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- [00:00]
A
Foreign.
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B
You are listening to an art media podcast.
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Yonatan, what's your number this week?
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A
My number is now the biggest number I ever came up with for the show. It is 40 trillion. 40 trillion as a target for the US GDP within the 2030s as it has been stated in the US National Security Strategy published by the White House last week. This is for me the most consequential documented printed recently, both on global affairs but also for the Israeli economy. It harbors both opportunities and risks. So if America goes to 40 trillion within the next decade, I think Israel will fare well.
- [00:41]
B
My number is a big one too. It doesn't compete with yours size wise, but it's 768%. This is the growth in private capital raised for Israel's defense tech between 2023 and 2024. We should know 2025 numbers pretty soon. Ben. This is according to a report, by the way, by Jeffrey's Israel Group just last month. In November, I would expect that we see similar if not greater growth from 2024 to 2025 in the sector. So whose number wins?
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A
I'm sticking to mine this time.
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B
I will give it to you. 40 trillion wins. And I think not just quantity, but qualitatively too, it is hugely impactful. As you said, the U.S. you know, if it hits this target to Israel and other allies. So you win.
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It is 11am here in Palo Alto.
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A
It is 9pm here in Israel and I apologize, I just literally came in through the door after a day at the Knesset being held back in traffic for an ultra Orthodox protest on the main road. And then the Israeli bracing for a storm supposedly coming over the next couple of days.
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B
I did see some of the video footage from the flooding in Eilat.
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A
Eilat, yeah.
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B
That was serious. So no joke there. But I want to get back to your number, give us a little bit more of a glimpse into just the both direct and indirect impact here on Israel.
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A
There's a lot to unpack. It's a 30 page document. I enjoyed thoroughly reading it over the weekend.
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B
You have a weird taste in what you read, but okay, I'll honestly, I.
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A
Think, you know, we are living in an era of an empire and so the direction coming out of Washington is often sporadic and sound bitey. So to read President Trump and his team in a coherent kind of end to end document made a lot of sense. Now I think for us focusing on the Israeli economy, you know, Israeli economy is an export driven tech heavy economy. So it does matter a lot where America is going and it does matter a lot. What's the world order? Is it a world order of war, of peace, of growth, or of growing tariffs and competition that narrow the Israeli export capacity? And so my main takeaways from that are three as they relate to the economy. One, Israel is very small in this report, so is the Middle East. One of the critical pieces of American strategy is energy dominance, not independence, energy dominance. And so that also relates to the fact that America is not willing to allow any other superpower to get entrenched in this region. The nation states around us get to be part of a group that the document calls sovereign states, whereby we don't care how you run your business so long as your country is reasonably stable. The second piece is America's, I would say, recognition that it is in competition not just for AI, but also for quantum computing and synthetic biology. America doesn't have a competitor in space. It does apparently consider itself to be super safe in robotics, but not safe in AI, not safe in quantum computing research, not safe in synthetic biology. Super exciting for the Israeli economy because these are complementary dimensions. We just learned that Prime Minister Netanyahu is coming to meet President Trump on the 29th. The There is an AI agenda. Last week, the Israeli Ministry of Finance signed. I think we're one of the only eight countries outside of the US that is going to be part of that supply chain as a bilateral agreement within a multilateral dynamic. So I think these are good news for the Israeli economy. The third is questionable. It's the front and center of the Monroe Doctrine in its Trump flavor, basically saying, we have our Western hemisphere, keep out, you know, stay off. And here are seven interests, supply chains, materials, you know, tech superiority and so on. That if you interfere with that, even if you're on the other hemisphere, we're going to fight for that. We're not going to fight for the global South. And the third one is a danger for Israel. Clearly, when you kind of paint the world in two hemispheres, it means that Israel has going to have a really hard time to deal with Asia, specifically China. It does open the door to India because there is a subset there that refers to India specifically and says the US Must make sure that India is part of the quad in Asia and doesn't sort of develop its own independent interests. So I think that's also very good for the Israeli economy. So that's my read into that.
