking the concept further.
To start, think of some of the activities you do, places you go, experiences you have that are special and make you feel like your best self.
Hitting Flow-state and creating something new and exciting;
Taking an amazing vacation and experiencing something completely new;
Having a moment with someone you love that makes you stop and say - "Wow!"
Making a difference in someone's day or giving back to your community;
Experiencing peace and relaxation;
Feeling pure joy.
It's easy to get lost and take these moments for granted when they happen, but when you think about how much time you have left ... they take a whole new meaning.
How can you maximize the time you have left? Fill it with the best experiences, activities, and people you can.
To start, think about different time frames:
What activities could you commit to doing at least once a year?
What activities could you commit to doing at least once a month?
What activities could you commit to doing at least once a week?
What activities could you commit to doing at least once a day?
Make those lists ... it is a simple way to get a better return on the time value of your life.
Seriously, try it.
Let me know how it worked for you – and what you chose!
As we near the end of the year, I start to think about what I want for my future, and how far I’ve already come. It’s also a reminder that while I can extend my life – eventually, the clock stops.
Death is often a trigger that sends my thoughts spinning: celebrating life; mourning death; imagining what lies in store for the family; empathizing with the survivors ... and even future-pacing to my death and memorial service.
In daily life, I often remind myself that ‘everything happens for a reason – and just because I can’t find the gift in a particular situation, doesn’t mean it isn’t there.
This is the anniversary of my Father’s death. When he died, I came out with a newfound respect for how precious life is. I decided it was time to stop thinking about what I do – and spend more time cultivating who I want to be. It also caused me to consider how I would be remembered – versus how I’d choose to be remembered.
Death is often a reminder to make the most of the time given to us.
It was a reflection on my struggle with juggling work-life balance. It was about a year that brought my Dad’s death, the forced sale of my company by venture capitalists, and a divorce (in that order). Luckily, sometimes, life’s darkest days bring the greatest gifts … if you are willing to look for them.
One of my biggest takeaways from that struggle was about the time value of life.
In finance, the “time value of money” refers to the principle that the purchasing power of money varies over time (meaning, money today has more purchasing power than money later). In part, this is because the value of money at a future point in time might be calculated by accounting for other variables (like interest earned, inflation accrued, etc.).
It occurred to me that a similar calculation applied to life ... or living.
The above video is 13 minutes. Hopefully, you’ll watch ... but if not, I’ve added some of my favorite excerpts below.
Live Like You Only Have a Year Left.
“During the last part of my Dad’s life, I think he would have done almost anything for a little more time.
Things that used to be unimportant, or even mildly irritating, took on increased importance. For example, a dinner together became almost a sacred event; a kiss goodnight was truly heartfelt, and saying goodbye meant something ... because it could be the last time.
Nevertheless, as a result of that focus, he took more life out of that time.
Shouldn’t we do the same thing? Think about it: We will never be younger than we are right now. We are never going to have more time to fix a big mistake. Isn’t it likely that the time value of your life is worth maximizing?”
People Who Are Good Take Advantage of Opportunities. People Who Are Great Create Them.
“When I think back to that year, I spent so much time moving away from pain ... that I forgot to move towards opportunity. I feel like I wasted so much time.
My Dad said the difference between good and great is infinitesimal. People who are good take advantage of opportunities ... But people who are great create them.
I think what he meant was that when they see the opportunity, they move towards it. They shoot through it.
It is easy to say, “I see that opportunity; but it’s not the right time.” Or, “I see that opportunity, and I really want to remember it for when this is over.” And as much as I want to believe that’s true ... deep down, I know that it’s always a good time to take the right action.
Instead, “life” (the noun) often gets in the way of “living” (the verb).
To Change Your Life, Change Your Perspective.
“When you are ‘stuck’... a shift in role, or a shift in perspective, is often all you need to see a new path forward or a new possibility.
Have you ever been stuck playing a role you knew didn’t serve you? Where you knew what the best next step was, from your perspective, but you had a sense that it wasn’t the right action? Sometimes it makes sense to step back and ask, ‘What role can I play that would get a better result?’”
That is often all it takes to change the game. Other times, what it takes is the decision to play a new game.
Everyone has the same 24 hours each day. Some use it better than others.
Sometimes we are conscious of how we use this precious resource. Sometimes it gets away from us.
The average life expectancy for men in the U.S. is 76.
How many amazing vacations do you have left? How many jaw-dropping moments? How many fantastic meals? How many Super Bowls?
What about time with your parents or older relatives? It’s easy to forget to call or to miss an important event because “life happens,” but if you realize you may have already used 95% of your in-person time with that person ... doesn’t it become more special?
In my TEDx talk, I mentioned “living like you only have a year left,” and how much more “life” we got out of the last part of my Dad’s life.
How do you replicate that?
To start, think of some of the activities you do, places you go, and experiences you have that are special and make you feel like your best self.
Hitting flow-state and creating something new and exciting;
Taking an amazing vacation and experiencing something completely new;
Having a moment with someone you love that makes you stop and say - Wow!
Making a difference in someone’s day or giving back to your community;
Experiencing peace and relaxation;
Feeling pure joy.
It’s easy to get lost and take these moments for granted when they happen, but when you think about how much time you have left, they take a whole new meaning.
What would it take for you to get the most out of your life today? How can you maximize the time you have left? Fill it with the best experiences, activities, and people you can.
