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Gershon Salkind this week took the cake in the salary sweepstakes at TASE-traded companies. Salkind's wages for chairing Elco Holdings (TASE: ELCO ) were NIS 11.5 million last year and although the financial reporting season is far from over it is unlikely that anyone will knock Salkind from the top slot.

Salkind's huge pay stub is only part of the story, however: more interesting is the rise in Elco's share price in the past two years. Most of Israel's leading concerns, especially holding companies, saw significant losses in value - in some cases, by up to half.

While most of Israel's tycoons were pained to watch tens and hundreds of millions of dollars of their fortunes evaporate before their very eyes as stocks tanked, Salkind saw Elco climb more than 30 percent, boosting the value of his own stake in the company to NIS 850 million.

How did Salkind's shares swell by nearly a quarter billion shekels during the serious recession in which all the country's major concerns are writing off, suffering enormous drops in profitability and wailing about "market conditions"?

Legendary American investor Warren Buffett says that during a boom there are many executives who look good in the stock market ocean, "but when the tide goes out you get to see who has been swimming without their trunks."

Good times rolled

Many of the stock market stars of the roaring `90s, including CEOs of holding and financial companies, looked very successful at high tide. Those who insisted on peeking below the surface noticed from time to time that a large portion of their profits from operations were not real or were short-term - but in the good times, how many were looking under the waterline?

And then low tide arrived, and we found out that many of the business sector's brightest stars were skinny-dipping, plain and simple. In recent months they have been washing up on shore en masse. It's not a pretty sight.

It is now clear that many built their empires on leveraged foundations, using stock market ploys based on short-term deals and on the assumption that prices could only go up and that past performance is indeed a predictor of future behavior.

Gershon Salkind and his managerial team were not skinny-dipping: they got a stinging slap in the face seven years ago when they bought retailer Shekem in a privatization deal, only to discover they know nothing about retailing, but they recovered quickly.

Ten years ago, Elco was exactly where most Israeli holding companies were: in its case, massively exposed to the domestic market through transformers slated for sale to Israel Electric Corporation, two industrial plants in the local market and one retail business (Shekem) that was doing nothing but churning out losses.

Salkind understood even then the shortcomings of the Israeli market, the increasing difficulties in competing with imports and the dangerous dependence of companies operating in Israel. He started sending all his companies abroad. Electra Consumer Products (TASE: ELEK ) is today a company with mostly foreign operations and Electra bought hundreds of millions of shekels in real estate abroad. The result is two companies that ended 2002 - one of the worst years Israel has ever known - with net profits of NIS 70 million each.

This is the time to mention that Electra Israel (TASE: ELTR ) and Electra Consumer Products were born as one company (Electra Israel), which Salkind bought in the early `90s from Clal Industries and Investments (TASE: CII ) for NIS 28 million. Today both companies trade at a collective market cap of NIS 1.4 billion. It is unlikely that they would have reached that status under the management of the IDB concern.

Taste for the exotic

Salkind's success in exporting Electra Consumer Products to the European market whet his appetite for international business. In 2002 he outbid giant international players for French appliance giant Brandt, the biggest player in the French market with brand names like Sauter and De Dietrich.

The European market is big and cruel. And even though Brandt under Elco management transitioned to profits in the first year, we must wait another year or two to see whether Salkind's daring move to make Elco into the second largest Israeli multinational after Teva can be crowned a success.

But what is certain is the sad part of the story: Salkind and his managers have lost their appetite for investments in Israel. Not because of bureaucracy, not because of government officials, not because it's fashionable to whine "but it's impossible to do business here." The biggest reason is simple, according to Salkind. "It is impossible to do business in a place that doesn't grow over time. Businesses need growth."

"Is this the time to pick up bargains here?," we ask Salkind. "No," he tells us. "I don't see the light at the end of the tunnel. I don't try to catch falling knives. In the next few years, Elco will expand and invest only abroad."