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B
Well, first of all, thank you for reading it so that the rest of us didn't have to much appreciated. You know, I do want to say that what struck me and just reading about it is this emphasis on moving away from, which is not terribly surprising. Obviously, we've seen this repeatedly in President Trump's actions. But really moving away from we're going to export our system, our ideologies into the Middle east to a more transactional kind of relationship, which again, we've seen that with Saudi, uae, others, you know, and I think that there are positives there for the stability of the relationship in the region. So there's that. We're going to move on to another just a foreshadowing of what we're going to dive into in today's episode, which is a very meaty side subject. It is Israel's 2026 budget, which was passed by the Cabinet, just its kind of first step in the process just a few days ago. So we're going to talk over what you need to know, what's in, what's out, what's controversial and what you can expect going forward for the next steps. But I think it's so telling as to, you know, what the priorities are. What, by the way, I heard one Israeli journalist refer to it as the like sweet, sweeping the dust under the rug budget. But you know, just as importantly, sometimes what's not in something is very telling as well. So, Yonatan, first, before we get into all of that, we want to take a look at some of the week's other pressing news, AKA our big shorts and of course, the latest on the Windex, the what's your number index that tracks the performance of publicly traded Israeli based or founded companies.
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Moving on to this week's Windex, Yonatan, how are the numbers?
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A
So Windex is continuing its recovery. We're nearing the end of year. So, you know, we're going to see the photo finish of the three indices, the Windex, the S and P and the Nasdaq. So it's regaining back its status as the leader. Not yet there, but regaining. So 3.29 in the green this week, second consecutive week in the green, beating both S and P and Nasdaq. S and p growing almost 0.7% this week, Nasdaq at 1.3. I think the big news for me on the green side is that Monday.com bounced back at around 10%. This is important to see that the headwinds from AI are subsiding a bit. This is due mainly to a Guggenheim buy recommendation for the stock. It is significantly higher price than it is right now. And that kind of drove Wall street in terms of Sentiment and that was good to see. Palo Alto Networks continues to kind of bounce back at 5%. Wix is back at 4.71 reboun again important to see that bleeding and lost about 25% in one month. Lemonade had a roller coaster week but it ended up on 1.09%. It's interesting to see where the industry and Wall street kind of judges Lemonade over the long run, 52 week run or year to date it is performing super, super well. Elbit talk about defense tech is finishing with 3.5% rise due to what seems to be a higher demand for Israeli defense tech. We'll talk about it in the big shorts. So that's in the green if you have any thoughts or kind of instincts on those.
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B
No, the only one is that I wanted you to say that Lemonade is looking bittersweet. But you said roller coaster, that's fine too. All right, what's in the red? Let's move on.
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A
So I think two interesting ones in the red. One is Zim, classically you know, the Israeli shipping company where shipping magnate Idan Ofer pulled out of the company a couple of quarters ago. Now it does not have a core investors so it's up for grabs. Last week Heipag Lloyd, the giant German shipping company put in its offer. It's a non binding offer and that's why the stock is down 2%. You would expect that if Hepac Lloyd tries to buy Zim, it would be on a higher note. But there are also political issues. Zim has a golden share for the Israeli government and so it's not an easy acquisition for a global player. And this is why the management buyout deal is actually unfavored by investors because it's only the management that can possibly conduct that buyout.
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B
So I did see some headlines about the company sort of, you know, weighing different options. Do we know who other potential buyers could be?
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A
So Heipa came out and that was big news. The core buyer is the management buyout. It's Rami Unger and the existing management it seems, and we don't know all the details, that their offer came under the net cash on hand of the company. Basically what some would call a predatory offer. Basically saying, look, we're going to take this company private because no one's going to be able to buy it because of the golden share and so on and so forth. I'm not sure I buy that. But at the end of the day these are the dynamics. Just to conclude, bottom of the Windex this week are two cyber companies and this is actually an interesting story. Possibly we're going to keep our eye on that. These are Varonis and Sentinel 1 two of the sort of more veteran companies that IPO that have strong numbers on a quarterly basis but are still kind of barely profitable or not profitable. And it seems like the market is penalizing cyber companies that are not sending strong predictions and projections for their revenues and for their profitability because this is becoming a very competitive market. There's actually an analysis in Wall street this week comparing the Palo Alto network and Cyberark acquisition that seems to have been digesting well in terms of where Wall street is. We saw Wall street kind of taking a step away from the stock market, but definitely the street is preferring high profitability, high volume, continued beating of quarterlies type cyber dynamics, then the sort of middle small cap. It actually is telling also for IPOs in this space. We heard Yevgeny a few weeks ago from Armis, which now sort of makes sense to me why he was looking for the billion dollar mark on the revenue side, saying this is a higher bar. And I think now I understand what he meant.
