Israel and the Logical Disconnect

As investment managers, my partners and I were frequently confronted with situations in which a stock that we owned was out of favor in the market.

In many cases, there was a negative momentum to the stock price that belied the facts on the ground with the particular company. Sometimes the situation became extreme as the company’s fundamentals continued to strengthen, yet its stock price continued to plummet.

Not surprisingly, these were painful episodes, as we would view the situation and say to ourselves, “This just doesn’t make sense. There’s a total disconnect here. Things are getting better and better, yet the stock is going to Hell in a handbasket.”

Many clients, seeing the stock price swoon, but not knowing the fundamental facts, were naturally nervous. They would often call, questioning our judgment, and occasionally our sanity. The conversations were never terribly pleasant.

I am proud to say that, as frustrating as these times were, and as seemingly painless as it would have been to have just thrown in the towel, we always stood fast. That doesn’t mean that we did not sell losing stocks; of course we did.

It did mean that we didn’t sell them if we believed the company was strengthening, and that the logical disconnect would eventually dissipate, giving way to a significantly higher stock price.

Far more often than not, our tenacity was rewarded. Sometimes the upshot was still an unsuccessful investment from inception, but most always it was successful from the point of contemplating giving up.

There is a strong relevance in all of this to Israel’s geo-political situation. Israel is in the midst of an enormous logical disconnect.

Our fundamentals look good and are getting better all the time. Israel remains economically vibrant and politically democratic. There is a broad-based grassroots renaissance of Jewish values, awareness and connection taking place.

For the first time ever, there is open commonality of interest with neighboring Arab countries, particularly Egypt and Jordan, and, to a lesser extent, Saudi Arabia. Increasingly, Israel is serving as a Light unto the Nations, offering agri-tech, bio-tech and natural resources technology that are profoundly helpful to billions around the world.

Perhaps most telling of all, our birth rate is by far the highest among Western countries, aliyah is growing and the country displayed an amazing unity this past Spring and Summer during the ordeal of The Three Boys and the ensuing Operation Protective Edge.

Simultaneously, however, our stock price – our esteem in world opinion and policy – is plummeting. Increasingly, the hostility to Israel from traditional allies or even handed parties is more overt and harsher.

Israel is in that logical disconnect where seemingly good news is interpreted otherwise. Operation Protective Edge was perhaps the epitome of this disconnect, as excruciatingly careful tactics to protect civilians in Gaza were nevertheless held to be disproportionate war crimes or crimes against humanity behavior.

The great success of Iron Dome, which saved thousands of Gazan lives by relieving the pressure on the Israeli government to respond to what might have been widespread carnage in Israel but for its successful deployment, was seen as a yet another opportunity for Israeli dis-proportionality.

Most tellingly, the exquisite sophistry of holding that anti-Zionism was somehow not anti-Semitism disappeared in a flash, as enraged mobs called for “death to the Jews” in many European cities.

Like in the investment situation, the real question, perhaps the only relevant question, is not why, nor how could this be, but what are you going to in the face of all of it?

As with short term movements in the stock market, appeals to reason are futile and the onus is on the investor – or Israel and it supporters – to decide how to react to the negativity.

Amazingly, but probably not surprisingly, there is the reliable “if-only” crowd, which holds that the solution to all of this is for Israel to double down on its efforts, to do more, to show more courage and to display vision. “If only our leadership would take the courageously painful steps of…..(fill in the blanks as you will) we could have peace. (Needless to say, we are the only ones ever asked to endure the pain, but that’s no news.)

Then there are those who will drink any situation pretty. “This is now the time for us to empower Abu Mazen and to stand firmly behind his efforts.” This mind bending exercise in suspending disbelief not only enshrines a terminally weak Abbas as the master of Gaza, but strenuously disregards his increasingly rejectionist and outright anti-Semitic pronouncements.

What I learned as an investment manager is that sometimes it’s not about me, but about the market. It didn’t really matter what we thought or did, in the near term the market was going to do whatever it would do, perhaps in the face of all logic and common sense.

This is a lesson that most Israelis, if not their leaders, increasingly understand. The antipathy, the warped interpretation of anything and everything we do, the outright hatred for our nerve in asserting ourselves, indeed for being here at all, all of this is going to continue no matter what we do.

For many Israelis this is a difficult realization, because it’s always all about us, about what we choose to do. The others will follow suit, once we set the table. For many Jews this is also a difficult posture to adopt, because we believe that regardless of what the other guy will do, we have to do the “right thing.” Plus, we need to seek peace, which means making accommodations, however imperfect.

However, not seeing ourselves as the central, determinant actor is not moral abdication. It is not giving up on finding a better outcome. It is not the coward’s way out.

Quite the opposite. It requires the mature courage to stay a course of rational self preservation that represents a humane policy towards ourselves and our adversaries. It takes great courage, and vision by the way to say, yes, we could cut this deal or that, provide this accommodation or that, give back, give up these or those, but… all of that would be a self destructive fool’s errand.

Those who would suffer no consequences for being egregiously wrong about what it is Israel should or must now be doing don’t get a vote. They have no existential skin in the game.

And those who condescendingly believe they know what’s in our best interest, and are prepared to save us from ourselves had better have the consequences of it all nailed down to a tee, and not console us with the need to take risks for peace.

So despite our lousy stock price, I prefer to focus on Israel’s great fundamentals and to say, this too shall pass, however long that might take. The market of world opinion will right itself at some point. And if not, we will continue to be at risk to the whims of those who are happy to dispense with us in the name of some grander (and typically self serving) vision of what they think things should look like, regardless of how devoid of reality that vision might be.

One way or the other, we are well advised to keep our heads screwed on straight, and to keep doing the amazing, right and appropriate things that constitute life in Israel, without worrying too much about things that are way beyond our control.

About the Author
After a successful money management career in NYC, Doug Altabef made aliyah to Rosh Pina with his wife Linda and their youngest of four kids in 2009. As a money manager, Doug was a frequent guest commentator on Bloomberg TV, CNNfn TV as well as Wall Street Radio, which was syndicated out to dozens of radio stations throughout the US. Today he spends his time serving as Chairman of the Board of Im Tirtzu and a Director of the Israel Independence Fund, where he has been privileged to get some amazing insights into how people are making a difference here. Doug also has invested in several early stage Israeli companies and is a big believer in the Start Up Nation attractiveness of Israeli technology.
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