Last Updated on Wednesday, 31 March 2010 04:49 Written by admin Monday, 29 March 2010 07:42

Besides being an excellent investing tool, the Big Mac Index can be used to calculate changes in real income. In Big Mac terms, real income is basically the amount of Big Macs you can buy. You can also think of real income as purchasing power.

Real Income = Nominal Income / Price Level

Since Price Level is related to inflation, you can think of real income as “the income of nations or individuals after adjusting for inflation”. Business Insider did a story about the purchasing power of $100,000 in 20 cities worldwide. The thing is though, they used the price of a Big Mac as the price level (or cost of living) in their calculations. For calculations relating to price levels or costs of living, a “basket of goods” is usually used. This time though, it’s the good old Big Mac Index. Here are the results …



Last Updated on Friday, 26 March 2010 09:49 Written by admin Thursday, 25 March 2010 07:25

Swiss Franc ETFs

You can simplify your currency trading by investing in the Swiss Franc using Exchange Traded Funds (ETFs). The symbol for the Swiss Franc ETF is FXF. The name for this ETF is the CurrencyShares Swiss Franc Trust. If the Swiss Franc is undervalued according to the Big Mac Index, buy FXF taking into account the Big Mac Index investing time-frame issue. Here is the description of FXF:

The CurrencyShares Swiss Franc Trust is designed to track the price of the Swiss Franc net of the Trust’s expenses, which are expected to be paid from the interest earned on the deposited Swiss Francs.

Swiss Franc ETF = FXF

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If you think the Swiss Franc will appreciate against the dollar specifically you could invest in the SZE. This is a description of the purpose of SZE:

The ELEMENTS U.S. Dollar/Swiss Franc Exchange Rate ETN is designed for investors who anticipate that the Swiss franc will appreciate against the U.S. dollar. The fund tracks the performance of the U.S. Dollar/Swiss Franc exchange rate plus the returns received on overnight deposits in Swiss Francs.

Swiss Franc vs. Dollar ETF = SZE

Last Updated on Monday, 29 March 2010 07:20 Written by admin Wednesday, 24 March 2010 07:10

Is the Canadian Dollar overvalued? David Allard, writing at castanet.net has this to say about the valuation of the Canadian Dollar …

“From a technical perspective, the Canadian dollar has a lot of strength and momentum supporting it. In the last year, it has risen from 85 cents to a high on Friday morning of 99.35 cents, however finishing the day lower on more worries about the global recovery. The current price has held above the 50 and 100 day moving averages for quite some time now and both relative strength and MACD are positive. Technically, the Canadian dollar is bullish and has been for the last year, despite the odd dip below it’s 50 and 100 day moving averages.”

Don’t be too quick to buy Canadian dollars though, the 2010 Big Mac Index shows that the Canadian dollar is actually overvalued against the American Dollar.

“What should the Canadian dollar trade for relative to the U.S. dollar? The 12-month forecast from RBC is $1.12 and from Scotia it is $1.05. Despite this forecast, RBC wrote one of the negatives is that the Canadian dollar is 16.4% overvalued on a PPP basis. According to The Economist “Big Mac Index”, the Canadian dollar is 13% overvalued.”

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