Archives for April, 2011

What happens when you don’t take my advice

Six months ago, I wrote an article about a recent “client” who decided to forgo our advice because he was afraid of the capitalization fee. You can read the piece right here: Who’s afraid of the capitalization fee? I heard from this guy over the last festival, so I quickly ran down his numbers again. Current debt: 2.16 M NIS (inflation has caused the debt to go up slightly, despite having made six more payments) Of which is indexed to inflation: 1.47 M As of this writing, the current exchange rate is 1 NIS = $0.294. Having take our advice six-seven months ago, the current debt would now be 1.97 M instead of the current debt. That’s right, an amazing savings of around 175,000...
Continue Reading »

If the bank is paying 2.6%, how much will you pay?

This is not a rhetorical question. Not too long ago the Supervisor of the Banks increased the capital adequacy requirements (הלימות הון) for loan over 70% to 1. This means that for every shekel they lend, they need to have 1 shekel in assets. For investment properties, this starts at 60%. This is, of course, a ridiculously high number. Any fair policy would allow the banks to use their judgement based upon the credit profile of the borrower. The policy doesn’t differentiate between someone whose mortgage payment is 40% of their free income and someone for whom it is only 10%. In Globes they report on yesterday’s offering of Mizrahi Tefahot bonds. Two things are really important to point out here: The bank is paying 2.6%...
Continue Reading »

Israel: A Better Place in our 64th year

2/1/64Happy New Year.Yesterday marked the first day of the 64th year of our Redemption.How does Israel look entering its 64th year? Never better. Our economy continues to be robust. We’re doing so well, we can’t figure out how to weaken our currency. There are more ridiculous market interventions on the way, and still the shekel continues to gain strength. As I write, 1 mighty shekel will buy you $0.289, up another cent from two days ago. Why is the shekel still strong? If you aren’t a regular reader, click on the energy tag on the right, I’ve explained a lot of it there. Israel is far less dependent upon foreign energy then we used to be. Our current need for foreign currency to purchase...
Continue Reading »
bank of israel

increasing rates, the shekel and a home on the range

As I write these lines, the current exchange rate with the US$ is 1 NIS = 0.288 US$. The Bank of Israel raised rates last week by 0.5%. The rate as of Friday was 3%, the Prime is now 4.5% Stan the Man Fisher has been trying to raise rates for some time now, and has been prevented from doing so because of problems with the exchange rate. The Bank of Israel has failed in this. Even though they “bought” a record amount of dollars on Thursday, the rate continues to plummet. If you read the interest rate decision, you will see that the bank felt that since the exchange rate fell only 1.9% since they raised the rate by 0.25% the previous month,...
Continue Reading »