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B
Absolutely. Yeah. No, I think that was very telling. The good news for Israeli founded and based companies on the cyber side is that we literally have them all. There's, there's the whole spectrum.
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A
No one's left out.
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B
No one's left out. Some will succeed and some won't, of course. As usual. Let's move along to our big shorts. Our big shorts today are very Euro focused, but we'll move through them quickly because we have a lot to get to in the long play. First one is critical. German Chancellor Friedrich Merz has visited Israel just this week, met with Bibi and other senior Israeli officials and also paid a visit to Yad Vashem. I'm curious to hear from you, Yonatan, about the timing of this, what he said about the temporary slash, partial arms embargo that we saw lifted last month once the ceasefire went into effect. But I know you've got some other takeaways, so give us just your quick take on this visit.
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A
So we had an episode about Germany a few months back. I think, you know, those who've listened or have watched so, you know, would gain an interesting insight into the visit right now. Mertz is a consequential leader for Europe. He is, you know, a transformative leader for Germany. He just passed a historic budget as well last week. So he's coming to Israel after he passed his own with 180 billion euros. Of added debt, new debt. Yeah. Quarter trillion of military spending in the next few years. Over half a trillion, over a decade. Committed now and budgeted. And by the way, he's coming after. Last week, Arrow 3, the Israeli Air defense system was embedded on German soil. As my wife's grandfather wrote to me, he's 100 years old. He's a Holocaust survivor from Germany. It is unthinkable that the grandchildren of those who ran from the Holocaust have built a system that is now protecting German soil. It seems like Germany is kind of thinking through where it wants to end up. The Chancellor paid a very close visit to President Erdogan of Turkey, if you weeks ago. And then Hakan Fidan, the famous and illustrious Foreign minister, ex head of Turkish CIA, visited Germany a few days before the visit in Israel, seeking to be part of what's called safe, which is the European defense sort of pact for technologies, and so far been refused. It is important for Israel to make sure that the Germany that is being built now over the next 20 years is going to be the anchor of Europe. No matter what happens to the EU still sees Israel as its favored partner when it comes to the core strategic economic issues. It's AI, it's the marks, it's the ties and the bonds between the countries. And it has to go beyond defense. I saw Prime Minister Netanyahu in the press conference yesterday. It seemed like behind the scenes there were very clear alignments. Although there's one thing to conclude with, and you've mentioned in terms of the embargo, the Chancellor did say, I regret I'm not able to invite you to reciprocate in Berlin because there is an ICC arrest warrant in Germany sort of hints. It's just not possible for Germany, where it is right now in terms of its role in the world, to disregard an open ICC warrant. Although if you go back to President Trump's strategy, sovereignty over international bodies is again another theme there. And so, yeah, that's where we stand with Germany.
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B
It's an odd but a logical segue to our next big short. I realize that the Eurovision decision seems on paper to be less consequential than talking about ICC warrants and, you know, whatever else, but it is consequential. So this is our second piece here, which we'll dive into just very briefly. But as a decision has been made to allow Israel to stay in the 2026 competition, you know, on the one hand, sounds great. On the other hand, we saw several key countries, including Spain, Ireland, the Netherlands, basically show that there isn't an end to the polit that we have seen. They are basically saying they're going to boycott the 2026 Eurovision because Israel is allowed to still compete. And so what I really want to get at here is this question of, you know, the threat of international isolation and that seems to still be alive and well. We're seeing it in different forms. So curious to hear from you, Yonatan. Maybe I'm making too much of a big deal out of it, but it feels big.
- [15:20]
A
I agree. And I think there are obviously two ways to look at it. I mean, first, we're seeing what Professor Barakoren, who was on the show talking bds, predicted, right. That even when there will be a ceasefire, this is not going to go away. This is sort of the beginning of a new chapter of antisemitism. And I agree with that. I think on the other hand, you see Israel fighting back in the euroleague Euro League games are back to Israel this week. This is a European basketball where Israel has a number of dominant teams and you are seeing the Eurovision. Someone made a comment this week, which I appreciated about that and I'm sorry for not remembering who it was. But the point was there was an outrage in Spain that Israel had a team at the President's residence. President Herzog dealing with this, creating alliances such that Israel would be able to continue to participate. They portrayed it as almost like an anti Semitic trope of conniving Jews using the global Jewish power to make sure that they stay at the Eurovision. It's like Jews can't defend themselves. I don't get it. Like, Israel wants to be in the Eurovision. It is not expected of the President of Israel, who is a sort of, you know, figurehead, to spend time on this spiritual capital. Of course it is. And I found that to be very revealing, right. Like the fact that from Spain and Ireland, like, how did the Israeli President pull the strings in Geneva?
