Here's Another article where CMVT is mentioned:
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Countdown
Not the Israeli Investor's Fault
By Shlomo Greenberg
If the stock exchange is a road, then the
investor may be likened to one who hires a car,
complete with chauffeur, to tour the country. The
car-hire company is the broker. The fellow
assumes the company has rented him a high
quality car and driver. The traffic cop is the
Securities Authority. The car, with our traveller
inside, and on which the traffic cop is supposed
to keep an eye, is the company and its shares.
The chauffeur is the company's management.
The traveller-investor gets into the car, which
seems to be all right, confident that the driver
will take him in the right direction and that the
traffic cop will uphold the rules of the road.
In weeks to come, we will talk about the car, the
driver and the policeman. Today, we will deal
with the passenger, namely the Israeli investor.
The reason for starting with the Israeli investor is
that we want to show that all the ills of our
capital market are nothing to do with him. We
moreover expressly determine that the Israeli
investor is not to blame for anything. One less
worry to start with.
Contrary to prevailing opinion on and around
Ahad Ha'am Street, the average Israeli investor
in no wise differs from the American, German,
Japanese or British investor. The Israeli investor
is one who, like any other, has some money he
is prepared to invest at one degree of risk or
another, in the hope of making a profit.
Investors come in various shapes and sizes,
ranging from the individual to the professional
money manager to the institutional investor. We
shall focus first on the individual, with whom it all
begins. Please keep track of the money and
you'll see. We may have forgotten the fact, but
all those vast sums of money, the billions and
the trillions floating around in New York, or all
the flow of funds on the Israeli capital market,
starts from the individual. That fellow who
accumulates a surplus of income over
expenditure, and is seeking the best way to put
the difference to work.
The Israeli investor's first problem is how he is
treated.
Israel is one of the few, perhaps the only country
in the developed western world, in which sellers
still decide what is best for purchasers. While
gradually on the decline, this attitude is still
woefully prevalent here compared to any place
else. There were fairly objective circumstances
that initially caused it to be adopted by various
governments and it subsequently evolved into a
generally accepted behavioural norm.
Our governments have always led the Israeli
consumer by the nose. Initially due to a dearth
of resources (the austerity era) and later by
force of habit. For some reason, we forgot that
the money the State uses to lay roads or pay
old age pensions, comes from the individual.
"Government of the people, by the people, for
the people", say the Americans. But in Israel,
we march to a different tune: "My father
chastised you with whips, but I shall chastise
you with scorpions". That is where is all begins:
with an attitude.
The first sine qua non for a stock exchange to
operate as it should is this: the investor must
feel he is really getting something in return for
his money. He must have the sense that the
people who are taking his money understand
that he is due at least some gratitude in
exchange.
If the investor feels the stock exchange is doing
him a favour by taking his money, he will prefer
to play the casino or invest in charity.
It not infrequently happens on the TASE, that
the article he gets is not what the investor
wanted. This not only unsatisfactory, it is
distinctly aggravating. For the TASE to function
as it should, it must give the investor service.
Otherwise, the money meant for investment
goes to another stock exchange, or simply is
not invested.
So until it starts taking the investor seriously, let
the TASE not expect the investor to take it
seriously.
During the 'eighties, we met a major Israeli
contractor, who was then a big TASE player.
Unlike many another client, he took the stock
exchange seriously, an aberration whose
causes we shall not outline. It took the man
about ten years and a new life in another
country, to recover from that wrongheaded
attitude. Today he has a New York portfolio
manager manage his investments.
We met him on a plane trip at a time when the
Karam was flat on its face. "Why don't you buy
a little?", we suggested, "You and I both know
things will recover". "Yes, things will recover",
said the man, "but leave me out of it. Nothing
has changed in Israel. The banks will come out
to play again, the government will once more not
know who is ultimately to blame. The money
meant for the Karam is safer in a casino. True,
the casino rips you off, but at least you enjoy it.
