And the Rich Grew Richer

Nathan Lipson
Rony Gabay
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Nathan Lipson
Rony Gabay

Two and a half years after the great financial crisis erupted, Israel’s rich have overcome. In fact they’ve grown even richer during the last year and the list of Israeli billionaires has expanded. The combined wealth of the 500 richest people in Israel comes to $87.8 billion, reports the TheMarker Magazine, an increase of $9 billion or 12% compared to the 2010 edition. (The calculation is from February 2010 to April 2011.)

Let’s put that figure into proportion. The combined wealth of the 500 richest people in Israel is 25% higher than Israel’s national budget for 2011.

“Huston, you have a problem” (sic): the reference is to Texas-based Noble Energy, a partner in exploring the Mediterranean sea-bed for natural gas. Credit: Emil Salman

Also, while the 500 richest Israelis in the 2010 edition listed 37 billionaires, now the club has 42 members. The new additions are Marius Nacht, whose wealth mushroomed thanks to the climbing share price of Check Point Software Technologies; the Harlap family, thanks to import of cars; Shaul Shani, thanks to what seems to be strong growth by ECI Telecom; and Zadik Bino and family thanks to the increase in the price of fuel. Then there is Mori Arkin, who did well by the rising share price of drugs company Perrigo.

In and out

It is true that while the rich grew richer, the pace at which their wealth grew was slower than in 2010. Then a major booster was the discovery of vast fields of gas in the Mediterranean seabed, and no less, the probability that even more would be found. This year the gains by gas and oil exploration stocks have been less extreme, in part because the government decided to increase its share of profits from the exploitation of Israel’s natural resources.

The No. 1 spot on the list is the Wertheimer family, with estimated wealth between $6.5 billion to $7.5 billion, an increase of about $1 billion dollars compared with 2010.

Second is the family of the late Sammy Ofer, which is estimated to be worth between $4.8 billion to $5.3 billion, an increase of $1.3 billion from 2010.

Certain people on the list were immensely enriched by certain events, including a surge in stocks. On that list we can find Gil Shwed and Shlomo Kramer, whose wealth was enhanced by the rally of Check Point Software Technologies shares. The fortunes of Shlomo Tiser were heightened by the recovery of Vilar, the real estate company he controls. The Rami Levi supermarkets chain continues to sprout nationwide like a weed and the Nimrodis have done well by their entry into the energy business.

But not all Israel’s well-to-do have done well this year. Some saw their fortunes sharply gall. Among that group are Mark and Isai Scheinberg, whose gambling technology company PokerStars found itself, along with many others, in the spotlight of an FBI investigation. PokerStars was shut down and its founders were arrested.

Trouble in Greece hits Loutraki casino

The crisis in Greece had a detrimental effect on the Loutraki casino of Yigal Zilka, Moshe Bublil and Nissak Khakhshouri.
Other people engaged in Internet gambling in one form or another, such as Avi Shaked, and the brothers Shai and Ron Yitzhak, also had a bad year as business at their gaming technology company 888 went south.

Retail chain Blue Square had its own difficulties this year, causing losses to its owners and founders, Shraga Biran and Dudi Wiessman.

And then there’s Moti Zisser, who is apparently in the throes of the worst crisis his career in business has known. Zisser has been working at assuaging investors’ concerns and broke precedent by writing a letter to holders of Elbit Imaging securities, urging them to discern the differentiation of his private business from that company, but Elbit Imaging bonds are still trading at double-digit yields.

One reason the list of super-rich grew is the upswing in Israeli economic growth. After slow growth in 2009, economic activity picked up sharply in 2010. Israel’s gross domestic product increased by 4.5% in 2010, much faster than the pace recorded in most member states of the OECD, which Israel joined last year.

Another reason for the inflation in wealth is the exchange rates. Thanks to Israel’s brisk economic growth and the gigantic gas discoveries beneath the sea, the shekel soared against the dollar. While exporters may bewail the shekel’s appreciation, it increases income denominated in dollars. If a person’s wealth stayed the same in shekel terms, it nonetheless grew in dollar terms.

And then there is the oil and gas scene. During the last year, shares and participation units of the oil and gas exploration companies soared wildly. The discoveries kilometers below sea level were the biggest in the last 10 years, it seems. While the true amounts down there remain to be seen, and their development is still in early stages, clearly much wealth stands to be made.

But then the question arose of the state’s share of the explorers’ profits. This year, a committee headed by economist Eytan Sheshinski recommended that the state increase its share of profits, for the general good. It also made several concessions to the companies, including that tax will become applicable only after the companies return their investments, and then some.

Despite intense lobbying by the gas and oil companies, which complained not a little about the government “changing the rules” in the middle of the game, the government accepted the Sheshinski recommendations. That moderated the steep slope of increase in the gas and oil pack’s shares this year.

Steep gains among tech stocks

Another sector that came back into fashion in market circles was technology: The last year was its best since 2000. True, there weren’t many new offerings. But startups and mature companies raised startling amounts in private placements of stock.
Meanwhile, the share prices of technology stocks traded on Wall Street rallied sharply. Nasdaq rose 24% in the last year. Also, in the last couple of months, there have been some technology issues worthy of note in stock exchanges around the world, not least involving Internet companies.

Bubble alerts are sounding from every corner. But going by past experience, warning bells sound well before the bubble bursts. And there are signs showing that the enormous wealth of the super-rich might keep growing this year, but not as fast as last year, which wasn’t as fast as the year before that