Barclays Capital came out predicting a quick end to the shallow Israeli recession, and a return to decent growth of 2.9%  by next year.  Keep in mind that the Israeli economy was late to the ‘recession game’ and looks to be an early ‘exiter’ from economic turmoil as well.

With all this great news Barclays said that they expect an Israeli Shekel/USD exchange rate of 3.65 buy the end of the year. That’s a big move from the 3.93 area that the currency is trading at now.

According to Globes: “Barclays sees a less severe recession in Israel, and relatively quick growth recovery. The investment house bases its optimism on the fact that about 75% of Israeli exports are high-tech goods, and Barclays says that a rise in the Tech-Pulse Index - showing a US high-tech recovery - points to stronger Israeli exports. The Tech-Pulse Index, measured by the San Francisco branch of the US Federal Reserve, tracks the US information technology sector.”

It looks like we have started to see this happen. As Tech has led the stock market turnaround in the US, Israeli stocks that trade in the US have been flying, up over 33% this year. Keep in mind that, like it or no, President Obama’s push for alternative energy sources will be huge for Israel, as Israel is one of the big global players in cleantech and water technology. If this trend of a ‘tech led recovery’ continues, look for the Israeli hi-tech scene, from small and mid-cap tech plays on the NASDAQ to M&A to Israeli VC, to have a very strong 2nd half of ‘09, and lights out for 2010.

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Could the Obama plan to regulate the VC industry in the US, provide a big boost to the Israeli VC industry? Sure could be the case. With Obama trying to regulate everything that has a smell of money, the VC industry could be in for trouble. That means opportunity for Israel. this means that the new Netanyahu government must cut taxes across the board and especially corporate taxes, that will help spur job growth and entrepreneurism.

Batya Feldman of Globes has an interesting interview with some local VC players. An an interview with Benchmark’s Michael Eisenberg: “Opposition to the rules being drafted is to be found in Israel as well. Michael Eisenberg, partner at VC firm Benchmark Capital, takes issue with the intention to impose the regulations on the world of venture capital.

“Geithner spoke of the need for regulation of anything that could become a substantial threat to the economy,” he says, “and I don’t see how a venture capital fund could represent a threat to the entire financial system. But we can relax. Regulation will apply to venture capital finds that will be put together in the future, so no problems are expected for funds that have already raised capital.”

How far will the new rules affect Israel’s high-tech industry?

“It’s hard to know what the regulation will consist of. If there’s a requirement to report on every investment, that will be impossible. However, for Israel this is in fact a once in a lifetime opportunity, one that could make it a world financial center. If they impose restrictions on the funds in the US, in Israel we should give incentives, loans and insurance that will encourage funds to register in Israel. That way we won’t be the carriage but the locomotive.

We here about the demise of the Israeli VC industry. Maybe Israel can capitalize on Obama’s mistake and not only save the VC industry, but have it both flourish here and attract foreign funds as well.

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Who says video games cant prepare you for real life? Faced with Iranian weapon convoys traveling through the Sudan on their way for Gaza and the Hamas, Israel took out a joystick, sent up a couple of Hermes 450 UAVs unmanned drones, and scored a direct hit on the entire convoy. Can you say Free Game?

According to Ynet: “According to the Sunday Times, Hermes 450 drones attacked two convoys, killing at least 50 smugglers and their Iranian escorts. One source claimed they were accompanied by giant Eitan UAVs, which have a 110ft wingspan, similar to that of a Boeing 737. The drones, controlled via satellite, can hover over a target for 24 hours, the report said. The defense sources said that the main reason for choosing the drones was that a convoy forms a “slippery” target. “When you attack a fixed target, especially a big one, you are better off using jet aircraft. But with a moving target with no definite time for the move UAVs are best, as they can hover extremely high and remain unseen until the target is on the move,” one of the sources said.”

Israel may have a political vacuum, but there is no disputing the tactical superiority of the Israeli Defense Forces. In the span of just a few months Israel has destroyed this convoy, doing it completely undetected, and let’s not forget that they made the Syrians look downright silly, as they blew up a nuclear reactor, again completely undetected.

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Now the numbers confirm what we all know; that Israel is truly a global leader in water technology. According  to a Globes article: “The Israel Export and International Cooperation Institute reports that water technology exports totaled $1.4 billion in 2008 - double the 2005 amount. The global water market is worth $400 billion annually and is expected to rise to $537 billion next year.”

The article continues “The areas of activity in which these companies are involved are: water management systems; safety and security for water sources; irrigation management systems; desalination; water recycling and purification; and others. Israel is ranked first in the world in recycling water for agriculture. 75% of sewage is recycled for agriculture with Spain, ranked second in the world, recycling 12% of its sewage for agriculture.”

Now if only the country could take of its’ own water shortage!

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