I love to find BIG investing ideas – and once-in-a-generation trades…

I love to find assets that are so cheap, you can even get some of the investment thesis a bit wrong – and still make a LOT of money.

Trades like this don’t come along often.

[ad#Google Adsense 336×280-IA]But I found one over the weekend, in a place you’d least expect… the McDonald’s (MCD) Big Mac.

No, I didn’t eat a Big Mac… Instead, The Economist’s latest Big Mac Index came out.

This simple fast-food burger, it turns out, is an excellent barometer of extremes in the world’s currency markets. Here’s how it works…

The price of a Big Mac in England or Canada, for example, should be roughly the same as in the U.S.

The “inputs” are the same – beef, cheese, bread, and labor. So the prices should be the same in all developed countries, for the most part.

But right now, a Big Mac is 8.6% cheaper in Canada than it is in the U.S., according to The Economist.

This makes at least some sense… Canada is a major commodities country, and commodities have been in a slump for a few years. So the Canadian dollar is currently cheaper than the U.S. dollar.

I’m not interested in the ordinary numbers like Canada’s today, though… I’m looking for extremes.

I want to see situations where a Big Mac is radically more expensive or cheaper than it has been in the past, relative to the U.S. dollar.

We’re seeing that in England today…

After last month’s “Brexit” vote, when the British voted to leave the European Union, the British pound fell to multi-decade lows. Take a look:

More important, take a look at the bottom half of the chart. It tells us whether a Big Mac is more expensive in England than in the U.S.

For all of the 1990s and the 2000s, a Big Mac was more expensive in England than in the U.S. But today – after the Brexit vote – a Big Mac in England is cheaper than ever, relative to a Big Mac in the U.S.

This is the kind of extreme I like to see.

Don’t get me wrong… I’m not going to rush out and buy British pounds today just because a Big Mac is cheaper across the pond than here at home.

But I do look for moments when one asset is seriously mispriced relative to another asset – and this is one of those moments.

I will, of course, do what I usually do before buying…

1. I will wait for the uptrend to confirm my idea.
2. I will do some more homework.

I do like to find unconventional sources of once-in-a-generation ideas… And The Economist’s twice-yearly Big Mac Index is one of those unconventional sources.

While I’m not buying the British pound yet, chances are very good that I will sometime in the next year or two…

For more on the latest Big Mac Index, click here.

Good investing,

Steve

[ad#stansberry-ps]

Source: Daily Wealth