ISRAEL
EL DicrEsir
`Do Your Job and
Make Money'
,Spet - 1- c l fly C Y ) I /piled
Stop Chasing Arab Business
ALLISON KAPLAN SOIWIER SPECIAL TO THE JEWISH NEWS
O
with management and incentive
fees reaching well into the
hundreds of millions of
dollars.
Needless to say, it's not
easy to get Mr. Steinhardt
to concentrate on a news-
paper interview in the
course of a trading day. As
he answers questions about
his view of the Israeli econo-
my and market, his eyes are
constantly darting among the
six video screens that cover
half of his semicircular desk.
Next to the screens sits a
pen resting in a holder be-
tween a crystal bull and a
crystal bear. There are also
four telephones, which he
picks up periodically to de-
liver orders, receive tips,
and keep in touch with his price-
less sources on the Street.
This constant alertness to
every move in the market is vi-
tal to Mr. Steinhardt's success,
which is built on short-term
strategies of rapid buying and
shorting stocks. His reputation
is built on trading and short-
ing. Steinhardt Partners and
Mr. Soros' Quantum Fund
are considered the masters of
the hedge fund. Mr. Steinhardt
makes no secret of his prefer-
ence for the short-term, keeping
a relatively small amount of his
fund's capital locked in the long-
term future of stocks. Mr. Stein-
hardt far prefers to make three
gains of 10 percent, through
trading in and out of the mar-
ket, than 30 percent through a
single long-term move, Institu-
tional Investor noted in a re-
cent article about him.
Skeptical, contrary — yes.
But Mr. Steinhardt is not a pes-
simist, he is not looking for a re-
play of the 1987 crash around
the corner.
"One of the few comforting el-
ements in today's market scene
is that people are skeptical," he
says. "That is the greatest bul-
wark against a greater decline."
There is a wide gap between
how others look upon Mr. Stein-
hardt and how he views himself.
It is conventional Wall Street
wisdom that a major move by a
Steinhardt or a Soros can make
or break stock prices, even fluc-
tuate currencies. Mr. Steinhardt
dismisses such observations.
"Nobody's moves in
any market affects any-
thing for more than a
minute," he said.
When asked about
how he deals with the
amount of power and in-
fluence he wields in the finan-
cial world, he replies, "I don't
Mtil
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Wall Street money manager doesn't fit the mold.
n my way to interview
Wall Street money man-
ager Michael Steinhardt
in the midst of a January
blizzard, a pleasant-looking
stocky white-haired man wear-
ing a skijacket and green flan-
nel shirt, khakis and
wire-framed glasses smiled at
me in the elevator. Nice, I
thought, that Mr.- Steinhardt al-
lows his managers to dress in-
formally to accommodate the
inclement weather.
After walking into his office,
prepared for a slick three-piece-
suited financial wizard resem-
bling Michael Douglas in the
movie Wall Street, came the dis-
covery that the man in the
rugged clothes was Mr. Stein-
hardt himself.
Later, I learned that neither
Mr. Steinhardt's casual garb,
nor the jeans-and-sneakers com-
binations sported by those in his
office, were unique to
blizzard season.
No, said Mr.
Steinhardt's
secretary,
Samantha, wear-
ing a baseball
cap, the 53-year-
old boss "doesn't care
what you look like, as long
as you do your job and make
money."
And they do make a lot of
money, the black-kippah wear-
ers and button-down Waspy
businessmen who hurry by the
watercolor of Jerusalem hang-
ing in the front entrance of
Steinhardt Partners. They walk
by a receptionist who answers
endless calls while arranging
lunch orders for everybody,
served in brown paper bags in
the office. When eyes are glued
to the markets and ears to tele-
phones, there is no time for
restaurants, and leaving the of-
fice for a three-martini lunch is
definitely out.
The intense working style has
characterized Mr. Steinhardt's
enterprise since he set up Stein-
hardt Partners in 1967. The of-
fices on the 33rd floor of the
midtown Manhattan building
house Mr. Steinhardt's three en-
tities: Steinhardt Partners, the
offshore SP International and
Institutional Partners, which is
a partnership for tax-ex-
empt accounts. To-
gether, Mr. Steinhardt
is responsible for the
management of more
than $3 billion of his
clients' money. He is
consistently ranked the
No. 2 earner on Wall Street,
second only to George Soros,
r 711 Cie 1 7 1St/ IC' I I 1
The time Israel's government
and businesses have spent try-
ing to improve economic re-
lations with the Arab world is
disproportionate to the bene-
fits the country can expect to
reap from them, Economic
Models Director Eli Sagi said.
