Dunn Warren Investment Advisors

Continuing our research into using the Big Mac as a gauge of inflation, we build on past posts but use our own research to draw conclusions. In previous articles, we have relied solely on The Economists calculation of the Big Mac price.

This time of year Investment Strategists are rampant with projections for the year ahead return. Typically the strategists process is to estimate earnings a year in advance and then apply a multiple on those earnings. Whether an optimistic bias or an eagerness to have investors buy into the market, the strategists assume a continuation of the trend. Vitaliy Katsenelson has provided research that earnings seldom follow a steady course. Rather earnings fall victim to regression to the mean because as a good thing becomes known, competition erodes profit margins over time.