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B
It's the double standard that we've seen repeatedly over the last couple of years. Speaking of President Herzog, by the way, the other thing that was kind of going on in the background is of course this push to rename a park. Is it in Dublin?
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A
In Ireland? Yeah, in Dublin, I think, yeah, Dublin, Okay.
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B
I believe it's named after his family name and you know, and it's not happening yet, but maybe it will. And there's been this kind of stuff again. It's like you can brush it off, but I certainly don't.
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A
The bottom line, as Evgeny D said on the show about ex Soviet Jews, right? Why are they so prominent? They just had to excel 10 times better than anybody else because there was such strong systematic anti Semitism put that if a Jew made it, it meant that he had to be like 10, 20 times better. This is the world where Israel's going into, like, we're going to have no choice. If we're in the Eurovision, we're going to have to outperform and do really well. If we're in basketball, we're going to have to do unit work twice as hard. That's been our path throughout the years and then it's not going to be different over the next couple of decades.
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B
Well, I'm not going to bring up the World cup process because that's a whole other can of worms. So let's move on. We'll save that for another episode.
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All right, moving on to our long play today, we're exploring the recent passing of the Israeli 2026 budget by the Cabinet. So just first step, and I want to start out by Jonathan, just asking you first question. Give us kind of the, you know, why is this budget different from all other budgets? What's different here, if anything at all?
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A
So, first of all, it's a 660 billion shekel budget. It is the biggest ever in Israeli history. There's not been much rejection to this budget, which is not a good sign. It means that there aren't, you know, fundamental reforms going on. So I think it is consequential to the degree that the government is making its fourth year in office count. If a government of Israel by March 30th doesn't have a budget approved, then it immediately dissolves and within 90 days there is election. So that would be June, which is 90 days ahead of the November timeline. We don't know yet if this budget is going to go through. I think it's left to be seen. Today we're going to focus on the defense budget, which is now at 150 billion out of the 660 as per the demand of the Ministry of Defense. This is a very risky proposition for the macroeconomic health and stability of Israel. We've been there before where the defense budget was such a huge part, you know, 20 plus percent of the budget in total. And if we will indeed end up there, it begs the question, are we not overcorrecting? Are we not preparing for no more October 7th, where actually the war is going in a different direction and we are going to pay by civilian infrastructure that's not going to be built? And one interesting piece that came out today. Israeli tax collection this year in 2025 has been tremendous. So the budget deficit, which was supposed to be 4.9, adjusted from 5.3, is now most likely going to be 4.4, because we just continue to deliver and continue to work. And the tax structure is so strong and progressive that I think it eases some of the dynamic within the Ministry of Finance. But it's all the same people, Michal. It's all the same part of society that does the reserve service, that creates the economy. And so there is a limit to sort of how resilient that population is in terms of its tax contribution.
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B
Yeah, absolutely. Well, let's get a little bit of historical context here. You mentioned that this is not the first time that the defense budget is such a. A burden. And so give us a little bit of the numbers of just putting this into historical context and previous eras that we've seen.
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A
So look, in the early years, we're looking at like a 1950 budget of GDP of $1.5 billion. Like how far Israel went.
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B
So quaint, right?
