Nearly a year ago the world was facing an economic collapse. One of the first signs was the dramatic collapse of Bear Stearns and of the Lehman Brothers a major American investment house. Major banks would have collapsed had the American government not stepped and pumped in billions of dollars to prevent a total collapse. England followed a similar pattern. Depositors at the Royal Bank of Scotland worried whether they would ever see their funds. Following the American pattern the English government stepped in to prop up the faltering financial institution.
Israel, accustomed to 4% annual gain in its GNP saw it fall into negative territory. Business activity faltered. In the high tech field m mergers and acquisitions came to a halt and the initial public offering market came to a dead stop. Rumors began to circulate about the critical problems being experienced by venture capital companies. However the, most painful development was the news of massive layoffs. Foreign companies fired personnel in their Israeli subsidiaries. Unemployment reached 10%, a record high
Two months ago the Governor of the Bank of Israel Stanley Fischer took the initiative and Israel became the first country to raise is rate of interest.
However in the past month the economy showed signs of an early revival. One did not have to be an economist to gauge the change. Daily the newspapers reported a pick up in employment. Companies were recalling employees that had been previously fired. A major international brokerage house chose Israel as the best bet for stock market investment. Indeed the local stock exchange recently surpassed an all-time high.
Perhaps most promising was the return of M & A activity. In the past two months more than six local companies were picked up by foreign companies. Including IBM.
A story is told of two brokers. They met on the street and one asked the other, "What do you think about the stock market"? " I am optimisdtic replied the other broker. "Then why do you have such sour look on your face?', he asked. "I am just a bit pessimistic about my optimism," he replied. Our own outlook for the intermediate term is that the current pickup will continue and that by the end of 2010 Israel will once again return to being a robust economy.