Saturday, August 25, 2007

Glatt kosher investments in the stock market?

This discussion will revolve around the following; money, stock market and loopholes in the Halacha.
What could be more exciting than this?
I came upon this gem while searching for some info on the Israeli derivatives market on my Bloomberg terminal. Problems areas to be discussed are highlighted.

Moreshet's Fund Follows Jewish Law to Outperform Israeli Market 2007-05-21 19:28 (New York)By Tal Barak May 22 (Bloomberg) -- Yaacov Moreshet's Shoam Gmisha fund,one of Israel's best performers last year, follows the dictates of Jewish law. Those rules are flexible enough to let him profit from potential gains in every stock in Israel.Moreshet, 43, runs Hilat Shoam Ltd., the biggest Israeli investment company offering mutual funds that strictly followHalakha: Jewish laws covering everything from diet to lending. Hecan't directly buy shares of companies open on the Sabbath, for instance.What he can do is buy options on the performance of Israel's principal stock indexes. Those bets, plus direct investments incompanies deemed compliant with Jewish law, helped his $35million Shoam Flexible fund become Israel's fifth-best-performing flexible fund in 2006 with a return of 23 percent, according toMeitav Investments & Securities Ltd. That is almost double the return of the benchmark TA-25 Index.``I buy the movement of the shares, I'm not its owner,'' Moreshet, who manages the equivalent of $328 million in threefunds, said in his office in Ramat Gan, Israel. ``The reason Istarted this company was based on a religion and ideology thatthere's a need for values in business.''Shoam Gmisha's performance has slowed in recent months,returning 30 percent in the past year while the TA-25 Index hasreturned 25 percent. It is lagging behind in 2007, posting a 12percent gain this year, less than the 20 percent return of thebenchmark index. A flexible fund lets managers choose how much toallocate to local and foreign stocks and bonds.

A Detour?
About 70 percent of Moreshet's assets are in options on the biggest Israeli gauges, including the TA-25 index, the Tel AvivFinancial Measure and the TA-75 Index. He can thus profit fromthe rise of such companies as Israel Chemicals Ltd., which operates on the Sabbath, the period of rest that starts Friday after sundown and lasts until sunset on Saturday. IsraelChemicals stock has risen 30 percent this year.Moreshet is ``using a procedure of a detour,'' said YairElek, who manages the equivalent of $35.3 million at AxiomaInvestment Management Ltd. in Tel Aviv. ``From the point of viewof the Halakha, this is fine, but essentially he still enjoys thegains of these companies.''Moreshet said he sees no contradiction in his investments in an index that includes a company that doesn't follow Halakha,since the fund does not actually own the shares.``I don't have an influence on the company's decisions, so there isn't a Halakha problem here,'' he said.

