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April 17, 2014 / 17 Nisan, 5774
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The Investor’s Guide To Israel’s Political Market (Part I)

Feiglin-Moshe

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The 2013 Israeli elections were supposed to have been boring. The pundits promised that the final result is already clear and there is nothing new under the sun. However, with less than two weeks to go until the polls open, we are in the throes of one of the most fascinating election campaigns that Israel has known. It is a campaign that faithfully reflects the deep currents of change in Israeli society. Nobody can yet predict its final outcome.

Here is my analysis of what is taking place, from Left to Right. First, though, we must understand the factors that influence the power of any political party:

The political world is very similar to the financial world. The “stock exchange” of the political world is elections. The value of the stocks – the political parties – is actually determined by a number of parameters. There is the stock’s current value, namely the number of people who voted for the party in the previous elections. There is also its real market value and the value at which it is traded at the given moment.

For example, the current value of Kadima is 21 mandates (seven elected members have left the party since the last election). But the real market value of the party (which has established mechanisms and registered members) is much lower. At the current moment, Kadima is being traded even below its low value and will apparently disappear off the charts.

When we try to understand what is happening now in Israel’s political arena, we must first assess the true value of the different parties. In this way, we will be able to differentiate between deep processes and processes that have no long-term significance.

The true value of a party is determined by the following six factors:

1) Message: When all is said and done, political parties are supposed to herald some sort of message. That is why they are established.

2) A consistent nucleus of voters that identifies with the party (in the financial world, this is called “trademark”).

3) Identification of voters at large (the market) with the party’s message.

4) Identification of voters at large with the party’s actions or accomplishments.

5) The party structure: Namely, an independent party that has established respectable party institutions, an internal voting mechanism and member participation in decision-making and choice of representatives.

6) The party leaders.

When Kadima was established and leapt to victory in the last election, I said that it would disappear off the political map within a few election campaigns. The reason for this evaluation was the understanding that Kadima’s “stock” was overvalued. The party enjoyed an extraordinarily strong Factor #6 in the person of its powerful and charismatic leader, Ariel Sharon. However, it lacked all the other components and it was clear that it was living on borrowed time.

At the same time, when many were already eulogizing the Likud, I publicly went on the record with the assessment that the Likud would return to the helm of government. The reason for this evaluation was that the Likud, on one level or another, enjoys all the other components listed above. So if it won only 12 mandates due to a political “accident,” its market value did not reflect the true value of the stock but rather its current value at that given time.

With these six components in mind, here now is the analysis of the current political picture:

On the Left end of the political spectrum in Israel are Meretz and the Arab parties: Hadash, Ra’am, Ta’al and Balad. No real change can be expected for any of these parties. They have all six components and we can expect them to more or less maintain their strength.

On the political Right, things are a bit more complex. Otzma LeYisrael, led by Aryeh Eldad and Michael Ben-Ari), the rightist parallel of Meretz, certainly has a clear message with well-known leaders and public identification with its message that should get it past the two percent threshold for Knesset representation. But it is a new party with no clear party structure.

The same is true for Am Shalem, Rabbi Chaim Amsalem’s party. It has a message and leadership, but it is not clear if it has the critical mass of the other components to create a real party and get it over the threshold.

The Ashkenazi haredi parties, just like the Arab parties, enjoy all six components and will likely maintain their current strength.

The picture is less clear for Shas. For many years Shas was overvalued due to the dominance of its leader, Rabbi Ovadia Yosef. The rabbi’s dominance is naturally diminishing, but the party enjoys all the other components. It will not disappear, but in the future Shas will contract to its real market value. I assess that at approximately eight mandates.

It is important to remember that while the Arabs will not enter a rightist coalition, the haredim are certainly willing to enter a leftist coalition – having done so in the past.

Let us now analyze what is taking place in the relevant Left (as opposed to Meretz, the ideological Left is not confused by the facts).

The shattering of the Oslo vision has left the Israeli Left with no relevant message. When there is no message, things get out of control and the first to be affected are political parties. Their politics become personal and not ideological, tension within and between the parties grows, and break-offs and new, strange bedfellows flourish. In the past we have seen the same phenomenon on the Right, also as a result of lack of relevant vision. There have always been hatred and jealousy in the Left and Right camps. But when the passengers believe that the driver knows where he is going, they fight for a good spot behind him – and not for the driver’s seat.

The Labor Party

The Labor Party has always enjoyed all six of the components mentioned above. In addition, it is a party with history and a leadership mentality that knows how to address the entire public. For this reason, Labor will always be a leadership option. I estimate that Labor’s current market value is between 25 and 30 mandates. The party that under Ehud Barak’s leadership deteriorated to an all-time low rose again to its real value as soon as it rid itself of its problematic leader and put a young and charismatic new leader at the helm.

Shelly Yachimovich understood that she must propose a new vision to replace the shattered Oslo dream, and had the wisdom to focus on social and economic issues. However, the founding ethos in Israel was and remains security. In Israel, “It’s the security, stupid.” As long as Labor will not be able to establish a political/security alternative, it will not surpass the Likud. In addition to this basic fact, competition from Yair Lapid and Tzipi Livni on the one hand and problematic primaries that put anarchistic candidates at the top of the list on the other hand have eroded Labor’s value. Today, the party’s market value is lower than its real value (17 mandates, as per the latest polls).

Yesh Atid

Clearly, Lapid’s party’s current market value (11 mandates) has nothing to do with its real value. The party lacks all of the components except #6 – a young and widely recognized leader (thanks to his media career). This party isn’t really a party; it’s a person. It is a shopping cart capitalizing on dissatisfaction and hopelessness without proposing any real alternative. Just like Kadima and Yair Lapid’s father, Tommy, this party will disappear in a short time period.

The Movement Party

Clearly, Livni’s current market value of 11 mandates has nothing to do with its real value. The party lacks all of the components except #6 – a widely recognized leader. Like Yesh Atid, the Movement isn’t really a party; it’s a person. And for the same reasons as Yesh Atid and Kadima (see above), this party will disappear in a short time period.

Likud

Except for a clear message, the Likud enjoys all of the other components that make up a real party. Like Labor, the Likud is also a ruling party. But unlike Labor, the Likud boasts a large membership that plainly reflects Israeli society as a whole. The method for internal elections in the Likud is far from perfect, and the political mechanism is problematic. Nonetheless, the party manages to faithfully express the main will of its voters and to ensure (with safe slots on the party list) a high-quality roster that authentically represents the multifaceted Israeli society.

The Likud evades its own message, preferring to be “not Left.” This is an effective method when there is no alternative on the Right. But it becomes problematic as soon as such an alternative appears. In my estimate, the true value of the Likud is at least 40 mandates. But for a long time, it has been traded well below its market value. This is due to the Russian vote that has migrated to former foreign minister Avigdor Lieberman’s party, Yisrael Beiteinu; the Sephardi vote that migrated to Shas; and Likud’s inability to establish a political/security alternative to the Left’s platform.

In the current elections, the religious Zionists are also retreating into an unnatural type of politics, thanks to Naftali Bennett, head of The Jewish Home Party. The Likud’s ridiculous fight against Bennett has accelerated the under-market-value phenomenon.

The Likud’s attack on Bennett’s declaration in favor of a sort of insubordination established it in the eyes of the religious Zionists as a party that could once again initiate large-scale expulsions. When Bennett reneged, the religious Zionists understood that once again their party would be a tool in the hands of possible future evictions. But the Likud’s attack saved Bennett from the results of his zigzag and featured him in the right place nonetheless: while his proponents heard him say that he would fulfill expulsion orders, they don’t believe him.

(To be continued)

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