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A
How far Israel went from 1950 where the entire GDP was one and a half billion. Today the GDP is roughly 600,580, as share of budget in those years. In that decade it was a quarter. And that worked relatively well for that decade, but it exhausted itself. Israel at the onset of the Six Day War was a defunct economy, a lot of it because of this burdening through conscription, through massive spend that almost brought the economy to collapse. If it hadn't been for the Six Day War and its incredible success, who knows, right? And then, you know, that was sort of like a heyday, and it worked sort of well. Created the innovation. It created the kind of melting pot of Israelis. And so it carried, you know, if you will, it was a quarter of the budget, but it carried some educational purposes and so on. I think it gets tricky in the second period, which is post 73, right? The failure, the catastrophe of the Yom Kippur War gets us to a point that we're at 40% of the budget for almost a decade. We're overcorrecting, we're afraid of another Yom Kippur war. So the defense budget becomes so big that it basically cripples alongside other areas of corruption and socialist management that MAPAI put in place, that the economy literally collapses in 1985. Collapses. 400% inflation, debt to GDP at 125, 70, almost 5% of the economy owned by the state. 1985, that's 40 years ago. And that's where the real shift happens first. The shift in terms of how we plan for the budget. Right. It has been taken away from ministers. Israel actually has a pretty interesting way of doing macroeconomic planning. There is a group of professionals in the Ministry of Finance and they're the ones doing that. You mentioned earlier, sometimes the members of Knesset have a day or two to review like a thick budget book issued by the Ministry of Finance. This is a result of the reform of 1985. Massive privatization, super super strong fiscal controls. So it is true for the last 40 years that's been the case. But the share of GDP of the defense budget has reduced dramatically. We are at the tail end of a golden era where we are at lower than sometimes single digit and sometime high single digit and a bit around the 10 over the last 40 years, but very bearable considering the outcomes that we get out of the defense budgets. In terms of innovation, in terms of the fact that there is no ip. We spoke about cyber. Some of the solutions that end up in Wall street are solutions that were developed in the army for defense purposes, the electro optics. So we are at the tail end of a golden era. That's, if you will, sort of the breadth and the challenges that Israel has with its defense budget. I'm concerned that we are back to 1973 dynamics.
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B
You're talking about this concern, the risk of an overcorrection now, which happened post Yom Kippur war. So if you look back historically and obviously this is not apples to apples in so many ways, but if you look back and you had to sort of learn from history, from that overcorrection, what happened next? What do you think we're in for if this does pass?
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A
So just to give you a sense of the numbers, right, so the Ministry of Finance wants this to be a 90 billion shekel budget. 70% of this budget is salaries and pensions. It's a very challenging way of running a defense budget. Right. The Ministry of Defense is saying, and you know, it's so hard to fight with them these days. They're at 150. Right. And this is without US aid and military aid and so on. This is the core budget. And so just the 50 billion difference would be the third largest budget.
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B
That's crazy.
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A
Almost three times the budget of the police. You can triple the police size just with the difference. And if you look at let's say 10% of the difference because this is kind of like their heggling, right? And they'll meet some way, I don't know, 80, 20, just 10%, 5 billion shekels, like one and a half billion dollars. That gives you like almost doubling of the nursing power in Israeli hospitals. It allows for you to increase the salary of teachers so significantly. These are big numbers. And so we will see an increase in the defense budget, that's for sure. But at some point, given that the upper middle class in Israel is paying almost 70% of the taxes right now in Israel, keeping that tax intact while keeping civil services beyond reasonable level and getting defense, the three don't add up. You want to get a high defense budget and you want to get high civilian infrastructure. You know, dynamics. You got to increase taxes somehow, right? Or come up with sources of income or, you know, use cushions, which, you know, I don't think we should.
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B
Yeah, well, I think this is the reason why, as I said earlier, one Israeli journalist referred to it as the sweeping the dust under the rug budget. But on the kind of the bringing in revenue side, are there any reforms here, even small? I mean, I did read some. There's dairy, right? This is near and dear to your heart. There's something there on dairy at least.
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A
Look, dairy, it's a controversial issue. It's a broader issue in terms of reforms that had to happen around the Israeli agriculture sector that is not competitive anymore. And I think there are three topics to end with here. One, you can't reconcile these types of budgets when the ultra orthodox challenge remains intact, right? Because suddenly you get also into fairness questions, right? Because you're saying, look, I'm willing to pay 2% more taxes. Like I'm going to get like 62, 63% net taxes, right? This is what happens if you're, you know, upper, upper middle class in Israel. But I'm not willing to do that if the ultra orthodox don't do their fair share. So I think that's a huge problem. 2026 is going to be a year where this becomes an issue. The second piece is, and this in 2028, we're going to end the military aid package, the 3.8 billion per year from the U.S. this is going to become again, controversial. There are already different formats of managing. That's no longer going to be aid. This has to do with America first. It has to do with sort of the American left saying, why do we support Israel with 4 billion a year? And the American right saying, why do we even support anybody with 4 billion? Right? And at 600 billion GDP? I think they're right. There shouldn't be military aid to Israel. It should be a co investment. There are so many good relationships being built in different states in America. There's employment involved, there are values that relate to where Israel is in the Middle East. So there is so much merit to 4, 6, 8 billion dollars of exchange per year that restricting it to aid I think is the bad choice. And there's a lot of good work there.
