Byline: Tokyo
(Confession 1 is immediately below this.) I investigated investments while I was in Israel and haven’t reported my findings yet. Part of withholding the investment information was because I wanted to report something positive and it took over a month to fully check it out.
The negative part was investment in an ordinary apartment. Real estate looked good initially. I looked at half a dozen apartments. A lovely two bedroom apartment on the third floor of a concrete building, one block from the beach, with elevator, parking and a nice, tree-lined street was $250,000. A great deal by American standards. The Israeli recession is over and land prices are slowly beginning to rise.
The trouble is that you get title to the apartment on a stand-alone basis. It's not a condominium, a tenants-in-common, nor a cooperative. Each apartment in the building is owned separately, with no provision for the common building. The management is handled by a volunteer committee in every apartment building. I asked around and found people saying things like “Don’t worry, the common expenses are around $70 a month including utilities and taxes.” That response made me worry even more, because maintenance should be five times $70. Everywhere I looked, apartment buildings were in disrepair -- almost certainly because of this unfortunate condition of real estate common ownership.
Additionally, I found that there was no title insurance. Most of Israel was bought from Ottoman Turks and local Arabs over the past 150 years. I know the history of land claims in California where the original owners bought Mexican rancheros. Rights to court cases were sold for the next fifty years. Israel needs title insurance.
The good investment I found is the Tel Aviv stock exchange.
What I wanted was a mutual fund of Israeli companies traded internationally as well as on the Tel Aviv stock exchange. ( There are hundreds of internationally traded Israeli stocks.) Even better than a mutual fund would be an exchange-traded index of such stocks. There isn’t one. (There needs to be one. There needs to be such funds made up of international and domestic Indian and Chinese stocks, too. Ethnic funds, I call them. )
Turns out it is possible for an American to buy Tel Aviv stock exchange stock. I wanted an index fund and found two. The market cap of the Tel Aviv exchange is about $100 billion, made up of about 70% in less than five companies. One index fund is a selection of the top 25 stocks and another is the top 100. I also found several good mutual funds. In my interviews with the fund managers I was looking for managers whose prime interest was corporate management. Israelis are great at technology and starting businesses, but less than great at managing growing companies. I found one fund manager whose views matched mine.
In order to buy an Israeli stock, you need to open a bank account. I choose the Bank Hapoalim. The account is in shekels and is visible online. I wiretransferred dollars to the account and it showed up in shekels online. Then I sent a fax and told the bank what shares to buy. The trade was executed by the bank trust department, where the securities are held. My new portfolio is visible to me online.
I expect rapid growth of Israel equities. In the next ten years I would not be surprised at growth rates of the GNP over 6% per annum and equities of more than 8% per annum.