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Stephen Dunphy / Times staff columnist
The Newsletter: Latte give Big Mac the worldwide bounce

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For years, the Economist limited itself to burgernomics, using the price of a McDonald's Big Mac hamburger to measure whether exchange rates were appropriate. It used an economic theory called purchasing power parity — over time, exchange rates should produce a dollar that buys the same basket of goods.

Big Macs, or now lattes, are made more or less the same around the world. So measuring the differences in local prices shows how much a currency is over- or undervalued vs. the dollar. According to the latte index, Canada's dollar is still 16 percent undervalued against the dollar while the euro has overshot the mark and now is 33 percent overvalued. Switzerland remains the most expensive place to be, with a currency 62 percent overvalued.

While the Economist index is great international exposure for Starbucks, I have to point out that I did much the same thing with Starbucks latte prices a year ago.

Owners of privately held businesses in the Pacific Northwest remain cautious about the economy, but business owners in Washington and Oregon have sharply different views about the future, according to a survey by the Rainier Group, a Bellevue-based company that helps businesses do transition planning.

Robert Gruber, Rainer president, said one of the biggest surprises is that 38 percent of Oregon business owners say they could foresee relocating their company to another state. In Washington, only 21 percent said they could foresee moving.

When those surveyed were asked to rate the current environment for their companies on a scale of 1 to 10, the average response was 5.6, up somewhat from the previous quarter's 5.4. In Washington, the business confidence rating moved from 5.4 for fourth quarter 2003 to 5.8 for first quarter 2004. But in Oregon, the confidence rating dropped dramatically from 5.5 to 4.5.

Hiring plans are strong. Among Pacific Northwest business owners, 42 percent plan to increase hiring in the first quarter of 2004, up from 32 percent for the previous quarter. In Washington, 47 percent said they plan to increase hiring in the first quarter of 2004, up from 34 percent for the prior quarter.

State pension-fund money soon may help Washington state-based startup companies. The Washington Technology Center (WTC) and the Washington State Investment Board agreed earlier this week to collaborate on finding likely prospects.

Under the agreement, the investment board will use the technology center's "knowledge of quality, in-state investment opportunities and can help connect potential investors with emerging Washington-based businesses looking for capital."

The center also will help improve company readiness for investment and develop a Web page through the WTC's Angel Network to provide more information on companies.

The state investment board last year adopted a policy to foster economically targeted investments in the state. The move matches a trend in other states where a portion of state pension-fund investments goes to in-state companies. The state Investment Board manages more than $50 billion in assets.

Stephen H. Dunphy's phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com

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