PHILADELPHIA – Michael Aronson says he yearns for peace in Israel and Lebanon. But as long as rockets are falling, the Philadelphia investor aims to take advantage.

“This may create buying opportunities,” said the pro-Israel merchant banker who buys and sells companies for a living. “If you’re looking to invest, it’s a good time.”

Whether it’s bravery or bluster, Aronson may reflect Israel’s calloused version of business-as-usual. As Hezbollah rockets hit deeper than ever into the New Jersey-size country, economists and analysts remained bullish about the $130 billion economy’s continued growth – as long as fighting stays concentrated in northern Israel and Lebanon.

Indeed, last week Hewlett-Packard Co. pressed ahead with its deal to buy Mercury Interactive Corp., a leading software and computer-services company with roots and major plants in Israel, in a deal valued at $4.5 billion.

“In America, if a bomb was dropped on our third-largest city, the stock market would drop 20 percent. Not in Israel,” said Clifford A. Goldstein, president of Amidex Funds Inc., a mutual-fund company that focuses on Israeli stocks.

“Israel is remarkably experienced at growing its economy with one hand tied behind its back,” Goldstein said, adding: “The unique feature of Israeli business is perseverance.”

So far, Israel’s pounding of Lebanon in pursuit of Hezbollah and the militant group’s rocket attacks have had mainly isolated impact in northern Israel and little or no effect elsewhere, including abroad and in Philadelphia, where many Israeli companies operate, say company officials and economists.

Many businesses in northern Israel have scaled back or moved operations to safer locations inside the country. Tourists have avoided northern Israel, hurting hotels, taxis, restaurants and tour guides.

The Bank of Israel said July 24 that economic damage could reach 1 percent of gross domestic product if the bombardment didn’t stop soon. The Tel Aviv 25 Index of 25 top companies is down about 2.4 percent from June 25, before the unrest.

But the index is still up about 110 percent over the last four years, and overall Israel’s economy is taking the blows in stride, analysts said.

Standard & Poor’s said last week that it expected gross domestic product still to grow 4 percent this year despite the fighting. The Bank of Israel stuck by its projection of a strong year.

Dan Farhi, head of institutional sales at Excellence Nessuah, an Israeli investment house, said that the northern Israeli economy was suffering, but that it accounted for less than 20 percent of national output.

“So if (fighting) stays at this level, then it can continue for weeks or months. It’s not positive, but it’s not crucial” to overall economic performance, Farhi said in a phone interview.


The marginal impact is being felt, but waved off, even in Philadelphia. Vishay Intertechnology Inc., an electronic-components manufacturer based in Malvern, Pa., that operates several plants in Israel, said it has moved production to the basement of its two-story concrete-roofed plant in Carmiel, a town within range of Hezbollah rockets. One assembly-line worker was wounded at home a week ago by rocket shrapnel.

But 80 percent of Vishay’s 200 workers in Carmiel have come to work despite the risks, the company said.

“Our output is the same. We just work longer. We’ve had worse,” Felix Zandman, Vishay’s chairman and chief executive, said in a phone call from Carmiel.

“We’ve been here since 1969, and we have never missed one shipment. Spirits are very high. It’s just amazing to see how people work through this,” Zandman, who lives in Bala Cynwyd, Pa., said.


Teva Pharmaceutical Industries Ltd., the Israel-based drugmaker whose North American headquarters is in North Wales, Pa., has reported no impact on its plants around Israel or main office in Petakh Tikvah, east of Tel Aviv. It employs about 14,000 people worldwide, including 1,000 in North Wales and at a factory in Sellersville, Pa.

Aronson, the Philadelphia investor, said one economic result of the bombardments was a slowdown in what he portrayed as a frenzy of foreign investors since Warren Buffett announced in May his deal to buy a stake in the metalworking company Iscar Ltd. in Tefen, Israel.

Buffett sealed his $4 billion deal July 5, a week before the fighting began when Hezbollah abducted two Israeli soldiers. Buffett’s current view of the Israeli business climate is unknown. His office said last week that he was declining all interview requests.

Aronson said investing in Israel “had gotten so popular since Buffett made his announcement that some investors were overlooking the political risk. Four years ago during the intifada, nobody wanted to invest, and people were actively divesting, and then it swung the other way.”

Now, tough times again may be clearing the field of rival investors and potentially pushing down prices. Aronson said he and his partner, Boris Kalander, owners of SVM Associates Ltd., made big investments during the last intifada and are poised to do so again, quoting a recent headline that “Israeli investors buy at the sound of cannons.”

“This happens anytime there is turbulence,” Aronson said. “When all is said and done, we’ll get some good deals.”

To Aronson, it’s about taking advantage of reality, not profiteering or actually hoping for unrest.

“Our hope doesn’t have anything to do with it,” Aronson said, meaning the conflict. “If it did, it would be over.”

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(c) 2006, The Philadelphia Inquirer.

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