Bottom Shekel / Confessions of a young investment manager
"You get into a good market and you're in euphoria. You make money hand over fist. And then one day, the positive sentiment starts to ebb. You don't even notice it, but all sorts of bad people start clustering around you," says a young investments manager at one of Tel Aviv's biggest investment firms.
"They want to be tycoons, but only a handful of them will make it. Meanwhile, they leverage themselves up to their necks. People in the marketplace have lost all sense of shame. They float a company and within less than three months it's lost most of its value. Some people care only about themselves. They don't care about the public at all. They pay lip service but don't mean it," says the wounded young man, who isn't the only one furious at being sold shoddy goods.
Companies high on risk and low on responsibility raised billions of shekels through selling bonds to the general public during the few boom years that predated the subprime crisis. Much of that money is doomed.
Another boom that developed in Tel Aviv this decade was young, inexperienced people, thousands of them, playing the market. Some were given pension funds and other investment vehicles to manage. But they'd never experienced a major financial crisis before, and apparently, their inexperience is costing the general public dearly.
They were in elementary school when the bank shares collapsed in 1983, and during the 1994 meltdown they were in high school. Even when the high-tech bubble burst in 2001, they were still at university, studying for their first degree.
One might have hoped that these green young investment managers would behave with greater responsibility and allow their freshly-learned theories to rule against taking too much risk. But that didn't happen.
Apparently management experience is a must at provident funds, pension funds and the like.
Experience will teach these young managers that with all due respect to intuition and the charisma of the controlling shareholders, a company must be judged by its financials. Nidar Construction & Development has collapsed and investors have lost hundreds of millions of shekels even though the Rachmin family had very good public relations.
Experience will teach these young managers that when a company depends entirely on one person, they should demand much higher returns because of the risk. Look what happened to Dadeland Towers when Eli Bardugo suddenly died. The company had explicitly warned in its prospectus that he was key to its operations, and presto, so he was.
And experience would have taught the young investment managers that if they don't understand what a medical-technology company does and how it intends to make money, maybe they should avoid it. And that "liquidity" and "financial soundness" may sound trite during the good times, but come the bad ones, there's nothing like them.
"I learned a lot from this crisis," says our young investment manager. "There are companies I wouldn't touch with a barge pole now. I'm looking for reliable companies that take care of their investors now." Well, better later than never.
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