{"id":657142,"date":"2018-04-03T16:12:27","date_gmt":"2018-04-03T16:12:27","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=657142"},"modified":"2018-04-03T16:12:27","modified_gmt":"2018-04-03T16:12:27","slug":"become-a-global-currency-trader-using-the-big-mac-method-2","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=657142","title":{"rendered":"Become a Global Currency Trader Using the \u201cBig Mac Method\u201d"},"content":{"rendered":"

By Nicholas Vardy<\/a><\/span> Global currency markets are the largest and most liquid financial markets in the world.<\/p>\n

Today, the volume of foreign exchange trading exceeds an astonishing $5 trillion a day.<\/p>\n

That averages to $220 billion per hour \u2013 equal to the entire market cap of AT&T (NYSE: T).<\/p>\n

Yet I bet you never thought of investing in this exotic asset class.<\/p>\n

But thanks to the advent of currency exchange-traded funds (ETFs), you can assemble your personal trading portfolio of global currencies at the click of a mouse.
\nThe \u201cBig Mac Method\u201d of Currency Trading
\nCompared with stocks and bonds, currencies are an exotic asset class.<\/p>\n

So before you go up against the likes of George Soros in the global currency markets\u2026<\/p>\n

You’ll need the proper framework for understanding currencies.<\/p>\n

Enter the \u201cBig Mac method.\u201d<\/p>\n

Back in 1986, Britain’s The Economist first published its Big Mac Index \u2013 an irreverent way of measuring purchasing power parity (PPP) \u2013 that is, the relative overvaluation and undervaluation of the world’s currencies.<\/p>\n

According to the theory of PPP, a dollar should buy you the same amount of the same good across all countries.<\/p>\n

In the long run, the exchange rate between two countries should converge to a rate that equalizes the prices of an identical basket of goods and services in each country.<\/p>\n

By comparing the cost of Big Macs \u2013 a good produced in about 120 countries \u2013 the Big Mac Index calculates the exchange rate (the Big Mac PPP) at which Big Macs would cost the same in the United States as they do abroad.<\/p>\n

Compare the Big Mac PPP with the market exchange rates, and voil\u00e0\u2026 you see which currencies are overvalued or undervalued.<\/p>\n

With this information, you can construct \u2013 and profit from \u2013 your very own global currency portfolio.
\nThe Big Mac Index Makes It Big
\nAlthough it started out as a tongue-in-cheek indicator, the Big Mac Index has gained a lot of credibility.<\/p>\n

Economic textbooks discuss the measure, and it has been the subject of at least 20 academic studies.<\/p>\n

Even governments take the Big Mac Index seriously.<\/p>\n

The Argentine government once subsidized the price of the Big Mac to suppress its reported rates of inflation.<\/p>\n

But you don’t need to go to Latin America to unearth suspect government statistics.<\/p>\n

Here’s one I found, right from the good old U.S. of A\u2026<\/p>\n

In 2010, the average price of a Big Mac in the United States was $3.73.<\/p>\n

Today, the average price is $5.28 \u2013 a whopping 42% higher.<\/p>\n

That’s triple the 14% cumulative inflation rate calculated by the U.S. Consumer Price Index over the same period.<\/p>\n

[iu-adbox]
\nHow the Big Mac Index Works
\nAs I noted, the average price of a Big Mac in the U.S. is $5.28.<\/p>\n

In contrast, a Big Mac will set you back $6.76 in Geneva, Switzerland.<\/p>\n

So according to the Big Mac Index, the Swiss franc is overvalued by 28.1%.<\/p>\n

That makes the \u201cswissie\u201d the most overvalued currency in the world.<\/p>\n

By way of comparison, in China, the average cost of a Big Mac is only $3.17.<\/p>\n

So the Chinese yuan is undervalued by about 40%.<\/p>\n

Where are the cheapest Big Macs in the world?<\/p>\n

According to the The Economist’s \u2026read more<\/a> <\/p>\n

Source:: Investment You<\/a><\/p>\n

The post Become a Global Currency Trader Using the \u201cBig Mac Method\u201d<\/a><\/a> appeared first on Junior Mining Analyst<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Nicholas Vardy Global currency markets are the largest and most liquid financial markets in the world. Today, the volume of foreign exchange trading exceeds an astonishing $5 trillion a day. That averages to $220 billion per hour \u2013 equal to the entire market cap of AT&T (NYSE: T). Yet I bet you never thought […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[4],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/657142"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=657142"}],"version-history":[{"count":0,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/657142\/revisions"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=657142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=657142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=657142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}