Regular readers may be familiar with The Big Mac Index, The Economist‘s beef-based gauge of international purchasing power parity (PPP). They should also be aware of its biggest limitation, namely the socioeconomic uniqueness of every country measured.
So is there a better way?
No, there probably isn’t. Nevertheless, if only for sport, we present The Black Cod Index. Our chosen metric is the price of black cod with miso, a signature dish in all 30 of Nobu‘s restaurants worldwide. (We’ve chosen Nobu because it’s a kind of Hard Rock Cafe for the peripatetic global jetset, so should factor out social differences. And we’ve chosen black cod with miso because the raw ingredients cost approximately 25 cents no matter where they’re bought.)
So without further ado:
Black cod w. miso, dollar-adjusted local price
Russia: $66.03
Great Britain: $57.09
Europe: $56.57 (see footnotes)
South Africa: $54.29
UAE: $50.37
Australia: $44.61
China: $43.53
Hong Kong: $41.00
Hungary: $40.89
Japan: $39.26
Bahamas: $29.83
United States (unweighted average): $26.38
Therefore ….
Black cod w. miso, relative valuation vs. US dollar
Russian ruble: 150.30 per cent overvalued
UK sterling: 116.41 per cent overvalued
Euro: 114.44 per cent overvalued
South African rand: 105.80 per cent overvalued
UAE Dirham: 90.94 per cent overvalued
Australian dollar: 69.11 per cent overvalued
Chinese yuan: 65.01 per cent overvalued
HK dollar: 55.42 per cent overvalued
Hungarian forint: 55.00 per cent overvalued
Japanese yen: 48.82 per cent overvalued
Bahamas dollar: 13.08 per cent overvalued
…. or, if you prefer, an (unweighted) average price worldwide of $45.82 for black cod with miso suggests the US dollar is 73.92 per cent undervalued against the global currency basket.
So what can we conclude from all this? Well, nothing really. It’s no surprise that a Moscow oligarch will pay more for sablefish than a Las Vegas tourist clutching a change bucket. America also lacks the scarcity premium Nobu carries in other markets, with four in New York alone. Still, it’s not up to us to tell you how to interpret the data. If you wish to bet on sterling devaluing by 50 per cent against the dollar based on the price of posh fish, that’s your call. Do let us know how you get on.
Update: the euro price is based on Matsuhisa Athens, a brass-plate Nobu derivative that may or may not be representative of the wider eurozone (HT Matina Stevis). Those wanting the Swiss franc benchmarked will have to wait until winter, as Nobu St Moritz opens only for Davos ski season.
Related link:
Mr Oil & Mr Vinegar – FT Long Room (membership required)