That's why you came there in the first place".
An American reaching the age of discretion
when he may invest in a stock exchange, first
looks around, studies his choices, and then,
depending on what level of risk suits him, goes
into action. In all our years of encountering
whole droves of private and institutional investors
in the United States, we have met very few who
would buy into a share based on an unexplained
tip.
If a company you recommend for investment has
an historical record of growth and dividend
distribution, that is one possibility. If the
company is a new one, your customer wants a
reasoned explanation as to why it is being
recommended, forecasts concerning it and so
forth.
Added to all of which, when an Israeli investor
decides to proceed on the basis of historical
performance or future promises, what basis, in
fact, has he got? An historically based decision
is usually reached by virtue of management's
credibility. The Israeli scene is not exactly
loaded with management teams exuding an aura
of credibility.
We have American-Israeli Paper Mills, we have
Teva, and these have been joined, in recent
years, by other managerial teams that treat the
investor with respect. Once having taken his
money, most Israeli managerial teams treat the
investor as a nuisance to be brushed off
impatiently.
As for future promises that new and old
companies wave before the Israeli investor,
these are a far worse proposition from his point
of view. Take all Israeli and foreign issues
marketed since 1990, and compare the rosy
forecasts to the stark realities. Is this what
happens in New York?
The difference is that the US investor believes
(where Israel is concerned, perhaps naively),
that once management has learned its lesson,
and after the share has been slaughtered,
greater credibility will attach to declarations.
Look what is happening with shares such as
Comverse, Technomatix, Laser Industries and <======
others. American investors have returned to
them. In Israel, investors are scared to return,
since they regard the business as a trap and are
confident, based on past experience, that no
one has learned any lesson. One of the main
reasons for this approach is the negligible
quantity of shares for trading, the floating
quantity, in the hands of the public. How many
Israeli public companies are there in which
interested parties hold less than 70%? 50%?
Compare that with the Standard & Poor's 500
list. How many of the founders of those
companies hold more than 50%? More than
10%?
When an investor, particularly a large private or
institutional investor, purchases shares in a
company in which the owners hold 70%, what is
his status? His status is nil. Rightly or wrongly,
the prevailing view in Israel is that the owners do
as they please and the investor has no say. Not
so in the United States.
The fact that the quantity of shares for trading is
so small makes our stock exchange look less
than serious. This state of affairs, of interested
parties and management teams that do as they
please, is not only characteristic of the TASE,
but is one reason why foreign investors,
especially institutional ones, steer clear of
Tel-Aviv.
Our claim that the Israeli investor is like all other
investors, can best be traced to the boom of
1992. Take, for example, the Isramco craze on
the one hand and the Adacom craze on the
other. Two different instances, but both typical
and instructive.
It is not fair to blame the investors who rode
bareback into the shares of those two
companies. In the case of both Isramco and
Adacom, Israeli investors were nourished by
managerial announcements and consultants'
declarations.
You tell us, what chance of due diligence did the
Israeli investing public have? You tell us, what
did Messrs. Gura, Elmaleh, Toledano have to
say? Please show us a few portfolio mangers
and bank advisers who did not "know" that oil
had been found offshore of Bat-Yam, and who
did not regard Gura as the Israeli Bill Gates.
So why is the Israeli investor different from any
other investor?
But show us another stock exchange from
which these fellows would have emerged they
way they emerged from the Tel-Aviv stock
exchange. And after all this, people expect the
Israeli investor, who cut his teeth on the bank
shares affair, to take what happens on Ahad
Ha'am seriously.
Next week, we shall discuss the other
characters. But be sure we have not a single
complaint against the Israel investor. We have
nothing but respect for him if, after the bank
shares affair, he took no steps against the
banks or the government, and if, after Isramco
and Adacom, he did nothing against his
advisors.
Look how the Albanian investors are behaving,
and show us please the difference between the
Pyramid in Tirana and the 1983 bank shares. |