To start, think about different time frames:
What activities could you commit to doing at least once a year?
What activities could you commit to doing at least once a month?
What activities could you commit to doing at least once a week?
What activities could you commit to doing at least once a day?
Make those lists ... it is a simple way to get a better return on the time value of your life.
Seriously, try it.
Let me know how it worked for you – and what you chose.
The world will reach 8 billion people at some point this year. That is a new (and potentially scary) milestone.
Part of the concern stems from how fast population is growing. Consider that the world’s population has doubled during the last 50 years … and the geographic distribution of the population has changed as well. Here is an infographic that highlights some interesting trends.
If you want to look at where the economy is going over time, you don't have to guess to wildly. Population growth is a primary clue. Consequently, focus on where the most children are being born - or where relatively more children are being born recently. For example, economists don’t have to work too hard to figure out how many 18-year-olds will exist somewhere in the next 15 years – they start by counting the 3-year-olds.
While China, India, and the U.S. top the world's population lists (with the U.S. dramatically behind China and India), many countries are creeping up the list. In fact, Lagos, Nigeria's largest city, is expected to the world's biggest megacity by the end of the century. Many of the world's highest growth rates are found in Africa.
As another "surprise," India is set to pass China as the world's most populous country. Meanwhile, much of Europe's populations are contracting.
The U.S. is still growing – but is not matching the rates of emerging countries in Asia and Africa.
The world is expected to reach a population of around 10 Billion before 2100. With that said, many expect the number to decrease from there.
Interesting?
How do you think this will affect the next 20 years?
Everyone knows that children are our future. They're the next generation of innovators, entrepreneurs, and workers. Countries that are having a natural decrease in population due to families not having children will likely find themselves becoming less important on the geopolitical stage.
While the future is often hard to predict, here is easy “prediction” (that is much less of a prediction than it is simple math). In order to predict how many 18-year-olds there will be in a particular country in fifteen years, simply count the 3-year-olds there now. Yes, there will be some death or migration … but it is an easy way to get a sense of some important mega-trends.
India, China, and Africa all are seeing massive population growth. America is still net positive. It's also worth noting that India and China are topping the list because they already have such large populations. Their birth rates are actually slightly below average.
On a longer term scale, it's also worth noting that population growth has been declining since the 1960s. Partly due to education, wealth, and the move from rural to urban living.
Slowing population growth means a larger portion of the population is older. As median age increases, there are lots of potential economic consequences.
It's an interesting compounding of consequences.
We'll see if the countries with the largest population growth have the economy and infrastructure to support that growth.
You could argue that we're in the middle of the first energy crisis of the 21st century.
While gas prices are finally on the way back down, the recent surge is driving inflation and has consumers thinking much more about where their oil comes from.
When I last wrote about oil production, the shocking "secret" was that the largest importer of oil into the U.S. was Canada - and that most of our oil was produced within the U.S.
While the U.S. is the largest producer of Oil, OPEC is the largest organization. OPEC accounts for 35% of total production, with Saudi Arabia accounting for a third of OPEC's output.
Almost half of the world's oil production comes from The U.S., Saudi Arabia, and Russia.
Also, despite being the world's largest oil producer, the U.S. is still a net importer of oil.
Supply constraints on oil - as a result of sanctions on Russia - are creating a price increase with skyrocketing demand from mid-pandemic levels. Combine that with OPEC refusing to increase production to meet demand, and you have an energy shortage.
The U.S. has already started releasing barrels from its strategic reserves, and we've seen gas prices go down as a result, but it remains to be seen if our efforts will be enough to curb the shortage.
I'm writing this from International Falls, MN (someplace I never thought I'd be ... ). Meanwhile, one of the only less likely things, I can think of, is the article's topic.
Taylor Swift is known for being vocal about climate issues. She was also just 'outed' for the 170 flights her private jet took last year. The news came out after another celebrity was chastised for a 20-minute private jet flight. Taylor claims that most of those flights weren't hers – and that she rents the plane out. Knowing other people with private jets, that's believable.
There are obviously bigger problems in the world today. Nonetheless, I'm sharing this info anyways because the chart comparing her carbon footprint to the average person's caught my eye.
The Big Mac Index: Worth Paying Attention To?
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
One of the main limitations of the index is that the price of a Big Mac reflects non-tradable elements such as rent and labor, which can vary widely across different countries and can distort the accuracy of the index. This means that the index is most useful when comparing countries that are at roughly the same stage of development and have similar economic structures and cost of living. Consequently, while it can provide some useful insights into exchange rates and currency values, it is important to recognize that it is only a rough guide and has some limitations when comparing countries.
Another limitation of the index is that it does not consider factors such as taxes, trade barriers, and transportation costs, which can also affect the relative value of currencies. These factors can be especially important in countries highly dependent on imports or exports. They can lead to significant disparities in currency values that are not reflected in the Big Mac Index.
Despite these limitations, the Big Mac Index can still be useful for gaining insights into global economic trends and currency values. By using the index in conjunction with other economic indicators and data sources, investors and economists can achieve a more comprehensive understanding of the forces shaping the global economy and make more informed decisions about how to invest their money.
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.
Posted at 05:32 PM in Business, Current Affairs, Food and Drink, Ideas, Just for Fun, Market Commentary, Trading, Trading Tools, Travel | Permalink | Comments (0)
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