Why does this former American stock broker invest half his savings in Israel? We sat down recently with Paul, a successful U.S. businessman and former licensed stock broker to learn why and how he is investing in Israel. Here's what he said:
Evan: Hello, welcome back to Wise Money Israel’s video series on investing in Israel. My name is Evan Liberman. Today we have a special privilege to be having a conversation with a successful Israeli investor and also Wall Street investor. He is a former stock broker in the United States, and he’s here to share some of his experience with investing in Israel.
Evan: Hello Paul. Good to have you on the program this morning. My first question is, “How long have you been investing in Israel.”
Paul: Well, I’ve been an investor in Israel for the last three years in the securities markets.
Evan: There are quite a number of ways to invest here in Israel. Paul, how are you investing in Israel?
Paul: I like bonds in Israel, more so than stocks. But I'm an active manager of my own account in the United States. In the United States, I invest in stocks, but in Israel, I invest in bonds. I consider the bonds to get a good rate of return, both because of the actual interest rate on the bonds, but also because of the favorable tendency of the shekel to gain against the dollar.
And this has been a pattern over some time. It has its ups-and-downs, but in the long-term, I actually have more confidence in the Israeli economy and its future than in the United States. Especially in recent years, the deficits and the seeming inability of the United States government to get a hold of its political situation relative to the economy leaves one feeling somewhat helpless. No one seems to be in charge, and everyone seems to want to obstruct. And on the other hand, I look at the Bank of Israel, and I see that they did some wise things. Back during 2008, while the world was indulging in CMO, bundled mortgages, Credit Default Swaps, the Bank of Israel more or less precluded banks and other institutions from dabbling in that, and that kept Israel out of trouble. I also see lower unemployment rates, I see more favorable balance of trade, and all of this gets reflected in appreciation in the shekel.
Evan: What are some of the other reasons you invest in Israel?
Paul: The good rate of return that I get on corporate bonds. In recent times, in recent months, I've been experiencing 8.9% on investment-grade bonds, which is better than the 7% that I desire and have been receiving. So, I'm happy with my investments in Israel. And, every few months, I send over another “slug” of money, so that I get some sort of averaging effect and I guess the idea is that I want to have about half of my savings in Israel, and half my savings in the United States, as a hedge one against the other. Bad things can happen in the United States, bad things can happen in Israel. Either way, I feel a little more protected.
Evan: What are your thoughts about investing in bonds in Israel versus investing, in let’s say, bonds in the United States?
Paul: The Israel bonds is a very much more fluid market. In the United States, the difference between the bid and ask prices: if I want to sell a bond prior to maturity, I can take a haircut of 8%. That doesn't happen in Israel. It's a very fluid market, much like the equivalent of say, the New York Stock Exchange, in that what the price is is pretty much what you get when you want to get out. Also, it has more flexibility, not just laddering the investments,things which my investment advisors can coach me through and which I understand.
Evan: Given your vast experience with investing, and having been a stock broker, why do you choose to use an Israeli portfolio manager to invest here?
Paul: So I feel very conversant with these issues, and I act with a measure of confidence, but in the United States I'm fully prepared to act on my own counsel in the United States, and do my own research. But in Israel, I feel the need to receive advise from people who have the pulse beat of the situation. And I feel that it's well worth the nominal cost to do so.
Evan: Investing half of your funds in Israel is a bold move. Does that reflect your thinking about what is going on now in America?
Paul: My apprehensions in the United States actually run pretty deep, because we watch all the turmoil in Europe, in Greece, in Italy, Spain, recently in Cypress, and you can see how seemingly overnight, once the markets get the drift of things, that this is not a safe place for capital, boy, it flees pretty fast. And I'm concerned that, you know the United States is a large and powerful economy, but there could be a point - I don't know when that might be - it might be months from now, it might be years from now, when the world decides that the United States is just no longer capable of managing its own affairs. And it could come to crisis before things get better. And therefore I want to have, and do have, have set up a situation with my securities house in the United States (my brokerage house that handles my account) - I set up a wire transfer situation and I have an account in Israel so that overnight I can transfer money out by picking up the telephone, and ten minutes later my money is on the wire. And I'm just very pleased that I have all that mechanism set up for the day, the unhappy day, when that adverse situation might occur.
Evan: What are your thoughts on Wise Money Israel?
Paul: They do enjoy my confidence. I'm not uneducated in these things, in my formal education or by way of my experience. So I have known some of the best questions to ask, and I've been satisfied that I'm in good hands, and it’s very important for me to feel that I can trust people with my savings. And when you get older, that becomes a primary issue - how do I hang on to what I've achieved over the years.
Evan: Unfortunately, that’s all the time we have today. Paul, thank you for the time that you’ve given us. I’m Evan Liberman, for Wise Money Israel.