There are several ways of coping with stress

Manager or Director of Research and Analysis

MMR Strategy Group - Greater Los Angeles Area

Plo the results on a curve. Dan Gilbert, author of "Stumbling on Happiness," challenges the idea that we’ll be miserable if we don’t get what we want. Our "psychological immune system" lets us feel truly happy even when things don’t go as planned. Experience simulator our marvelous adaptation skill, how it works. Chose between winning the lottery & becoming paraplegic, handicapped. They are equally happy in their lives. The impact bias; the simulator behaves badly. Passing a college exam has a long duration, and has great impact on UR happiness. Convert adversity to prosperity. The machinery is in our brains, the immunity machine is in our brain; we synthesize happiness, but think, we can find it out there somewhere, which is not true. Jim Wright, powerful democrat who lost his power. But he felt happy. Ray Crock started McDonalds, the richest man in America. The secret of happiness; 1st accrue power and prestige; then lose it. Ironies exemplified. Natural happiness is what we get when we want it. Churning the economic engine of synthetic happiness. Mari nation in data. 6 objects; which one you like the most, to the one you like the least. (He uses Monet prints). The one I got makes me happy, the one I didn't, really sucks. b. Amnesiacs patients, Polyneurotic psychosis (don’t know who you are, if they met you recently; lost their near memory). Normals can synthetize happiness thy changed their reaction to the prints, as they owned the prints. It is a mental trick; YOU OWE the prints. It turns out that freedom is the friend of natural happiness. But is the enemy of synthetic happiness. Accept the things that you cannot change. YOU FIND A WAY TO BE HAPPY. B. The black & White photography Course.

I get to keep one, you get to keep one. You can swap it out with me. What the students thing: what is really happening before the swap; people who are deliberating don't like their picture because the irreversible condition is not conducive to synthetic happiness.66% want to be deeply dissatisfied with the picture. Made hyperbolically. ADAM says:" over rating the situation, find quote. The remorse for the horror of our own injustice. Preferences drive us too fast; so we are at risk; unbounded ambition leads us to. BOUDNED FEARS ARE GOOD. OUR LONGIGN are usually overblown.
https://www.youtube.com/watch?v=ndZ_OUFwbpI

The Global Guru: Why You Should Give a Hoot About Global Currencies

By Eagle Financial Publications, July 30, 2014, 10:18:57 AM EDT

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The relevance of global currency movements is tough for most American investors to get their heads around.

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Looking to make the difficult and remote even more philosophically complex, currency speculator extraordinaire George Soros once opined that investing in currencies is an “existential choice.”

Now before you reach for your well-thumbed copy of existential philosopher Jean-Paul Sartre’s “Being and Nothingness,” understand that Soros’s point has nothing to do with the thinking of this Gauloises cigarette-smoking, womanizing French rake.

Soros’ point is that no matter what you invest in, you are always also betting on a currency -- whether you know it or not.

So when you buy a share of Facebook (FB), this U.S.-dollar denominated stock carries U.S. dollar risk with it. You just don’t think about it because the U.S. government does not have a history of announcing an overnight currency devaluation -- as governments elsewhere in the world have done in the past.

Throw in the fact that Facebook gets a growing percentage of its revenues from overseas in non-dollar denominated currencies, and you start to see why currencies matter. And that’s even if you are comfortably ensconced far afield on the beach in Naples, Florida.

Enter The “Big Mac” Index

Britain’s Economist magazine has just updated its measure of global currencies -- the “Big Mac Index.”

The “Big Mac Index” has provided a tongue-in-cheek but surprisingly useful way of measuring purchasing power parity (PPP) since 1986 -- that is, the relative over- and undervaluation of the world’s currencies compared to the U.S. dollar.

The Big Mac Index is useful tool for assessing the relative over- and undervaluation of the U.S. dollar -- according to the textbook measures of “purchasing power parity.”

According to the theory of purchasing power parity, a U.S. dollar should buy the same amount of the same good across all countries.

