Aaron Katsman
IsraelNewsletter.com
Last week in the tourist city of Eilat, the big-wigs( yours truly was not invited) of the Israeli economy got together to speak about the future of the Israeli economy. Speaking about the global economic slowdown and the ramifications on the Israeli economy, Ministry of Finance director general Yarom Ariav mentioned that he expects a slowdown locally on the heels of the global economic slowdown. Pretty standard analysis.
Then, according to Globes, Ariav said, “The decision to integrate into the global economy has greatly limited options for the Israeli economy. 10% annual growth by emerging markets affects raw materials, oil, and disposable goods.”
What?
Is he saying that that fact Israel is now part of the global economy a bad thing? Would it be better for Israel to be a protectionist and isolationist economy, and just produce goods for our own survival? (Continue »)
Smart investors know how to look at company provided projections. You’ve got to take them with a grain of salt.
So, when Israel’s Finance Ministry begins making bold projections, you probably require at least a bucket full.
(Continue »)
Aaron Katsman
www.IsraelNewsletter.com
It’s official. Israel is no longer an emerging market. Yesterday, ratings agency Moody’s joined Standard & Poor’s and Fitch, by upgrading its ratings for Israel. The government foreign and local currency bond ratings have been upgraded to A1 from A2, and the foreign currency ceiling for bank deposits has been upgraded to A1 from A2 as well.
This is another feather in the cap of the Israeli economy. It was only 6 years ago that Israel was on the verge of economic collapse, but thanks to then Finance Minister and former PM Benjamin Netanyahu’s courageous economic reform policy, the economy has strengthened considerably. By lowering taxes, limiting government spending and privatizing state owned industry, Israel has experienced some of the strongest growth outside China that world has seen in some time.
The sign of a strong economy is a strong currency. Over the last year, the Israeli Shekel is one of the 3-4 strongest currencies in the world.
“Fiscal reforms are paying off in terms of increased economic vibrancy, diversification and competitiveness, and to the benefit of strengthening tax revenues, in spite of tax cuts,” said Moody’s Analyst Joan Feldbaum-Vidra.
In spite of tax-cuts? Joan, it’s because of the tax cuts. This is another proof that supply- side economics is the way to go. If you increase the economic pie, you will have larger tax revenues even with lower taxes. How do you increase the pie? By cutting taxes.
Disclosure: Author’s fund has no position in any other stock mentioned as of 4/18/08.
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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.
