How to Read the Ratings

Ha’aretz reported on May 27 that Goldman Sachs analyst Daniel Tenengauzer says Likud Finance Minister Silvan Shalom flopped when he met with investors and analysts in NY. Readers of the Ha’aretz English edition on the Internet had to make do with this part of the report.  

We need to answer two questions: what is missing from the English report? And, does Tenengauzer have an agenda that perhaps is coloring his “analysis”? 

The answer to the first question provides the answer to the second. Readers of the Hebrew edition of the Ha’aretz newspaper were able to read a five-column story on page 13 of the Economics Section, elaborating on the front-page attack on Shalom.  

In column two, after repeating the attack on how unprepared Shalom was in NY and how he should never have told them in NY that the government was going to cut spending in various unspecified ministries in order to fund increased defense needs, we learn that Tenengauzer lowered Israel’s rating from “buy” to “hold” – when? After the Israeli election results were made known earlier this year. At the time that Tenengauzer lowered the rating, he also noted that a national unity government would probably be formed and that the budget framework wouldn’t be broken, but that if a narrow rightwing government were formed, it would overspend because it would fund the army, settlements and religious parties. 

Perceptive readers may know what is coming next, or may not need to read column three to find out what this article and analysis is really about.  

For in column three we read about what is really worrying Mr. Tenengauzer: “In my favorable approach towards Israel I begin with the assumption the prime minister will operate according to logic and democratically. The decision to use F-16s seems to me hasty and not democratic, because it was taken by Sharon himself. If this policy of Sharon continues it will hurt the way the financial world views Israel….You have to understand the use of an F-16 has economic meaning.”  

Let’s try to get inside Mr. Tenengauzer’s head. For the last three months of 2000 and the beginning of 2001, Israel was under attack, its soldiers and citizens were being lynched, the Arab world was gearing up for war, and none of this affected Israel’s rating. It was obvious the defense budget was going to be increased, but this didn’t affect Tenengauzer’s rating process either. The prime minister had, arguably – and according to a huge majority of Israeli voters including most of his own party – made more serious mistakes than any prime minister of a civilized country in recorded history. This didn’t worry Tenengauzer. However, election results showing a rightwing victory – by the largest margin in Israeli history – were enough to lower Israel’s rating in Mr. Tenengauzer’s eyes. 

Luckily for Israel, the 33-year-old Tenengauzer, with an M.A. in economics, has no problem donning the hat of military expert, in order to tell the Israeli government that its generals were all wrong, and there really was no need to use an F-16 to bomb the building in Shchem where terrorists were planning attacks, or mortar factories in Gaza. For, as we have just learned from Mr. Tenengauzer, months of mortar fire into Israel and terror attacks won’t lower Israel’s economic rating, but a rightwing response will do so, immediately. 

Again, fortunately for Israel, Mr. Tenengauzer is willing to wear the hat of a political scientist too, and offer Israel advice on how to be more democratic. Interestingly, Mr. Tenengauzer had no problem last year when a minority government, without the support of the Knesset, in which so many ministers had quit that the prime minister himself was defense minister, education minister and who knows what else – Tenengauzer had no problem with Israeli democracy when this minority government with no parliamentary support offered to give the country’s capital to the PA, against its own platform, on which it was elected. That, apparently, was democratic, and shouldn’t lower Israel’s rating. But if Mr. Sharon, backed by Laborite Foreign Minister Peres and Defense Minister Ben-Eliezer, decides to use an F-16, that is antidemocratic and Israel is blessed that such sharp-eyed analysts as Tenengauzer are able to converse so well in economics, political science and military matters that they can set Israel straight. 

Another way to read the whole Ha’aretz story could, theoretically, be: Silvan Shalom told the truth in NY, that defense needs would require further funding this year. Had he said anything else, everyone would have known he was lying. He also said he wouldn’t increase taxes to pay for the defense needs, but would cut spending elsewhere. That is the kind of talk Goldman Sachs can be expected to like. But since Shalom is from the Likud, it wasn’t enough for Goldman Sachs’ analyst Tenengauzer, who accused Shalom of not being specific enough. Still, Tenengauzer let Shalom off easy, saving his real ammunition to blast the antidemocratic prime minister of Israel, Sharon.

Israelis now know how to read Goldman Sachs’ ratings: When Goldman Sachs rates Israel high, it means Israel is under attack and/or led by the left. When Goldman Sachs drops Israel’s ratings or issues ex cathedra military commentary by young economists, it means Israel is defending herself, or led by the right.

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