Following a global trend to try and cut costs and not lay anyone off, Israeli cutting tool maker Iscar has announced that it too will switch to a 4 day work week. The move comes as orders have slowed down, especially from the US auto industry.

According to Globes: “Iscar, which manufactures cutting tools for the vehicle and aviation industries, is taking a range of cost-cutting measures to cope with the plunge in orders from customers, especially US carmakers. Iscar chairman Eitan Wertheimer told “Globes”, “If we have no alternative, we’ll lay off people, but our goal is to avoid this and to adjust sales to the long term. This crisis is going to be tough.”

In the past Buffett has spoken about how well the Iscar investment has been. It looks like even the best investments can’t withstand the global rout.

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A theme that we have been echoing here at Israelnewsletter.com is the fact that many in Israel are living in a bubble and don’t realize that the economic tsunami that has swept the world will cause damage in the holy land. Globes has a great interview with Gemini Israel Funds general partner Menashe Ezra. He says, “Warren Buffett said that we’re facing an economic Pearl Harbor, and I feel that, in Israel, the understanding that we’re at war has not sunk in.” Ezra added, “One of the things that is bothering me is that we’ll experience a local patriotism. I think that globalization will take a few steps back. In Germany and the US, people realize that if they buy a locally made car they’re helping themselves.”

He goes on to say that he doesn’t think that money will be readily available to hi-tech entrepreneurs. “In recent years, we had too much money here. There was a bubble, and entrepreneurs could fund companies without paying a price. They left big companies and got similar salaries at private companies and start-ups. They received stocks and options. This had never happened before in Israel or in the world. It happened because of the surplus of money and incautious behavior, and it created distortions.”

The picture Ezra paints isn’t all that pretty for the short-term future of Israeli hi-tech. On the other hand I think we need to keep in mind that Israel weathered the internet bubble storm, and learned a tremendous amount in the areas of running businesses day to day. I think that that experience will help pull Israel through this global crisis, and the Israeli technology scene will be as strong as ever.

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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Today’s post comes from a guest blog, New Rules of Investing:

Institutional investors have powerful tools at their disposal to screen through reams of data.  Part of the institutional investment process entails screening through thousands of securities looking for a needle in a haystack — stocks that fit certain investment criteria.  From thousands of stocks, analysts can filter through a couple of hundred that fit these so called screens.  With a couple of hundred stocks in hand, analysts set out to do the hard work analyzing these companies, comparing them to one another, speaking to management and whatever else hedge fund and mutual fund analysts do when looking at prospective investments.

If I’m a value investor, I’m probably going to use some metrics that focus on Return on Capital (RoC) or Return on Equity (RoE) and Earnings Yield (E/P).  Growth investors might like to compare the price/earnings ratio (P/E) to the actual growth prospects of the stock in question.  There are literally thousands of things to look at.  So, where to start?

As we discussed in the “Piggybacking the Pros“, the Internet is a wonderful place to get information on stocks.  From monitoring actual moves that uberinvestors make to seeing what your peers think of certain firms, the information is out there.  You just need to be able to find it.  Investment Screening 2.0 is all about using screening criteria from super investors like Warren Buffett to find the next big stock.  Think of it as tapping the world’s greatest minds to see what they think of a given investment.

John Reese, a well-regarded entrepreneur with degrees from the two best schools in Cambridge, MA, has created a premium service that is the product of many years of research into the strategies of super successful investment managers.  Having devoured numerous investment books and interviews with the world’s best investors, Reese embarked on an ambitious project to computerize this information.  His firm, Validea, has created an algorithm capable of analyzing thousands of stocks according to differing investment strategies ranging from Fidelity’s Peter Lynch to Berkshire Hathaway’s Warren Buffett and applies screens to the overall market to find stocks that would fit these uberinvestors’ criteria.

John Reese joins New Rules of Investing for an exclusive interview. (Continue »)

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Aaron Katsman
IsraelNewsletter.com

Volatile markets have impacted even the best of investors. Last week we heard that Warren Buffett had his worst first half of a year in 19 years, and news out yesterday shows that the hedge fund industry didn’t fare much better.

According to a report in Bloomberg: ” Hedge funds declined by an average 0.7 percent in June, bringing the year-to-date loss to 0.75 percent, data compiled by Hedge Fund Research Inc. show. It’s the worst start to a year since the Chicago-based firm began tracking returns in 1990.”

While hedge fund investors lamented the lack of volatility in markets for the last few years, they finally got their wish and, on average, weren’t able to deal with the high level of volatility.

But before we jump on the anti-hedge fund bandwagon, it’s important to note that the average equity hedge fund lost about 3.3% during the 1st half of the year. That thoroughly crushes the S&P 500 which dropped 19% from the October peak. This actually means that the hedge funds are doing what they are supposed to do and be a hedge against falling markets. To often recently hedge funds have become correlated to the market, exactly what they shouldn’t be.

It will be interesting to see the numbers from the mutual industry as well. If actively managed mutual funds also manage to beat the market, it may help slow down the explosive growth of the ETF industry. With investors constantly being told to simply buy and hold ETFs, double digit under-performance within traditional ETFs has burned investors.  This may cause investors to revert to more actively managed accounts.

After all, how many buy and hold investors wish that they would have only lost 3.3% so far this year?

Disclosure: Author’s fund has no position in any stock mentioned as of 7/10/08.

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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.

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