Betting the farm

IDB Holdings has money to pay its debts for the next two years and has a lot of valuable properties such as 3% of Credit Suisse and 40% of Makhteshim Chemicals (the 60% has been purchased by the Chinese Chemical Monopoly). Yet its D Bonds are paying 60% and are valued as if IDB Holdings were broke and could not pay its debts. 

I beg to disagree. Concerns and countries base their finances on recycling their debts, not to mention all banks. If refinancing is not going smoothly, they ALL go down. Yet, almost miracolously, refinancing is being done smoothly and automatically and everything works out well.

Except when not. European banks have hit one of those rare events when market fail to refinance their debts. The reason is panic caused by Greece's default. Now that we have some kind of european central bank and collective promise of helping out temporary problems, things will regularize once again. It cannot be otherwise.

The problem of IDB  Holdings is Profesor Stanley Fisher, the Bank of Israel. In the light of the panicky mood of world financial circles, he concludes that Israeli banks should have larger capital base and less exposure to unstable financial pyramids like IDB Holdings. So IDB Holdings's credit lines suddently dried up and cannot recycle its debt as normally would do. The computer models say that without refinancing and recycling debt, IDB is broke and kaputt. It bonds and promises to pay ten years from now are worth nothing. 

I am an optimist and am betting the farm on IDB Holding D Bonds payable in the next ten years. Let me explain my reasoning with a Jewish story. A Jew was accused of stealing the horse of a Polish officer and was being carried off to the hanging tree. "Dont worry, everything will be all right!" he said to his crying wife. "But Moyshe, how can you not worry when you are being going to be hanged?" "Rivkeleh, that is far away in the future, in the meanwhile the horse may die, they may find another horse, the nobleman may fall from the horse, the judge may receive a heart attack or they'll find another Jew to hang. Something may happen so there is nothing to worry about!". 

I mean that the current credit drought cannot last three years. Something will happen and all will be ALL RIGHT !