The “Big Mac” Index compares the cost of Big Macs (MCD) -- an identical item sold in about 120 countries -- and calculates the exchange rate (the Big Mac PPP) that would result in hamburgers costing the same in the United States as they do abroad.

Once you compare the Big Mac PPP to the market exchange rates, you see which currencies are under- or overvalued.

I like to think of purchasing power parity as the “fundamentals” of a currency.

But as with stock prices, exchange rates can often diverge substantially from their fundamentals.

The Economist highlighted the following example:

A Big Mac costs 48 kroner ($7.77) in Norway but only $4.80 in the United States. That makes the kroner overvalued by 61.8% and makes it the most overvalued currency in the index. In contrast, the Big Mac costs just $1.62 in Ukraine, making its currency the weakest looked at by the Economist. Ukraine beat out long-time cheapest “Big Mac” champion India -- though because Hindus don’t eat beef, Big Macs in India are made of chicken.

One Way to Think About Currencies

Another good intellectual shorthand is to think of a currency as the “stock” of a country.

Much like stocks, overvalued currencies become overvalued for reasons that have little to do with their fundamentals.

These include a country’s future prospects, its perceived “safe haven” status or, as in the case of Brazil, just plain investment fashion.

About four years ago, the Brazilian real was 52% overvalued based on the Big Mac Index. That was because Brazil was perceived to be (yet again) the “country of the future.” But as Brazil’s economic growth has tumbled as the government introduced populist policies, the reputation of Brazil’s currency has suffered a big fall.

Today, the real is “only” 22.1% overvalued compared to the U.S. dollar. But on the Economist’s scale adjusted for gross domestic product (GDP), the real today is still overvalued by an eye-popping 86.8%.

Over the past few years, savvy Brazilians have been quick to convert their overvalued Brazilian reals into Miami condominiums. Based on the current “Big Mac” Index, they would be wise to continue to do so.

Puzzling also is the continued “safe haven” status of the Swiss franc, as well as the still-remaining Scandinavian currencies, the Norwegian Krona and Swedish crown. These currencies have been consistently the most overvalued currencies in the world over the past decade. Today, according to the Big Mac index, each is overvalued by 42.4%, 61.8% and 24.2%, respectively.

Here is one possible explanation.

Deep-pocketed investors don’t think of these currencies like they do others.

Much like central London property, they hold these currencies simply as a way to store value.

When you have too much money, your “existential choice” is about keeping what you have safe.

And these currencies offer the opportunity to do just that.

The ‘Exorbitant Privilege’ of the U.S. Dollar

Just last week, French Finance Minister Michel Sapin launched into a rant about the U.S. dollar’s unfairly dominant position in the international financial system.

He’s not the first Frenchman to do so.

Almost 50 years since Valéry Giscard d’Estaing did the same complaining about the U.S. dollar’s “exorbitant privilege.”

Much to the consternation of the “doom and gloom” crowd, the U.S. dollar has maintained its exorbitant privilege as the world’s safe-haven currency.

And looking at the “Big Mac Index,” the editors of the Economist conclude that the U.S. dollar is faring quite well, thank you.

Despite predictions of the “death of the dollar,” the U.S. dollar has gained ground on its emerging markets rivals since the global financial crisis.

The average valuation of the emerging-market currencies in the Economist’s GDP-weighted index has moved from roughly neutral in 2009 to about 15% undervalued against the dollar this year.

It turns out that the recovering U.S. economy and the Federal Reserve’s gradual reduction of quantitative easing is making the U.S. dollar ever more attractive.

So there you have it...

Currencies add an extra, complex dimension to the investment process.

But understanding how to think about currencies can give you just the extra edge you need to make better and more profitable global investments in the future.

In case you missed it, I encourage you to read my e-letter column from last week about why investing in Russia may not be a crazy idea. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

Sincerely,
Nicholas Vardy, CFA

Editor, The Global Guru
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing , Forex and Currencies , International , Investing Ideas
Referenced Stocks: FB , MCD