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What a shock. Your holdings in provident funds, managerial insurance policies or training funds earned 15 percent to 20 percent this year. Mutuals boasted profits by dozens of percentage points.

It really was a surprise, too. None of the so-called experts had predicted that 2003 would be the stock market's best year in a decade. You never imagined your portfolio of financial investments would expand by 20 percent or 30 percent this year.

Don't get too excited. Sit back down. Think of it as retroactive compensation. The 15 percent made by your deposit in Tamar, Gadish or Otsma provident fund, or by your policy at Migdal Insurance, Clal Insurance or The Israel Phoenix Assurance Company is the mirror image of the losses you suffered in recent years.

The average provident fund or managerial insurance program generated a real yield of 2 percent to 3 percent a year over the decade ending at the start of 2003. This year's surge is impressive. But if divided over the whole period, it raises the multiannual take by only 1 percent to 2 percent, to an average of 3.5 percent to 4.5 percent.

Sorry performance

And if you adopt that long-term perspective, you find that your portfolio has actually done pathetically. It has mirrored the sorry performance of the Israeli economy and the general inability of the TASE-listed companies to create value.

If you broke a year or two ago and redeemed your mutual or other fund holdings, you missed out on the compensation. You "realized" your losses and missed the retroactive reimbursement.

And that's a lesson we repeat here from time to time. If you're going to invest in the stock market, do so all the time. If you try to leap in and out, you'll usually lose money.

Remember that a year ago, most people thought 2003 would be the year to avoid the stock market. Yet from the perspective of yield on one's portfolio, that could best have been said of the last five years, not the last one.

The "investment experts" say we should be seeing the improvement spill over to the economy in general and to corporate reports.

Sit back down. Don't take that too seriously. The stock market does not presage economic processes, and the correlation between corporate profits and shareholders is not clear. In 2003, share and bond prices shot up because Israel's risk premium and interest rates dropped sharply. In 2004, both will be highly significant too.

Can a stock market keep rising over time just because interest rates are low? That's a tough one. Millions of Americans are asking just that. Wall Street and the U.S. economy have recovered at breakneck speed from the crisis of 2001-2002, mainly thanks to low interest rates. Here too, under certain conditions, the process of lowering interest could continue tempting investors onto the stock and bond markets without any dramatic economic change urging them too.

In recent months, major shareholders and companies have raised almost NIS 10 billion through issuing bonds and selling shares. Who did they sell to? To you, courtesy of the institutional investors managing your money.

Some of the sellers badly needed the money. They were about to run out.

Indeed, the sudden flood of offerings does not attest to particularly attractive terms for the sellers. It attests mainly to the tremendous pressure most of the major players felt as the credit crunch bit down.

Cui bono?

So. Who actually gained from the spike in stock and bond markets this year? The general public? Depositors in mutual funds? Interested parties?

No, no, no - few of these grew rich from the stock market surge. Most of the gainers were people who lost in the previous years.

How much did Brazil's stock market rise this year? Or the markets in Russia, Turkey, Peru, India, Thailand, Chile? How much did stocks rise in the emerging markets?

The lowest yield was posted by Moscow, where stocks rose only 55 percent. Elsewhere it was an incredible year. Jakarta's market rose by 60 percent, Venezuelan stocks gained 130 percent. Suddenly that 40 percent gain in Tel Aviv, in dollar terms, looks pretty small.

And that is a significant fact that most Israelis, including the ones reading the business pages, do not realize. It reminds us that the climb isn't a local success story fueled by U.S. loan guarantees and an energetic finance minister, it is part of a trend. Small stock markets the world over shot up in 2003, all pushed by Wall Street and interest rate cuts. That's yet another reason to take predictions regarding the Tel Aviv Stock Exchange lightly. First, you should look at the global stock markets.