Just the Beginning?

Resort owners in the north had expected a glorious summer season, their best in years. But their losses from cancellations as the Lebanese border exploded in violence are nothing compared with what investors lost on the Tel Aviv Stock Exchange yesterday.

NIS 30 billion evaporated yesterday as Tel Aviv stocks dived 4% on huge turnover of NIS 2.5 billion.

The disengagement from Gaza had become an economic event, which lifted the stock market to new heights on tremendous turnover. Now there's war in the north and it's having the same effect, just in the opposite direction.

Three years of improvement on the security and economic fronts could go up in smoke. The vacuum in economic leadership, the return to the Lebanese quagmire and terrorism in Gaza, while security issues thrust economic ones to the sidelines - none portends well for the Israeli economy.

The signs all show that the fighting will escalate, Amos Harel wrote in Haaretz yesterday. If you agree, be warned that the drubbing Tel Aviv stocks took on Wednesday was just the beginning. Stocks could sink below 700 points and the shekel could implode, weakening to NIS 4.60-4.70 per dollar.

What can be said is that until we know how the northern situation will develop, nothing good will happen to stocks. But bad things could happen, and how.

Yesterday foreigners stood firm and barely sold. But the news this morning could spur them into action. Israel's risk premium could soar and any sovereign credit rating upgrades we'd expected just went further away.

If you agree with all that, don't panic. Panic is no way to handle your business. Think coolly, have a nice glass of juice and then call your broker.

"Sell everything," say calmly.

Or: Look at the brighter scenario. A 4% drop is not the end of the world, certainly not after 170% gains in three years. Bonds retreated by 0.8% yesterday, also not the end of the world: if anything it goes to show how robust the Israeli economy is.

Several investment advisers, including Deutsche Bank and Zvi Stepak of Meitav, suggested viewing the pullback in share prices as an opportunity to buy. Maybe they did; and an opportunity to get a great place in a resort overlooking the cedars of Lebanon.