Friday, August 04, 2006
The war according to investors
For all the hanky-twisting that the war is not going well, investors in Israel seem to think otherwise. The graph below is a three-month chart of the Tel Aviv Stock Exchange 100 Index. Yes, it sold off broadly at the start of the crisis, but the progress has been impressive since Israel began its campaign to disarm Hezbollah. If you believe in the distributive wisdom of the financial markets in assessing geopolitical risk, Israel is improving its position.
Now, compare the three-month performance of the TASE 100 (in blue) to the Dow Jones Industrial Average (in red).
The two indices traded essentially in tandem, but started to diverge significantly in mid-June, a month before Hezbollah made its move and almost two weeks before Hamas kidnapped Gilad Shalit. Did the market "know" that Israel was on the brink of some security crisis, even if no individual understood the contours it would take, or is there another explanation for the divergence in the indices in mid-June? Anybody out there trade the TASE 100? We seek your wisdom.
In any case, it is obvious that investors were worried about Israel's security until it began major operations to deal with the twin threats of Hamas and Hezbollah. Since Omert and his cabinet bit the bullet and began to move against Hamas (see the spike in late June, followed by the drop when Hezbollah intervened) and then Hezbollah, the index has been rising. Some investors obviously think that Israel's situation is improving, and they are putting their money on the line.
5 Comments:
By 
jj mollo, at
Fri Aug 04, 03:02:00 PM:
Michael Totten told us that something big was coming as far back as April 28.
“Any minute now something huge could break out," he said. "I am afraid to go home and leave my soldiers. When Hezbollah decides to do something, they do it. And they’re pretty good at it.”
"What do you think they'll do next?" I said.
“I have no idea," he said. "They could do anything. Kidnapping. Sniper.”
...
“How dangerous is it here, really?” I asked the lieutenant.
“I say this to my guys every morning: Everything could explode at any moment. ... It’s crazy. They shouldn’t be here. You shouldn’t be here.”
“What’s happening here is very unusual," Zvika, the Israeli Defense Forces Spokesman, said. But he wouldn't tell me what, exactly, was so unusual. Shortly after I left the country, a story broke in the Daily Telegraph that explained it.
Iran has moved into South Lebanon. Intelligence agents are helping Hezbollah construct watch towers fitted with one-way bullet-proof windows right next to Israeli army positions.
By TigerHawk, at
Fri Aug 04, 03:08:00 PM:
Smart man, that Michael Totten. But was he smart enough to short the TASE?
By jj mollo, at
Fri Aug 04, 03:26:00 PM:
Probably not. No funds. He's forever rattling his tin cup.
By 
, at
Fri Aug 04, 08:40:00 PM:
correction not over yet..more to come..
By Fat Man, at
Sun Aug 06, 03:31:00 PM:
In my experience, Tel Aviv companies that cross list, list on NASDAQ. I just matched the TA 100 with NASDAQ 3 months on yahoo and it was much closer than with DJIA.
