In an article on Bloomberg today, billionaire investor Warren Buffett allayed concerns about a credit crunch, though he didn’t have the same calming effect when discussing the decline in the U.S. dollar.

Funds are available and can be borrowed inexpensively, said Buffett when addressing a crowd in Toronto. And without policy change, the U.S. dollar is likely to continue to fall during the next decade, said the master investor.

While Buffett isn’t making outright bets on currencies, he does hold the Brazilian real. Buffet is looking to make international investments via his investment vehicle, Berkshire Hathaway (NYSE: BRK.A), in part to hedge his exposure to the U.S. currency.

The company made its first non-U.S. acquisition in 2006, when it paid $4 billion for 80 percent of Israel-based Iscar Metalworking Cos., a family-owned maker of industrial tools, said the same Bloomberg article.

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Someone called us recently to ask about a newish ETF called the SPDR Emerging Middle East & Africa (Amex: GAF). The ETF is heavily weighted around three countries — South Africa (65%), Israel (17%) and Egypt (6%).

There are other ETFs that include exposure to Israel but as far as we know, this ETF currently has the largest exposure.

Israel as a destination

We like Israel (but hey, we’re biased). While Israel is not putting up double-digit GDP growth like China, we are seeing close to 4-5%.

Not too shabby.

Foreign capital is flowing

We’re continuing to see money coming into Israel looking for a home. Canaan Partners just announced another fund that will be targeting opportunities in Israel.

Can Israel do better?

And if you ask Netanyahu [subscription required], we could see close to 8%, if certain pro-market policies are put into place. Even Netanyahu’s detractors credit his cuts in welfare benefits, the removal of remaining currency and capital controls, and liberalization of the banking sector as cutting the way for an amazing economic recovery.

Check out Eze Vidra’s post, “Israel 2008: What the Bulls and the Bears are saying“, for some good forecasts of what various analysts are looking for from the Israeli economy in 2008.

What does the ETF hold?

Check out the GAF’s holdings. What you’ll see is that Israel’s 11% weighting is driven by the fact that Teva Pharmaceuticals (Nasdaq: TEVA) is the ETF’s largest holding at over a whopping 9%. We then see Israel Chemical (2%), Bank Leumi (1.43%) and Bank Hapoalim (1.41%). Elbit Systems (Nasdaq: ESLT) is also in there (1.06%). The rest of the Israel holdings each account for less than 1% of the SPDR Emerging Middle East & Africa Fund.

Investors in Israel from abroad may like the fact that this fund holds locally traded companies that aren’t dually listed or carry a corresponding ADR in the US.

So, what’s an investor interested in Israel to do?

That said, 17% of a fund that has exposure to really different economies may not be enough for foreign investors looking to trade locally-traded Israeli shares. Also, TEVA’s weighting at 9% of the overall fund means that Teva alone accounts for over 50% of the total Israeli exposure.

Teva may be a great company but it’s not indicative of the Israeli market as a whole. I’d like to see more exposure to Israel Chemicals, the Israeli banks, Bezeq, 012.Smile (Nasdaq: SMLC), the Mobile phone carries including Partner (Nasdaq: PTNR) and Cellcom (NYSE: CEL), let alone all the newer, smaller, tech firms listed locally.

What about mobile fixed telecom players like Alvarion (Nasdaq: ALVR) and Ceragon (Nasdaq: CRNT)? Both have taken a worse beating than Britney has received from the paparazzi.

I’d like to see a country ETF also include local retailers like Blue Square-Israel (NYSE: BSI)

Israel investors may be better off weighting for new offerings in the works as we hear that Barclays and another firm has an Israel ETF in registration.

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Aaron Katsman
www.IsraelNewsletter.com

What is going on at Incredimail(MAIL)? the last time we heard from the company was to reassure investors that they had worked out their problems with Google(GOOG), and that they were buying back stock. Well that was 2 weeks ago. In internet time 2 weeks is a lifetime.

Today the company announced a change at CEO. Yaron Adler is stepping down and being replaced by his brother Ofer, co-founder and current Chief Product Officer.

Tami Gottlieb, Chairperson of the Company’s board of directors, commented: “We are grateful to Yaron for his vision, leadership, enthusiasm and determination, bringing together with Ofer the Company so far. We accept Yaron’s wish to allocate more time to other endeavors, resulting in a lesser involvement in the Company’s operations, and are thankful for his continued availability and advice, which we believe will contribute to the Company’s future growth and success.”

The whole thing sounds weird, especially the timing of the recent events. We interviewed Yaron a few months ago, and actually had a conference call with him 2 weeks ago, and he gave no indication whatsoever that he wanted to “allocate more time to other endeavors.”

The fact is that in our conference call, absolutely no new information was shed about the Google issue. The call was just a rehash of the press release. While we had our differences about whether the company should be an acquirer or an acquiree, we really liked Yaron and respected his creative vision, and we wish him well.

Unfortunately for investors the total lack of transparency is shocking. This is a publicly traded company, not some mickey mouse operation. We at Israelnewsletter.com are calling for the company to come clean about the whole Google issue, as well as the sudden change in management.

Disclosure: Author’s has no position in any stock mentioned as of 2/5/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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Aaron Katsman
www.IsraelNewsletter.com

As we dig out from the snowstorm that crippled Jerusalem, attention this weekend turns to sunny Arizona, and the playing of the Super Bowl. While IOI has a strict policy against choosing one team over the other, as an individual poster I will take the liberty and say that the Patriots better win, because I can’t imagine what it is going to be like to have to listen to a bunch of obnoxious New Yorkers go on and on about the Giants.

Here at IOI we would like to present our top 2 Super Bowl picks. These Israeli stocks are sure to rise enough in value that you will be able to fly to Disney World with your earnings.

Verint Systems(VRNT.pk) the security company has been on fire over the last month and a half. Previous to that it was a one way ticket downhill. The stock has gotten crushed over the last few years, mostly due to the mess that is the parent company Comverse Technology(CMVT.pk). The fact the Verint had to delay filings and get delisted from the NASDAQ has taken its toll on the stock. If you can get beyond the scandal with Comverse, you will find that Verint is growing nicely, and well undervalued to its competition, namely fellow Israeli security play Nice Systems(NICE).

Elbit Systems(ESLT) the defense company just keeps signing new deals. This past Sunday’s deal with the Netherlands, while only a $40 million deal, was much more important than the money. The company thinks that this may help them crack into NATO, and if that happens, they will start selling like crazy. With the world continuing to be a very dangerous place, Elbit Systems should benefit.

Go Pats!

Disclosure: Author’s has a position in VRNT.pk and ESLT and is long the stock as of 2/1/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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