Frida Ghitis writes: Here in Sri Lanka, where a three-decade war has just ended, war-weary civilians hope peace will hold, while savvy investors rub their hands, already counting their juicy peace dividend. The Colombo exchange has already climbed 40% this year, the best in Asia. Investors are betting peace will, indeed, hold.
A few years ago, James Surowiecki wrote “The Wisdom of Crowds.” He argued that large numbers of individuals deciding independently can prove smarter than “experts” at making predictions. Markets and economies tell us the opinions and predictions of crowds. That’s why I was so interested when I heard that, amid frightening predictions of war in the Middle East, the Israeli economy is firing on all cylinders. Among other important things, what happens in Israel has a powerful impact on our stock holdings.
A number of highly-regarded experts are predicting an imminent attack – by the US and/or Israel – against Iran’s nuclear facilities. The experts tell us this would unleash attacks against Israel from Iran’s friends Hamas and Hezbullah, which have the whole of Israel within rocket range.
The wise crowds, however, are not afraid. Israel’s economy is booming, growing faster than anyone predicted, even as the rest of the developed world struggles to revive economic activity.
Growth topped 4.7% in Q2, embarrassing economists who had predicted a slowdown from Q1’s 3.6%, and sending unemployment lower. Exports are soaring, as is domestic consumption. Tourist arrivals – despite war fears – have reached a new record. The Tel Aviv bourse, meanwhile, has climbed more than 20% in the last year. Not too bad for a country possibly on the verge of war. One can only imagine what would happen if the clouds of wars ever dissipated. Milk and honey, anyone?
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