Even with predictions of crude oil hitting $200-300 per barrel, the current drop in crude has it moving very quickly down to the $100 level. While investors have been focused on how the drop in oil will impact oil related stocks, I think they need to take a bit more of a Macro view and look at the impact on emerging market investing. The first country that comes to mind is Brazil. Brazil has been one of the world’s best performing markets so far this year, but a drop in crude prices may severely impact their market going forward as so much market weighting is given to companies in the oil industry.  To a lesser extant this applies to Latin America as a whole.

With crude prices dropping it wouldn’t be too surprising for other commodity prices to follow suit. So much emerging market economic growth has centered around the huge run up in commodity prices, as many of these countries are blessed with rich supplies of raw materials. Russia and other natural resource based economies like Australia, and even Canada could be in for a rude awakening if we get a continued drop off in commodity prices.

So which emerging markets will benefit? I think Israel is one. Blessed with little in the way of natural resources, but with an abundance of creative and entrepreneurial people, Israel will continue to produce cutting edge innovation that powers the technological revolution that we are in the midst of. I wouldn’t be surprised to see rotation in emerging market investments with natural resource based economies being under-weighted and countries that produce value added goods, be over-weighted.

Aaron Katsman, IsraelNewsletter.com

Disclosure: Author’s fund has no positions in any stock mentioned as of 7/23/08.

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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What to do about the strong Shekel? That is a question I hear about 10 times a day form my clients. Everyone has been talking about the impact the strong local currency has had on the economy. The Bank of Israel has even attempted intervening in the currency markets, mostly with little success. So what to do? Let the free market work its magic.

Once again we see how market forces are able to correct short-term imbalances. Over the last week the US Dollar has surged more than 6% against the Shekel. Part of this was due to BOI intervention, but most of the impact has come from two large Israeli companies taking advantage of a strong currency to make very large foreign acquisitions.

Teva Pharmaceuticals (TEVA) $7.5 billion acquisition of Barr (BRL) and Koor Industries $900 million investment into Credit Suisse (CS) has sparked Dollar buying by these acquiring firms to complete the deals. According to a Globes article: ” Bank Leumi will provide Teva with $1.8 billion in financing, is expected to boost domestic demand for foreign currency. Capital market sources say that Teva has been buying dollars on a large scale in the past few days for the acquisition. In addition, IDB Holding Corp. Ltd.  subsidiary Koor Industries Ltd.’s announced that it plans to double its investment in Credit Suisse Group to NIS 3 billion, and has also been buying foreign currency for this purpose.”

We have also recently seen European companies buying up American firms, for the same reason. They also have a strong currency and want to get good deals. Be it Genentech (DNA) or Anheuser-Busch (BUD) while their price tags were massive, the acquiring firm actually bought these companies for a 20-30% discount in local currency. Now they need to go out and get the Dollars to complete the deal. This should help the greenback as well.

The lesson we can learn: leave markets alone, and let them do their thing, and ultimately, aberrations will work themselves out.

Aaron Katsman, IsraelNewsletter.com

Disclosure: Author’s fund has a position in TEVA as of 7/23/08.

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
IsraelNewsletter.com

In what has been an extremely volatile trading session, which has seen the shekel trade near the 3.21 level against the US dollar, news that Bank of Israel Governor Stanley Fischer has increased the level of BOI intervention in the currency market has sent the dollar surging by more than 2.25%. The BOI announced that it will increase it’s buy-up of the greenback to a $100 million a day.

The continued rise in the Shekel has defied all logic. Even yesterday, the shekel strengthened by more than 1%, as Iran announced the testing of missiles that have the range to hit Israel. Under normal market conditions that news would have sent the Shekel reeling, but it just didn’t happen.

Let’s see if fundamental reasoning returns to the local currency market on the heels of the BOI move, or if this move is just a knee-jerk reaction that will reverse in the next few days.

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
IsraelNewsletter.com

Clearly demonstrating his total misunderstanding of how a free-market works, Democratic presidential candidate Barack Obama said ‘it would be a shame’ if Anheuser-Busch (NYSE:BUD) was sold to a foreign company.

According to a Reuters report, Obama said, ” I think we should be able to find an American company that is interested in purchasing Anheuser Busch if in fact Anheuser-Busch feels that it’s necessary to sell.”

Huh?

Who is the ‘we’ Obama is referring to? Is it the government? Since when is the US government an investment banker? It’s not exactly a secret that the maker of Budweiser is in play. If there was a US company interested in purchasing Anheuser-Busch, they could put out an offer. The lack of a competitive offer means that no one is interested based on the asking price. Isn’t that rather obvious? Maybe the government should nationalize the company, in order to keep it in American hands!

Is Obama advocating the worst kind of government intervention? Does he really believe that he knows better than the market, regarding whether a publicly traded company should be sold and to whom? His protectionist tones mimic his beliefs on NAFTA. It sure appears that Obama has shown a consistent policy of being against free trade.

What’s wrong if an American company is sold to a foreign buyer? As fellow IOI colleague Zack Miller says, ” Isn’t his policy xenophobic?” Conversely, what are his feelings about an American company buying a foreign firm?

From the little we know about his stance on free trade, the impact to Israel as well as the global economy could be profound. If Obama wants to make the US into an economic island, it would cause not just catastrophe to nations no longer able to export their goods into the US, but would harm the US consumer, with less choice and more costly goods.

Someone needs to ask Obama to explain in depth his belief that we need to find an American company to buy Anheuser-Busch. As I mentioned, if he really is a protectionist, shouldn’t the voters be made aware of this and shouldn’t he need to explain his position?

In order for the economy to grow we need less government intervention not more. Let the market sort things out, and keep the government out of the way.

Disclosure: Author’s fund has no position in any stock mentioned as of 7/09/08.

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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