Rabbinical Guidance
Moreshet works under the guidance of 97-year-old Rabbi Yosef Shalom Elyashiv, whose rulings on Jewish law and practices arewidely followed among the most religiously observant Jews.Halakha is based on religious laws whose origins appear in the Bible and in other early texts such as the Talmud.Elyashiv is one of the most influential leaders of theOrthodox community, said Menachem Friedman, a professor of sociology and anthropology at Bar-Ilan University in Ramat Gan.Rabbi Arie Dvir, another leader in the Orthodox community,is the director of the Hilat Shoam and represents Elyashiv inorder to interpret Jewish law on a day-to-day basis.Among Moreshet's direct investments are companies headed by a religious collective settlement. Albaad Massuot Yitzhak Ltd.,for instance, which is run by Itzik Ben Hanan and makes wet wipesunder the brand name Fresh Ones. Shares of Massuot Yitzhak,Israel-based Albaad have gained 18 percent this year.
Interest Laws
Moreshet also invests in Clal Insurance Enterprise Holdings Ltd., Israel's biggest insurer by premiums, which has added 26 percent since the start of the year, and Bank Hapoalim Ltd.,Israel's largest lender, which has gained 17 percent.Moreshet meets with representatives of each Israeli company that he plans to invest in to make sure they follow Halakha.Financial institutions need a religious endorsement of their lending practices. According to Jewish law, interest can't becharged on any kind of transaction. All banks and insurance companies in Israel are approved by various rabbinical courtsunder these guidelines.Moreshet also has other considerations in mind when choosing investments, such as having the option to change his position in the market in an hour.``The most important thing for me is liquidity,'' he said.``If there is a dramatic event such as soldiers being kidnapped,I want to know that I can immediately change my position in the market.''
Wartime Selling
On July 12, 2006, the Shiite extremist Hezbollah group attacked an Israeli army unit on the border between Israel and Lebanon and captured two soldiers. The TA-25 slumped 4.2 percenton that day -- after Moreshet had sold most of his shares in less than an hour.Because he invests in indexes, Moreshet's fund can profit from the rise in shares of companies deemed non-compliant, such as Israel Chemicals, which harvests minerals from the Dead Sea to make fertilizers.It has a 9.5 percent weighting in the TA-25, the largest along with Teva Pharmaceutical Industries Ltd.Over the past five years, the Shoam Gmisha fund has outperformed the TA-25. It has returned 127 percent since 2002,compared with the benchmark index's 99 percent advance.Moreshet also operates a Halakha bond and a dollar fund. The three funds received the highest rating of three diamonds byMaalot The Israel Securities Rating Co., which is affiliated with Standard & Poor's. Outside Israel Moreshet, who is married with three children, graduated witha bachelor's degree in economics and accounting and a master's in business administration from Bar-Ilan University. He previouslywas head of provident funds, long-term investment plans thatprovide tax benefits, at Clal Finance Batucha InvestmentManagement Ltd. and was the deputy director of financial planning at the Transportation Ministry.Moreshet said about 8 percent of his fund is invested abroad, mainly in indexes in China, Russia and South America. He has to make sure the person who heads the foreign company he is considering investing in isn't Jewish and therefore isn't subject to the restrictions of Jewish law.The company has doubled its assets each year for the past five years, except in 2006 when they tripled. Moreshet says he issure investors are drawn in part to the fund's religious affiliation.``Most people believe there is a God and they like tradition,'' he said. ``They want to be able to get a day ofrest. Otherwise we all go back 2,000 years to the epoch of slavery.'' --Editor: Taylor (aes)Story illustration: Enter {TA-25 MOV } for a chartof the share movements for members of the Tel Aviv StockExchange's benchmark index. To contact the reporter on this story:Tal Barak in Tel Aviv at +972-3-754-1151 --------------------------------------------------------------------------------------------- Here are the basic transgressions you might be committing by buying a single stock in a company. (From Shulchan Aruch)
From JLaw-Stockmarket
from Orach Chaim - Shabbat prohibitions such as profiting from one's business, employing Jews and working animals; possessing leaven during Passover,from Yoreh De'ah - benefiting from a mixture of milk and meat, from avoda zara, and from orla; lending and borrowing at interest, doing business in forbidden foodstuffs; from Even Ha-Ezer - being a partner in licentious activities;from Choshen Mishpat - being a partner in robbery, withholding of wages, or commission of damages. Mr Moreshet refers to the following loopholes when he is referring to the fact that he does not hold ownership in these companies which are melacha Shabbat.
B. SHABBAT There are numerous prohibitions which relate to running a business on Shabbat. Two of them, working one's slave or beast, are of Torah origin and are dependent on ownership. Practically, the problem is limited to animals, since few-publicly owned corporations own slaves (though it may be that the definition of slave or servant for the purposes of Shabbat is broader than for other laws; see Rambam Shabbat 20:14). It is advisable not to hold stock of a corporation which owns animals that labor on Shabbat.The other restrictions, relating to the ban on directing others to do one's labor on Shabbat or even having them do so without orders, are of rabbinic origin and relate primarily to direct control. According to R. Feinstein (Igrot Moshe OC Vol. IV, 54), control is in the hands of management; the management resembles a sharecropper or contractor who acts on his own initiative, and not a hired worker. Therefore, a Jew may hold even a majority interest in a corporation which does business on Shabbat, provided that the controlling management is predominantly non-Jewish. (Minchat Yitzchak Vol. III, 1 rules likewise). In the case where the Jew is the primary owner, his ownership should, for appearances' sake, not be publicly known.If the management is primarily Jewish, severe problems arise, since it is still prohibited to have a Jew work on Shabbat even on his own initiative. Several authorities have permitted, in case of great need, a partnership with a Jew who would have worked on Shabbat regardless, if a condition is made that the business belongs to the shomer-Shabbat partner only on weekdays (Igrot Moshe OC Vol. IV, 55, Chelkat Ya'akov Vol. II, 54, Tzitz Eliezer OC Vol. II, 65); perhaps the company management, who are the representatives of the shareholders, are empowered to authorize such a condition with an individual shareholder.If the company's business cannot be conducted without Shabbat operations, this resembles the case of having the market day on Shabbat, and it is difficult to be lenient (see Shulchan Arukh OC 307:4 and Mishna Berura 15, Sha'ar Ha-tziun 15). This presumably refers to a case where business is impracticable, and not merely unprofitable, on weekdays only. ----------------------------------------------------------------------------------
I seriously have a problem with his detour method. He is indirectly reaping gains from companies who are mechalel Shabbat and which are represented on the index. I have never heard of any true frum Jews who indirectly reap gains from from a mixture of milk and meat, or from Avodah Zarah, or from orla; lending and borrowing at interest, from businessess in forbidden foodstuffs or from robberies. Have you? Would you invest in this fund? I wouldn't. I am also dying to know if this Halacha bond of his needs a heter iska. Obviously at the time of the transaction it is obvious who the creditor and debitor are.
JLaw-Halacha of Ribis
E. State of Israel BondsOne of the most popular and efficacious means of financing the State of Israel's burgeoning needs is the sale of bonds. Is a Heter Iska required for every transaction? Rav Pinchas Teitz, writing in Hapardes some 30 years ago, rationalizes the practice of selling Israeli bonds without a Heter Iska on the basis that Ribis implies a known creditor and debtor. Here, however, one cannot identify the individuals backing the bonds. Nor at the time of the transaction does the lender know the debtor's identity. Furthermore, it could be argued that all bonds are sold through a broker, invoking Rashi's opinion that is not prohibited. He also raises the corporate status of the Jewish State, the fact that the Ribis involved in each bond is less than a Perutah (the halachic equivalent of a penny) per citizen of Israel, and interestingly enough, the argument that Arabs are also issuers of Israeli bonds, thus involving a non-Jewish partner in the transaction. However, a respondent in the periodical Hamaor (Jubilee Volume) strongly disputes Rav Teitz's assertion and requires a Heter Iska for bonds.
The questions are:
1) Would you invest in this fund?
2) If, not, why not?
3) Are you comfortable with his detour method? If, yes, would you be comfortable with earning indirect gains from other prohibited activies listed in the Shulhan Aruch?
3) Do you think his halacha bond needs a heter iska? Crossposted at:Dov Bear and my blog Rebelwithacause

