Monthly Archives: February 2016

What is this “Teudat Zeut Bankai” – Bank I.D Card? Is it “good for the Jews”?


Although the majority of Israelis still view the banking system as monopolistic at worst, oligopolistic at best, The Bank of Israel really does try to create an illusion of competition between the banks.

Different moves have included prevented the take-overs of smaller banks, assisting in changing over standard orders and taking the pension funds and certain capital market activities out of bank hands.

The latest invention is the Bank I.D card – known as the “Teudat Zeut Bankai”. This is a full run down of accounts and activities to be provided by each bank to the customer on the 28th of February, in order to allow easy comparison between banks’ charges, interest rates and credit ratings.

Is this document of value or should it be discarded like most of the surplus paperwork there banking system insists on supplying its consumers?

For customers who have one bank account, like the majority of the country, apart from cause frustration about the amount the bank charges, there is little to be gained by studying this report. People are unlikely to compare between friends or post this to Facebook to get shares, likes and comments. If you run more than one account, then by all means, compare and contrast. It is even worth going into the more expensive bank to ask reduce fees, but I fear the response will be more frustration and few will actually follow through.

This report does provide, however, a useful vessel for any customers who are credit-consumers. The majority of banks have recently instigated credit scores for their customers. These are based on algorithms which rely on very routine criteria. Part of these criteria are on the running of the account; this is fairly generic. There is however an emphasis on the constancy of What is this “Teudat Zeut Bankai” – Bank I.D Card? Is it “good for the Jews”?


Does the Financial Technology boom mark the end of banking?

At the end of the 1970’s, most of London’s double-decker busses were newly equipped for one person operations, making redundant the vast work-force known as “bus conductors”. This period was plagued by constant strikes of London transport workers, but more importantly, by a vociferous public debate about the social repercussions of machines replacing people.

Little were the disputants to know that this was a tiny stream in what was to become a flood of positions and professions slowly made irrelevant by growing technologies, which in turn created new types of jobs and vocations. There are very few professions which can truly say or believe that they are immune from redundancies due to technological reforms.

The current trend of FinTech – Financial Technologies – is giant in its vastness and diversity. Around 5,000 FinTech start-ups are attacking almost every angle of the conventional banking and financial world and biting at the flesh of their income sources. The catalyst of this trend was the financial crisis of 2008 and the subsequent credit crunch, which sent the market to search for new sources of finance. The shortage of credit paired with a low interest rate environment for investors provided perfect conditions for the growth of peer to peer (P2P) lending, improving the situations of both sides of the equation. Hereafter, the road to the FinTech eruption was short.

Does FinTech mark the end of the banking industry? Many would hope that this is the case; public sympathy with this industry is justifiably not high. FinTechs aim to find the banks’ most profitable sources of activities and replace them. The expectation is that banking profits will be reduced, over the next decade by up to 40%. However, there are several key reasons why banks will remain a central part of the economies, despite this boom in competition:

  1. The banks themselves spotted or sensed this change at a fairly early stage. Many banks are themselves heavily involved in FinTech – Citibank probably a leader in this field – and they will still protect their core business.
  2. The majority of FinTech’s, however revolutionary they may be, are reliant on the banks for success, and need to tie in to the banks’ infrastructure to make their product function. Even the firmly rooted P2P industry has to use a bank as a clearing agency.
  3. The FinTechs tend to choose areas which are not regulated or the regulations are less stringent. Many areas will remain highly regulated and, although burdensome, these will remain in the hands of the banks which have the systems to deal with the regulators.
  4. Many changes require legislation and changes in regulations. The high tech industry works on a two-year cycle; these changes can take five or six. Few start-ups have the ability to breathe that long without oxygen.

The FinTech industry has to be collective and strategically calculated to beat the Goliath of the banking industries. A full bodied attack will lead to self-destruction as many of the companies are creating similar products, and will be more focused on competing with each other than fighting the giant. Groups should continue to bite at the banks heals relentlessly, wearing out the beast over ten rounds rather than going for a knock-out blow.

The falls in the global stock markets: The start of a recession or repairing a wrong?

“Only when the tide goes out do you discover who’s been swimming naked.” Warren Buffet

2016 started with a sharp downturn in world markets, and for many portfolio owners, and managers, it would be gratifying just to return to where we started off.

Will the market will correct itself, or will it continue in its decline? To try to analyze whether the market will continue to fall, we have to solve the mystery of whether we are on the verge of an economic or financial crisis.

Two of the properties which previously existed on the eve of financial crises do not exist today.

Firstly, the interest rates. Towards the crises in 2008 and 2001 US interest rate was around 5%. We are not in that position today, and, even if the Fed will raise interest rates once or twice more this year the rates are far from the levels pre 2001 and 2008 financial crunches. Today, investors do not have the privilege to flee the equity markets to higher interest rates in the market bond.

Secondly, there is no world recession. China’s growth is lower than expectations and probably has not grown 6.9%, as according to official figures. Previous crises were accompanied by recessions in the world. True, today there are economists who argue that the US will slip into recession in 2017, however, the vital signs of the US economy are still positive.

Causing further instability are the Chinese efforts to stabilize the situation. The Chinese are doing this by way of government intervention. Although the intentions are good, markets in general respond negatively to the notion the governments can intervene with market forces, especially in the aggressive way that the Chinese government intervenes.

However, even if we are not on the verge of an economic or a financial crisis, there are signs which hint to vulnerability in the markets. It always comes from the same place – leverage. For the past seven years, companies have generously leveraged at very reasonable prices, have developed their business and cared for their shareholders through generous dividends and buy-back. Now, when there is heavy pressure on the revenue line of those companies and lower global growth, companies will have to work primarily to serve the creditors. This is the main reason why some overpriced stocks will take a dent in the metalwork.

There will be cases of insolvency and lack of cash flow to service the debt, raising the prospects for an increase in bankruptcies. The most obvious examples of this are the world’s metals companies. These companies are borrowing in bonds to develop more mines, when they thought that demand for metals from China will only increase. In reality, China requires less raw materials, after years of rapid industrialization, and there is no country in the world which is replacing China in demanding these products. The result is that metals prices crash and revenues go down sharply. The combination of these factors will conclude, inevitably, in companies that will not be able to serve their debt.

Another industry which will cause the market to continue to be volatile is the energy market. Morgan Stanley has said oil could fall to $20 a barrel while Standard Chartered has predicted an even bigger slide, to as low as $10. Standard said: “Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the US dollar and equity markets.

The Israeli share market should stand out with relatively moderate declines. 30% of our index is in global pharmaceutical, which is a defensive industry in terms of risk and leverage. The corporate leverage in Israel is lower than most western countries and the currency remains stable.

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