The Dave Index… now in a tastier version

Photo:  http://www.flickr.com/photos/ajax/21452259/

Way back when Dave introduced “The Dave Index” (aka the golden monkey) it was the price of an ounce of gold divided by the price of a barrel of oil.  When Dave introduced the index on October 26, 2010 the ratio was 16.34.  Today the index rests at 17.45.  Dave has been trying to figure out what to do about his famous index, particularly in light of the introduction of the gold renminbi kilobar at the new Hong Kong Mercantile Exchange oriental gold fix.  You see to publish an index, it has to be relative to something. 

It’s really been bugging Dave that there is an onshore Renminbi (CNY) and an offshore Renminbi (CNH) but there isn’t an offshore Big Mac and an onshore Big Mac.  What’s an index publisher to do when the Chinese solution to being excluded from the IMF’s currency pic-a-nic basket (think Yogi and Boo-boo) is to introduce a second currency while trying to convince us that a “Y” is an “H”.  Dave’s smarter than the average bear and he’s working on an answer.

Take a look at the most recent report out of the famous Economist Magazine and you’ll notice what’s been occupying Dave’s mind of late.  You see the folks at the Economist published the Big Mac Index in Hong Kong Dollars and in a five-city survey of China.  That means that they only published the BMI in CNY (and only in a 5 city survey at that).  The decision to bypass the CNH and to avoid regions of China outside the largest five cities is no picnic for the millions of unemployed in the less developed areas of the mainland. 

Dave’s plan is to republish The Dave Index and to add to what was previously just a ratio of gold and oil and introduce a factor of the Big Mac index in both USD, CNH and CNY.  Not only that, but will Dave be able to go a step further and survey select cities in China that are not part of the “Big 5.”  What will this tell Dave?  It will tell him what’s really going on behind the wall in Jellystone. 

If you are having difficulty following the plan for China to break out of the mainland with its currency intact while such animated Western corporations (think Ronald and McDonald’s) are trying to break-in to the Chinese market, maybe this original Yogi Bear cartoon will help.  You see, the key is maintaining a steady flow of Western gold imports into China while managing to get the honey out of the honey jar (selling to the Chinese growth market) all the while not getting stung by unexpected capital controls (i.e. Ranger Smith).   

Here’s a report on the most recent pricing of the Big Mac Index courtesy of the Rothschild controlled Economist magazine: http://www.scribd.com/fullscreen/78055840

Prof. Antal Fekete explains the West to East migration of gold and its relationship to Chinese unemployment: http://www.professorfekete.com/articles%5CAEFWhatChineseUnemployment.pdf

The origins of “The Dave Index” (aka the golden monkey) Oct. 26, 2010 http://tradewithdave.com/?p=3018

 Here are links to some recent posts on the subject: 

http://tradewithdave.com/?p=9276

http://tradewithdave.com/?paged=2

http://tradewithdave.com/?p=9186

 

2 Responses to “The Dave Index… now in a tastier version”

  1. [...] for their global inflationary scale known as the Big Mac Index (see Dave’s previous piece: http://tradewithdave.com/?p=9334)  they offer up a steaming short stake of a chart known as The Cost Of Making Pancakes Around The [...]

  2. [...] The gold stores come out of hiding for the revaluation.  Once the new figures are set and those gold holdings of the central banks are redeployed (from their same vaults or maybe the newly expanded vaults at 33 Maiden Lane designed to hold Greece’s gold) we’re good as new.  But hold on just a minute… there’s more and it’s not a Ginsu knife set… it’s Vector Gold!  You see, the price discovery mechanism for gold will evolve in the same way that all price discovery evolves (think Monopoly games with your grandmother).  It’s about weak hands and strong hands.  The strong hands will hold the large amounts of gold (say 10 metric tonnes and above) and the weak hands will hold gold paper (GLD and the like).  As far as your neighbor who has gold coins in a sock, that’s not exactly relevant especially when gold is no longer priced in dollars.  Gold will be priced in oil, but good luck buying access to an oil refinery and the mercenaries to protect it with a sock full of gold.  (for more on what index you should be using to measure eternal value in Big Macs, pancakes and gunpowder, please see http://tradewithdave.com/?p=9334 ) [...]