With another trading week now upon us, I decided to read what two experts, whose opinions I value very highly, have been saying about the current crisis - economist John Mauldin and Citigroup chief US equities strategist Tobias Levkovich. These are two experts with both legs firmly on the ground, who do not indulge in the firebrand rhetoric usually heard from people such as the famous Jim Rogers.

Rogers has made himself scarce of late, probably because his situation is pretty grim. He is short on the dollar, long on oil (a target price of $200 a barrel), and all the other commodities now tanking, and long on the Chinese stock exchange, which collapsed more than 60% last year.

Today is silly day on the Tel Aviv Stock Market. It is also evil day. The Shorts are going nuts. There is a rumor spreading that Lev Leviev, Chairman of Africa Israel, has passed away and that is driving the price of Africa Israel's stock and bonds way down and hence the yields on the bonds are going way up. I am sure the shorts are driving this rumor. 

I am not blind to the troubles of the real estate industry. I am also aware that there is some chance Africa Israel could go out of business. But... here are two facts:

Last week saw history in the making with the U.S. election of the first black president, but it was also a week in which Wall Street made a bit of history of its own. In the two days following Barack Obama's victory last Tuesday, the Dow Jones saw its sharpest ever two-day drop. It is not clear whether the fall was a result of the fact the markets rose on election day itself in anticipation of a shock result that wasn't to be, or that it was the grim reality of the state the economy is now in which brought about a swift awakening from the euphoria over the Obama win.

The four leading indices ended the week with a cumulative negative return of 33-38% since the beginning of the year, and if we go back one year, the fall has now reached more than 40%. A fall as heavy as this means that the markets have now priced in the onset of a severe recession, but historical figures show that since 1929, the total fall from high to low on markets in times of recession has averaged 36.5% - which means that the potential for further falls from the current levels is limited.

The collapse continues in the markets, with two key U.S. indices, the Nasdaq and the S&P 500, now down by 40% on their level at the beginning of the year. Having erupted initially in the U.S., the crisis is now spreading rapidly to the rest of the world, where the falls have been even heavier than in the U.S. since the beginning of the year. The falls have reached 50% in Japan, 47% in Germany, 43% in France, and were even heavier in the BRIC economies, especially Russia where they reached 76%, followed by India with 67%, China with 65% and Brazil with 50%.

With less than one trading week left in October, the level of the collapse on the Nasdaq is fast approaching the low it hit in the previous crisis in October 1987, when it fell by 27%, compared with 26% as of the end of last week. Last Friday's earthquake on currency markets worldwide, could bring about the collapse of yet more hedge funds, banks, or even small countries.

The index (the CBOE Volatility Index) is breaking all records, and when your panic-stricken mother-in-law calls you to ask how much money she has lost on what she's got in her checking account, you realize that the panic has reached fever pitch, and perhaps the bottom really is here, or just around the corner.

Those who believe that history repeats itself would do well to make a note of October 9, (which this year is the day on which Yom Kippur falls), since it was on this day in 2002 that tech stocks slumped to their low, in the bubble whose implosion began on March 10, 2000, when the Nasdaq began its collapse from a closing high of 5,049 points at the close to a low of 1,114.

On August 25, The Wall Street Transcript interviewed Sachi Gerlitz, President and CEO of Ness Technologies (NSTC). Key excerpts follow:

 

This interview with Jamia Jasper of  The American Israeli Shared Values Capital Appreciation Fund was featured as part of our new subscription newsletter, Israel Opportunity Investor

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Here is a list of the best performing American Depository Receipt [ADR] stocks Year-To-Date:

Will SanDisk come clean?

The most interesting news of the companies currently in my portfolio tracked by "Globes", will come from SanDisk Corporation (SNDK), whose CFO Judy Bruner will be talking to investors on at the conference on Thursday, an hour and a half before the end of trading. SanDisk's share is currently wallowing at a multi year low and NAND chip prices are in freefall. Those who have kept faith with the share, like me, believe the crisis is temporary and that the company will be thriving again from 2010 onward, but would nevertheless like to find out exactly how its finances stand at present. SanDisk has loans and liabilities on an investment in Japan it committed itself to in a joint venture with Toshiba (TOSBF.PK), but these are off-balance sheet because SanDisk's share in the venture is less than 50%.

You turn on the faucet, and-voila-you have a drink of water! Those of us who come from western nations tend to take water for granted. However, after a few years in Israel, we appreciate the fact that whatever water we receive is a gift. The media is filled with reports about how the world is running low on crude oil, but not too much attention is paid to the growing water crisis.

Water as an Investment

Three of the companies in my portfolio, tracked by "Globes" are unveiling their second quarter results this week. First to step up to the plate was printed circuit board maker Eltek (ELTK), which will be followed after the bell on Thursday by semiconductor company Marvell Technology Group (MRVL) and IPTV chip maker Sigma Designs Inc. (SIGM).

After sinking below $1, Eltek has rallied 35% since the beginning of the month to $1.40, a climb-back that signaled that its results would not be the calamity the company was feared it would be when Eltek was languishing at $0.80 at the end of the session on July 31.

So today the Manufacturers Association of Israel is out calling on the government to implement some kind of emergency rescue program to save the fledgling textile industry. They say that due to the Shekel strength over the last year or so, exports have fallen and about 5% of workers in the industry have lost their jobs in ‘08.

According to a report in Globes: “While textile exports fell 3.3% to $520 million in the first half in real terms, compared with the corresponding period, textile imports (especially from Asia), rose 18.6% to $656 million.”

It’s no secret that the airline industry has issues. Soaring fuel costs, have left airlines scrambling for ways to increase revenues. Instead of just raising fares and cutting capacity, airlines have decided to nickel and dime travelers to death. Just yesterday the Israeli El Al airlines decided to start charging travelers more for seats in an emergency row. This follows other airlines charging for pillows, food, luggage…etc.

Customers are getting fed up with an ever expanding list of fees. In an age where most industries have made their fee structures much more simple, the airlines have decide to drive us crazy. ” Sir, you’d like ice with your beverage? That’ll be 3 bucks.” Or “Miss, I am sorry but since your shoes have high heels, that’ll be $2.”

Alvarion (ALVR) continues to grow at a very strong clip; yet after every earnings report, most analysts, investors, and message board posters tend to dump on this very well run company. Either margins are too weak because of the weak US dollar, or too much competition from Tier 1 equipment manufacturers will push them out, or WiMAX will lose out to 3G or now LTE, or the supposed biggest proponent of WiMAX in the US, Sprint (S), continues to struggle and delay its plans.

All along the way, ALVR continues to hit its numbers and guide to inline or even higher results going forward. What is not to like about the bigger picture of 20%+ growth and over 230 worldwide WiMAX deployments?

Investors in the Israeli company Nice Systems (NICE) can breathe a sigh of relief, as their earnings came in as expected. Some traders that we had spoken to were worried about how Nice’s exposure to the financial sector, and the slowdown in spending would impact the numbers. Well, it turns out that its security business is doing nicely.

The company came in with revenues of $155.3 million (a record) an increase of over 20% YOY. The company also showed an increase in margins and raised revenue numbers for the rest of '08.

For many years, the poster child for Israeli ingenuity was clearly Given Imaging (GIVN). The company which produces a disposable, miniature video camera contained in a capsule, which is used for gastrointestinal diagnosis, is well-known for this ground-breaking technology, but has disappointed investors with trouble growing sales aggressively. The hype of the technology has been way ahead of the company’s actual execution of its business model. But, after its recent earnings report, that may have changed.

The company reported Q2 revenue off $33.1 million, an increase of 19% of last years Q2 and a 22% increase over Q1 ‘08. Gross margins remained strong coming in at 75.5%, and net profit came in at $0.09 a share, and the company raised guidance for the rest of ‘08.

In my view, the one factor that will have the most impact, both in the immediate future and over the longer term, on interest rates, forecasts from Cisco (CSCO) and other companies, and share prices from the US to China, and on almost every item of economic data, either directly or indirectly, is the price of oil.

The good news is that oil prices have now beaten a hasty retreat, after failing to break through the $150 a barrel level, and from there to the doomsday scenario of $200 a barrel that the experts had been predicting.

One of Israel’s largest asset management firms, Prisma Investment House, is out with a report on global fertilizer leader, Israel Chemicals (see below). Speaking about the the future of potash pricing, Prisma takes a contrarian view. While analysts are busy raising estimates for stocks like Potash (POT) and Mosaic (MOS), on the heels of continuing strong demand and rising Potash prices, Prisma encourages investors to take a step back, and re-evaluate what the future holds.

Whilst we estimate that the near future will provide positive headlines for the potash sector, the increase in supply (predicted for 2012 and beyond) presents a completely different long term perspective. In our opinion the increase in the global output will lead to a sharp decrease in the price, while the entry of new participants into the club of potash producers will only accelerate the process. We remind you that in recent weeks the arrival of two companies (EuroChem, Rio Tinto (RTP)) into the potash industry has been announced.

Rumors are swirling in the Israeli press that Ormat Technologies (ORA), a leader in geothermal energy, is about to close a large M&A. These rumors are based on an article in Power, Finance and Risk, which is reporting that:

Geothermal developer Ormat Technologies is on the hunt for strategic acquisitions and is working with Lehman Brothers to do so. The company has reportedly looked at a few targets but nothing has yet come to fruition.

The article continues:

Targets on the geothermal side are scant, but one Ormat is said to have chased is Salton Sea, an inland saline lake in Imperial Valley, Calif., with some 500-600 MW of geothermal potential.

Shares in the Israeli RRSat Global Communications (RRST) are having its best day in a long time, as the company surpassed earnings estimates and guided higher for the rest of the year. The company reported that gross margins increased to 32.4%, a 30% year-over-year revenue increase and a strong backlog of orders.

The company provides global, comprehensive, content management and distribution services to the rapidly expanding television and radio broadcasting industries, via  “RRsat Global Network,” composed of satellite and terrestrial fiber optic transmission capacity and the public Internet.