What’s going on with the Israeli Shekel? A local’s perspective
Written by: Zack Miller | May 10, 2007
Gary Dorsch has an interesting article over on SeekingAlpha about the “Incredible” Israeli Shekel. Gary’s research is top-notch and he brings a ton of macroeconomic research into his post.
Gary is astounded at the apparent strength of the Israeli shekel against the dollar: we’ve broken through the psychological barrier of 4 shekel/dollar (the lowest level in 7 years) and since January, the dollar is off 15% and still dropping.
There are plenty of reasons for strength:
“the Tel-Aviv 100 Index hit an all-time high of 1,100 on May 3rd, more than tripling in value from four years ago, after Israel’s economy expanded at an 8% rate in Q’4, exceeded only by emerging giants in China, India, and Russia.”
Furthermore, Israel has seen a growth rate for 2006 ofFor all of 2006, Israel’s 624 billion shekel economy ($150 billion) grew by 5.1%, similar to 2005’s growth spurt of 5.2%, and posted a current account surplus of $6.8 billion, or 5% of gross domestic product last year. Following a deep recession in 2003, Israel’s economy has grown about 5% for the past three years and the central bank forecasts 5% growth in 2007. Industrial output surged 10.5% higher last year, exceeded only by emerging powerhouses in China, India, and Russia.
So why are guru-level investors like Warrent Buffet making huge investments in Israeli companies? For this, Dorsch cites the level of education (highest per-capita engineering graduates), the strong bent towards technology, and the participation of foreign companies in locally-generated R&D (Intel, Microsoft, Cisco, et al all have thriving facilities here).
The fact that the Israeli economy is thriving is due to the resilience of the Israeli people in the face of numerous entities maniacally focused on destroying Israel. Instead of destroying, we’re entirely focused on building: educating our children, ourselves, our women and creating vibrant forms of commerce locally and abroad. It’s not just for ourselves — we’re creating innovative charities to give to those less fortunate. We’ve made the desert bloom and we’re still just beginning.
Gary’s right and he’s not right: while the Shekel may be trading outside its normal bands, Israel isn’t. We do this everyday.
Share with others:
