Written by: Aaron Katsman | March 17, 2009
In yet another bit of data that points to worsening economic conditions in Israel, the number of bounced checks jumped in 2008 over 2007. According to Globes: “4.4 million checks amounting to NIS 28.1 billion were returned in 2008. This is 226,000, or 5.4%, more checks than were returned in 2007. The value of the returned checks increased by 2.4%, or NIS 662 million, the Federation of Israeli Chambers of Commerce reports. The Chambers of Commerce noted that most of the increase in returned checks last year occurred during the fourth quarter, and reflected the credit crunch, which has created cash flow problems.”
Looks like the Israeli consumer is going the way of their US counterparts.
Written by: Aaron Katsman | November 9, 2008
Will the real Bank of Israel Governor please stand up? A week after telling us that everything is just peachy re: the Israeli economy and Israeli banking system, all of a sudden Globes is out with an article that Fischer is now ‘worried.’ The article says, “We expect 2.7% growth in 2009, and we’re accused of over optimism. In such times, if you want to be serious, you should be worried, and I am really worried. Wise men won’t tell you that there is nothing to be worried about,” said Governor of the Bank of Israel Prof. Stanley Fischer last week during a meeting of the EU-Israel Chambers of Commerce and Industry held at the home of the Ambassador of France.”
I guess Fischer figures that the Israeli public isn’t fluent in French. As posted here last week Fischer said that Israeli banks were in good shape. If so then why did he tell the Chambers of Commerce that, “There will probably be a period of a rise in unemployment, a drop in the growth rate, and some companies will find it difficult to raise capital. These things happen during a slowdown. Some companies will find it difficult to obtain credit.”
Why should it be hard for companies to get credit if the banks are safe and sound????
Gov. Fischer, please just level with us.
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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.
Aaron Katsman
www.IsraelNewsletter.com
We have posted frequently about how Israeli publicly traded companies in the US have basically mismanaged their cash and have had to write down large amounts of their cash reserves. Many companies tried to squeeze higher yields on the cash they held by investing in Auction Rate Securities (ARS) ranked AAA and AA, which pay much higher interest rates than other similar fixed income alternatives, only to watch as this market has dried up and their investments have lost significant value. While no one knows what will ultimately happen to these ARS, since there is currently no secondary market for them, many companies have no access to cash.
Scott Austin had a great article in CBS Marketwatch about the impact cash management is having on the world of Venture Capital.
“Back at the conference, another panelist, Battery Ventures general partner Ken Lawler, sounded an alarm. He said his firm took a quick poll of his group of 60 or so portfolio companies and was shocked to find out that 12 of them, or 20%, have some amount of cash tied in auction-rate securities.”
Hi-tech start-ups use cash to fund their operations. Most of the time they don’t have the luxury of taking large sums of cash and trying to invest it. The fact that we are starting to see that they have exposure to ARS, is very worrisome, because if they can’t access their cash, they can’t fund their operations. Where was the VC oversight that allowed this to happen?
We already know that many Israeli publicly traded companies have received bad advice vis-a-vis managing their cash — let’s hope that Israeli start-ups don’t suffer a similar fate. If they do, the Israeli VC industry may just grind to a halt.
Disclosure: Author’s has no position in any stock mentioned as of 3/19/08.
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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.
