Fast cash from Israel Bonds

The next time violence erupts between Israel and its neighbors in the Middle East, Israel Bonds CEO Israel “Izzy” Tapoohi is not going to run to major banks and mutual funds if the government needs emergency cash.

Forgoing Wall Street in favor of the likes of “Mr. Cohen” — his term for the thousands of American Jews who buy from Israel Bonds, a private Manhattan-based company that underwrites securities issued by the State of Israel in the United States — Tapoohi told the Journal during a recent visit to Los Angeles that “I can probably raise within three months another $1 billion for the Israeli economy.”

To illustrate, the 68-year-old CEO raised the following scenario: “If I now sit with a large bank, most likely if everyone in Israel is sitting in bomb shelters, he will say to me, ‘Izzy, it’s nice to know you. Is there any possibility to get an early redemption on my bond?’

“But if I go to Mr. Cohen, and I say to Mr. Cohen, ‘Israel is for the moment under a war situation. You bought $10,000 recently; do you mind buying another $10,000?’ I guarantee he’ll say, ‘Yes.’ ”

Reaching out to the Mr. Cohens of the world, Tapoohi believes he could raise $1 billion at an interest rate of just a few percent (current Israel Bonds rates range from about 1 percent to 4 percent). Reaching out to the global market? Tapoohi thinks it would be closer to 10 percent if Israel were under siege.

“In the emergency time, Wall Street is ruthless,” Tapoohi said. “Wall Street would downgrade. S&P [Standard & Poor], Fitch would downgrade Israel immediately.”

Since 1951, Israel Bonds has raised more than $36 billion, much of which has funded Israeli infrastructure projects, technology development and immigrant resettlement. In 2013, bond sales to Americans exceeded $1.1 billion, a company record.

Tapoohi, who has led Israel Bonds since 2011, emphasized that Americans should view Israel Bonds not only as a pro-Israel investment, but as a strong financial instrument. 

The possibility of war may seem ever-present, adding risk to doing business there, but Israel’s economy has actually performed head-and-shoulders above many Western economies since the beginning of the 2008 recession, growing at  nearly a 5 percent clip in both 2010 and 2011 and just under 3 percent in 2012. The United States, meanwhile, has struggled to eclipse 2 percent during that period.

And the shekel is performing so well relative to world currencies that Israel’s central bank is concerned about it becoming too strong, which would make it more difficult for Israel to export its goods. 

Despite these positive indicators, though, Tapoohi is predicting another global economic downturn, albeit not comparable to the one in 2008. He thinks that central banks around the world will increase interest rates sooner or later rather than risk feeding unsustainable bubbles. The real question, as Tapoohi framed it, is whether Israel’s economy crashes or makes a soft landing when interest rates go up. He’s betting on the latter.

“Israel never gave its people borrowing rates at 90 percent like it was in America,” Tapoohi said. “We have never allowed in Israel refinancing of your house and using it for spending.”

Tapoohi has experienced the highs and the lows of Israel’s economy. Born in 1946 in what would become Israel, but raised in Australia, Tapoohi moved to Israel for good in 1979. Since then, he has been an executive at multiple Israeli companies, weathered Israel’s 1983 financial crisis and served as chairman of the board for Bezeq, Israel’s largest corporation and communications provider.

The businessman also has a close relationship with Prime Minister Benjamin Netanyahu. He served as an economic liaison during Netanyahu’s first term in the late 1990s and as a member of his “100 Days” economic advisory team in 2009, when he helped prepare economic guidelines in his second term. 

Since Tapoohi took the helm at Israel Bonds in October 2011, the company has, in an effort to reach a younger demographic, launched an online portal through which users can purchase bonds. In less than three years, online sales exceeded $55 million, with nearly half of that coming in 2013, according to an Israel Bonds spokesman. A mobile app is reportedly in the works, too.

Regarding the Boycott, Divestment and Sanctions (BDS) movement that is attempting to gain a foothold in the United States, Tapoohi said it doesn’t scare him. But that hasn’t stopped Israel Bonds from using its threat as a rallying cry for pro-Israel Americans. (The headline on its website reads, “Israel Bonds are a strong response to BDS advocates.”)

Of more concern to him is that individuals, pension funds and governments continue to see Israel Bonds as a smart financial investment. According to the group, states and municipalities have invested more than $140 million in Israel Bonds since Jan. 1, and there are commitments for another $50 million.

“Whether you like it or not, most companies like to do business,” Tapoohi said. “And they couldn’t give a damn who they do business with.”