This is the number that introduced me to global exchange rates. The fancy Reebok sneakers my friend brought back from London in the mid-80’s cost $12.00, when the same pair was an unfathomable luxury in rural Pennsylvania – $40.00.
Imagine my dismay when I moved to London in 2005 to find that this ratio had reversed. Those sneakers would have cost 2-3x as much in London vs. Pennsylvania by then. A small latte was $7. (Did I mention that caffeine was my #1 food group at the time?)
All of a sudden, this week we’re back to those mid-80’s exchange rates, with the pound clocking in post-Brexit in the $1.30’s.
Of course the latte conversion rate is not the most important or interesting implication of Brexit, but these personal flashbacks are a reminder that it’s been a LONG time since we’ve been here – so long that most portfolio managers have no professional experience with current pound/dollar exchange rates, let alone the circumstances which have led to them.*
What is your own reference point as you try to make sense of recent events? Recognizing this personal “home port” – along with its particular benefits and its shortcomings – helps us interpret new maps and to navigate choppy seas.
Wishing you safe passage!
* The average age of portfolio managers is somewhere between 35-45, depending on which study you cite. This means the average PM was a young child the last time US/UK rates were here.