Friday, August 24, 2007

Allright, party people!

I have not posted anything on my blog this week cause I took a break for a week. Starting Monday 08.24.2007 I will be executing around 100 trades per week. That of course electronically. I will pick out a dozen examples from those trades and post them on here on a weekly basis.
Hope you guys have a great weekend. :-)

Sunday, August 19, 2007

Wrap up for week 13-17 August

No trades were executed since the volatilities were still within the higher percentiles.

Monday, August 13, 2007

Watery eyes?

Is it me or does Bernanke have watery eyes?

Bernanke, Trichet Urged by Markets to Do Rates U-Turn (Update1)

Where is gold going?

The question is:

Why is noone buying up gold?

And for the best answer, the price goes to Ron Goodis:

``In times of a liquidity crunch, people want cash, and that's Treasuries, not speculative stuff like gold,'' said Ron Goodis, who has been trading gold since 1978 and is director of futures trading at Equidex Brokerage Group in Closter, New Jersey.

Yay!!!! Ron Goodis for President! The rest of the article below.

Gold Lags Treasuries as Dollar Fails to Ignite Rally (Update1)
By Pham-Duy Nguyen and Saijel Kishan

Aug. 13 (Bloomberg) -- Gold is going nowhere.

Dollar-priced bullion, a traditional haven for investors in times of turmoil, is lagging behind U.S. Treasuries. The metal is stuck at about $670 an ounce in London, up less than 1 percent since July 16, when stocks started to tumble.

It should be the best of times for investors in the metal. The dollar has weakened 3.4 percent against the euro this year. The Federal Reserve says inflation remains the ``predominant risk'' to the economy. Commodity prices, as measured by the UBS Bloomberg CMCI index, are heading for a sixth straight annual gain. The supply of gold is falling for the third time in four years, and global stock investors lost as much as $2.66 trillion in the most volatile trading since 2003.

``It's a mystery,'' said Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, with $700 million in customer accounts. ``These are ideal conditions for gold. The fact that gold hasn't risen means there's a lot of complacency out there. People aren't panicked yet.''

Gold analysts are retreating. New York-based Citigroup Inc., the biggest U.S. bank, cut its 2007 forecast to $679 on average from $700. John Reade, the analyst at Zurich-based UBS AG who predicted last year that gold may approach its 1980 record of $850, now forecasts $670. Gold fell $2.55, or 0.4 percent, to $670.25 an ounce at 11:47 a.m. in London, for a gain of 5.3 percent since Dec. 31.