Mr. Sagi, speaking at a gov-
ernment seminar on the peace
economy, blasted Treasury
and Bank of Israel officials, as
well as some businessmen, for
traveling worldwide to work
out economic relations with
Arab nations at the expense of
running the country's day-to-
day economic interests.
He said that at best, trade
with Arab countries will in-
crease exports by 5 percent, or
$500 million, by the year 2000.
The reason for his pessimism
is the tremendous mismatch
between economies. Arab
countries, which are poor,
mostly import basic goods
while Israel exports sophisti-
cated capital intensive goods.
By contrast, Mr. Sagi sees
the peace process contributing
to the country's economy by
lowering the defense burden
and the country risk premium.
Economy Doing Well
Israel Finance Minister Avra-
ham Shohat gave the Cabinet
a glowing report on the coun-
try's employment situation
and developments in the labor
market in 1993.
Despite the positive report,
think
of myself in those terms. I like
to think some of my judgments
are worthwhile and that I use
my abilities to impact the areas
I care about." Power and influ-
ence, he says, "are not things I
think about a great deal."
Mr. Steinhardt brings his
skeptical and analytic approach
to his investments in Israel. The
Tel Aviv Stock Exchange, he
said back in January, is "filled
with promise and excitement
and speculation. I would even
say overspeculation. The mar-
ket is overvalued and has been
characterized by a lot of specu-
lative excess by those
who are less than
sophisticated."
He attribut-
es the current
"enthusiasm
and effusive-
ness" on the
TASE to a num-
ber of factors.
"The economy has done well
for several years, and, in the
broadest sense, the government
is moving in the right direction,
though the Labor government
has not made any radical
changes."
In addition, "the peace
process represents potential
which boggles the imagination.
Finally, the general movement
in the capital markets and the
increasing globalization of in-
vestment" are responsible for
the boom in prices and the pop-
ularity of Israeli IPOs (Initial
Public Offerings).
But, he cautions, "that's the
broad scenario. Investment in
Israel is fraught with risk on a
lot of bases. A lot of the growth
is based on the substantial im-
migration, which creates multi-
plier activity. This is, at the very
JOB page 36
based on the drop in unem-
ployment to 9 percent last
quarter, Shohat warned that
after such a sharp fall, unem-
ployment may rise slightly
this quarter.
Europeans Blocking Telecom Treaty
part of the recently concluded
Israel Industry and Trade
Minister Micha Harish Uruguay Round trade talks.
blasted the European Union The GPA did not include
(EU) for blocking the agree- telecommunications because
ment on a government the U.S. government is not in-
volved in that area. As a re-
telecommunications procure-
suit, the countries agreed to
ment treaty. He threatened to
bilaterally negotiate govern-
shut the Europeans out of gov-
ment telecommunications pro-
ernment procurement alto-
curement.
gether.
According to a source close
Mr. Harish said the obsta-
to the negotiations, the Euro-
cies the Europeans have
peans are trying to extract ad-
raised to reaching an agree-
ment to open access to gov- • ditional concessions from
Israel in return for opening
ernment contracts with Israel
their telecommunications
telecommunications firms are
market. However, Israel was
unacceptable.
The telecommunications very generous in the GPA
negotiations are designed to talks in opening its govern-
complete the Government Pro- ment procurement market
curement Agreement (GPA) and additional demands are
bound to backfire, the official
that was reached among 29
added.
countries, including Israel, as
Super Deal for Super-Sol
Super-Sol announced it was
unofficially informed it has
won a tender to purchase a
package of shares represent-
ing 50 percent of Budapest
Kozert RT for $6 million.
Super-Sol participated in
the tender through Super-Sol
Hungary, a newly established
subsidiary set up specifically
for the purpose of purchasing
the Hungarian government=
owned firm.
Net Investments. Abroad Fall Sharply
Israelis' net investments
abroad fell by more than half
last year compared to 1992 as
a buoyant Tel Aviv Stock
Exchange led to massive
redemptions of foreign
stocks, the Bank of Israel re-
ported.
Net foreign investments fell
to $600 million, from $1.278
billion in 1992, of which a
record $891 million were in
foreign securities. By contrast,
net foreign securities invest-
ments last year were a nega-
tive $193 million. What kept
overall net foreign investment
positive was the more than
doubling of foreign capital in-
vestments by the business sec-
tor.
Businesses invested $793
million abroad last year com-
pared with $387 million the
year before. Most of the in-
crease reflected large acquisi-
tions by Israel electronics and
telecommunications firms.
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