Friday, March 02, 2012
Israel's Self-Destructive Urge
TASE is dying and stock prices are agonizing. Israel Corporation, Discount and all other large corporations have lost 50% of their values in the last three months. The disaster is causing me much damage and I am distressed because what is happening in the bourse goes against my instincts of what the bourse should be doing.
After three months I am starting to see more clearly what is happening. It isnot hat foreign funds have confused Israel with Syria and retired their funds. They are less myopic than I presume. It is us. Last summer's middle class protest against the price of cottage cheese (!) and Pesek Zman candy (!), thanks to the incitation campaign led by HaAretz against the wealthy, has cowed the government and it is acting forcefully against "capitalist swines" (sic in Hebrew). Firstly they ordered our Potash mining Company KIL to "save the Dead Sea", meaning to restore that geographical concept into some ideal pristine state. I cant say that it is a "green" environmental demand since what the "Greens" want is to restore the original deadness of the Dead Sea, to reconvert into a lifeless body of salty water. By the way, Minister Landau has been accusing the Greens of irresponsibly killing the Ashdod Termoelectric Station Project in order "to save" some coastal sand dunes and causing a severe electricity deficit in the country.
The venomous campaign against the wealthy has succeeded to the point that most corporations in Israel are unable to pay their debts (Tshuva Group reached an arrangement with its bondholders to pay back about half) and now they are being ordered to divest their holdings. That is, a bank or financial entity is forbidden to have any relation with a "real" company producing material goods. I had no time to think out the logic of this new law, but it goes against what is happening all over the world. The trend is toward large mixed corporations with partly State ownership, because only these large conglomerates are able to compete in the global marketplace and carry out large projects. To break them up makes little sense to me, and even more because we are talking about conglomerates that are large only at the Israeli scale, they are veritable midgets out there. Anyway, Israel Corporation has lost 50% of its worth and even Nochi Dankner's wonderful corporation has been ordered to sell its banking or manufacturing assets (and its price is down).