Central Banks Sell

Investors' optimism is waning because central banks in Europe have increased sales of reserves this year by 7.3 percent, or 24.5 more tons valued at $581 million, data from the London-based World Gold Council show. The world's central banks are the biggest holders of gold, controlling about a fifth of all known supplies.

The European banks have sold 358 metric tons of the 500 tons permitted annually, compared with 333.5 tons through Aug. 11 last year, the council said. Banco de Espana has sold 149 tons in the current year, more than double the sales in the previous two, says London-based research firm GFMS Ltd.

``It certainly has been a source of frustration for gold investors,'' Sean Boyd, chief executive officer of Canadian gold producer Agnico-Eagle Mines Ltd., said on Aug. 3. ``We've had some well-timed central bank sales that kept us away from the magic $700 number earlier this year.''

Less Bullish

Hedge-fund managers and other large speculators have pared bullish bets. Speculative long positions, or wagers prices will rise, dropped 34 percent in the week ended July 31, the most in two years, based on holdings of New York gold-futures contracts tracked by the U.S. Commodity Futures Trading Commission.

Rising global interest rates have made holding gold less attractive for foreign investors. While the Fed has kept rates unchanged at 5.25 percent since June 2006, the European Central Bank has raised rates twice this year to 4 percent and the Bank of England made four increases to 5.75 percent. Gold priced in euros is up 3 percent this year.

Gold investors say the last time they saw as many reasons to buy was in the 1970s, after Iran cut oil supplies, U.S. inflation rose to 12.8 percent, the Standard & Poor's 500 Index fell to a 12-year low and the economy sank into recession. Gold reached its record high of $850 an ounce on Jan. 21, 1980.

The top reason investors buy gold is to hedge against falling U.S. assets, said Martin Murenbeeld, chief economist at DundeeWealth Inc. in Toronto. The firm manages $27 billion in mutual funds.

Supplies Decline

Gold jumped 23 percent last year, the sixth straight annual gain, as the dollar fell 11 percent against the euro. The dollar is down against all 16 of the world's most-traded currencies in the past six months, according to data compiled by Bloomberg.

Falling gold supplies are another motive to buy, says Agnico-Eagle's Boyd, who sees prices reaching $850 in 18 months. Output from mines, recycled metal and sales by central banks and speculators fell 2 percent in the first quarter to 808 tons from a year earlier and declined 22 percent from the first quarter of 2005, according to the London-based World Gold Council.

Still, investors haven't turned to gold as an alternative asset as stocks declined the past four weeks.

The S&P 500 has fallen 6.2 percent since July 16, including a 3 percent drop on Aug. 9, as concern mounted that losses in U.S. subprime mortgages may hurt economic growth and earnings. Central banks in the U.S., Europe, Japan, Australia and Canada added about $136 billion to the banking system in an attempt to avert a crisis of confidence in global credit markets.

Treasuries Rise

``All these credit problems and bailouts are inflationary and creating dollars,'' Euro Pacific Capital's Schiff said. ``I'm expecting an explosive move for gold any day now.''

Yet as stocks fell, the return on 10-year Treasuries since July 16 was 1.5 percent, outpacing gold, according to data compiled by Merrill Lynch & Co. The bonds, which carry the highest debt rating and are backed by the government, provide a fixed return. Gold doesn't.

``In times of a liquidity crunch, people want cash, and that's Treasuries, not speculative stuff like gold,'' said Ron Goodis, who has been trading gold since 1978 and is director of futures trading at Equidex Brokerage Group in Closter, New Jersey.

Inflation isn't as much of a basis for buying gold now, said Eugen Weinberg, senior commodities analyst at Commerzbank AG in Frankfurt.

``If we see inflation rates rising to 5 percent and beyond, there will be a case to buy gold, but we are not there yet,'' Weinberg said.

To contact the reporters on this story: Pham-Duy Nguyen in Seattle at ; Saijel Kishan in London at

Last Updated: August 13, 2007 07:28 EDT

Sunday, August 12, 2007

Outlook for week August 13-17

-Volatilities are still in the higher percentiles.

Biggies are:

-Retails sales-13.08
-Industrial Production and Capacity Utilization-15.08
-Housing data-16.08

-No position on equity options rolling into this week.

Possible plays:

-Scalps on ETF or Index options

-Equity option spreads

EDITED: I have asked someone to post this one for me and I am not sure what he did but he combined an old draft with some stuff I wrote last week. So this post has been updated for the econ biggies.

Friday, August 10, 2007

Yeah, just deny it so investors won't be scared LOL

There is a guy on Bloomberg now and he just denied that his company is invested in anything that might be affected by the subprime crisis. Great strat, just deny it all so the investors won't pull out their money. Hahahaha!