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bucheon bum
Joined: 16 Jan 2003
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 Posted: Mon Oct 29, 2012 12:35 pm Post subject: |
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| 12ax7 wrote: |
| It's still grossly undervalued. It was 740/$ when South Korea was still a developing country 15 years ago. |
What does the exchange rate 15 years ago have to do with anything?? Why did the currency dropped so much during the IMF crisis? Perhaps because it was overvalued? You probably should factor in monetary policy instead of just looking at an exchange rate from ages ago. I'm sure the USD looks incredibly undervalued compared to the Turkish lira if you were to look at that exchange rate from 15 years ago. And the yen is significantly overvalued if you look at 2007, but just right if you look at the mid-80s.
Anyway, according to the Economist's Big Mac index, the won was 20% undervalued in January, when the exchange rate was 1159/1 USD. Assuming little has changed in the last 10 months, the current exchange rate is pretty accurate. |
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alongway
Joined: 02 Jan 2012
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| Posted: Mon Oct 29, 2012 3:11 pm Post subject: |
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| the big mac index is a load of garbage. |
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Weigookin74
Joined: 26 Oct 2009
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| Posted: Mon Oct 29, 2012 8:34 pm Post subject: |
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| alongway wrote: |
| the big mac index is a load of garbage. |
eating a big mac makes me feel like garbage. |
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Gorf
Joined: 25 Jun 2011
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| Posted: Mon Oct 29, 2012 8:39 pm Post subject: |
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| That's because it's more garbage than food |
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KimchiNinja
Joined: 01 May 2012
Location: Gangnam
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| Posted: Mon Oct 29, 2012 8:43 pm Post subject: |
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Sweet, I used to get paid in USD but got my salary converted to KW, right after which it tanked, of course. I'm still down 1.3% but getting better. I just don't like seeing that I got a pay decrease due to FX, rubs me the wrong way. Not that it really matters I guess, unless you convert your KR back to USD.
Anyhow FX crap always makes my head hurt, if we start talking about triangular arbitrage on freain' Dave's ESL Cafe I'm out. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Mon Oct 29, 2012 9:27 pm Post subject: |
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| alongway wrote: |
| the big mac index is a load of garbage. |
Right. And it is garbage because why exactly?
It was thought up over 25 years ago and people still use it. Obviously it isn't completely accurate, but it is a good, general barometer. |
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alongway
Joined: 02 Jan 2012
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| Posted: Mon Oct 29, 2012 11:15 pm Post subject: |
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| bucheon bum wrote: |
| alongway wrote: |
| the big mac index is a load of garbage. |
Right. And it is garbage because why exactly?
It was thought up over 25 years ago and people still use it. Obviously it isn't completely accurate, but it is a good, general barometer. |
Not remotely, because it fails to account for the cost of the supply chain and the effect supply and demand in a given region might have on the price of a big-mac.
It simply compares the adjusted price of a big-mac flatly across the board. it's utterly and completely meaningless.
It takes all of 30 seconds on google, if that, to find some of the common problems with this:
http://en.wikipedia.org/wiki/Big_Mac_Index#Limitations
This details some of the more obvious issues that exist. |
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KimchiNinja
Joined: 01 May 2012
Location: Gangnam
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| Posted: Mon Oct 29, 2012 11:37 pm Post subject: |
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| alongway wrote: |
| the big mac index is a load of garbage. |
^ smart person award 2x double score.
As a hot-shot venture capitalist making truck-loads of money I have to agree with this analysis.
Besides things like purchasing power partiy and FX movements are insanely complicated, subject to all sorts of corrupting influences and measurment difficulties. To think about analyzing it in terms of "big mac purchasing power partiy" is just entertain-o-nomics. Cute but cmon. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Tue Oct 30, 2012 6:24 am Post subject: |
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| alongway wrote: |
| bucheon bum wrote: |
| alongway wrote: |
| the big mac index is a load of garbage. |
Right. And it is garbage because why exactly?
It was thought up over 25 years ago and people still use it. Obviously it isn't completely accurate, but it is a good, general barometer. |
Not remotely, because it fails to account for the cost of the supply chain and the effect supply and demand in a given region might have on the price of a big-mac.
It simply compares the adjusted price of a big-mac flatly across the board. it's utterly and completely meaningless.
It takes all of 30 seconds on google, if that, to find some of the common problems with this:
http://en.wikipedia.org/wiki/Big_Mac_Index#Limitations
This details some of the more obvious issues that exist. |
Right, I came across that and that was about it. Wikipedia. Woo. Like I said, it is a barometer. Obviously it has its issues. I'm not encouraging anyone to start making investments in foreign currencies using the index. That being said, it's certainly better than looking at what the exchange rate was 15 years ago!
I also haven't seen anyone post info on this thread indicating the won is still undervalued (beyond their own statements). |
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alongway
Joined: 02 Jan 2012
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| Posted: Tue Oct 30, 2012 6:47 am Post subject: |
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| bucheon bum wrote: |
| alongway wrote: |
| bucheon bum wrote: |
| alongway wrote: |
| the big mac index is a load of garbage. |
Right. And it is garbage because why exactly?
It was thought up over 25 years ago and people still use it. Obviously it isn't completely accurate, but it is a good, general barometer. |
Not remotely, because it fails to account for the cost of the supply chain and the effect supply and demand in a given region might have on the price of a big-mac.
It simply compares the adjusted price of a big-mac flatly across the board. it's utterly and completely meaningless.
It takes all of 30 seconds on google, if that, to find some of the common problems with this:
http://en.wikipedia.org/wiki/Big_Mac_Index#Limitations
This details some of the more obvious issues that exist. |
Right, I came across that and that was about it. Wikipedia. Woo. Like I said, it is a barometer. Obviously it has its issues. I'm not encouraging anyone to start making investments in foreign currencies using the index. That being said, it's certainly better than looking at what the exchange rate was 15 years ago!
I also haven't seen anyone post info on this thread indicating the won is still undervalued (beyond their own statements). |
It's a meaningless barometer. You might as well simply make stuff up. |
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