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B
And by the way, I agree with you there. The only caveat I would say, yes, but is that I would hope that at that point, once that goes away, that aid goes away, the camp that we're seeing the most kind of fervent rhetoric from against Israel and against the relationship, that that sort of like appeases and dies down. But I do not at all expect that it will be. The attention will just be turned elsewhere on whatever that relationship evolves into.
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A
I totally agree. The point I'm making is that there is merit to the claim that a $600 billion economy like. Agreed, you know, Egypt is a $400 billion economy of 140 million people. And it also gets very, very strong, you know, military aid from the us but you would argue, well look, they can't afford food, their GDP per capita is a tenth of Israel. Like why does a rich country. That's a fair argument. Let's put it this way, from a fiscal perspective, it's doable. It's doable. But that is indeed $4 billion. That's 20 plus billion shekels. So if you take that away, it is a challenge. Israel on the other hand has $230 billion in net cash position in the Central bank of Israel. It has a 71% debt to GDP. So it's doable. And if both governments invest and there's sort of like an equity package, there's such that innovation that comes out of it benefits both countries and so on, I think that's a better way of running it. Irrespective of the political pressures from right or left, which I agree with you are not going to go away. But on merit I think is the right thing to do. So ultra orthodox going to be an issue. Military aid in the US is going to be an issue. And I think the third one is the overall budget dynamics. Are we going to become again like in 73 to 85 a country that prefers defense spending to anything else? I think that the level of expectation of the Israeli creative class today is very different than what we had in 1973. So if you further reduce Israeli single payer system in healthcare, roads, this and that. Right. You may Risk a privatization of some of the elements, because the creative class in Israel is going to basically say, look, if the quality of public services has been reduced so significantly in order to provide for a big defense budget, fine, I'm going to build a private school, I'm going to build a private clinic. And so the overall budgetary dynamics here may lead to a significant change in the fabric of Israeli society. That's how important the budget is right now. And the reason why we chose today to zoom in on the defense budget possibly creeping into its old levels of being 20 plus percent of the budget. That's unhealthy in any economy. It's unhealthy in the Israeli economy, given the ultra orthodox challenge, given the military aid from the US given the sort of overall compromises to be made because there's not a lot of taxation left on the Israeli middle class, upper middle class, to kind of enable that.
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B
And Jonathan, one more question for you real quick. Cost of living is such a huge topic here in the United States. Obviously it's been a really big topic for a long time in Israel. I remember the cottage cheese protest speaking of dairy, by the way. But you know, on the one hand, you're not seeing big taxation increases with this budget. That's kind of, again, kicking the can down the road because there is money that's going to have to come from somewhere. But is there anything here that addresses existing cost of living for Israelis? You know, kind of across the socioeconomic spectrum?
- [30:14]
A
The genie is out of the bottle in a way, but it's so politically difficult to do that. It's very clear what needs to happen. There's a bitter pill. We all know what it is. The prescription is there. The market is very concentrated when it comes to cars and mobility. You have X amount of families that control the import of cars, spare parts. Therefore, 12% of the income of the country from taxes is related to private cars, gasoline taxes. There's almost 100% purchase tax on cars in Israel. They cost double than they cost in the U.S. off the bat, even as they land at the port. Right. So it's very clear how you do that. But you're going to have to fight with dominant families in the economy. I don't see political will or capacity to do that in the next couple of years. I will say, on the other hand, and this is a very positive message, I think that a society that is now in its thousandth day of adversity, the first year of this government was the attempt to change the foundation of the judicial system, 10% of society were on the street day in, day out. Usually countries have regimes or governments collapse. None of that happened. Then the October 7th invasion, the terror, the rape, the war in Gaza, people came in, it's again the same people wear the uniform, go in, come out on a Friday, protest against Netanyahu or for the hostage release and go back to fighting up north or in Syria, wherever. Two years of war, the cost of the war. And still we're talking about an economy. And this is super strong Shekel and so on and so forth. The society is very strong, very robust, very cohesive, massively democratic. Massively democratic. I mean, I do town halls and salons every week. There's so much ideological rejuvenation going on. And the cost of living from a kind of like CPI perspective. So gasoline, groceries, super high. But the fundamentals that Israelis tend to take for granted, which is medical insurance, which is, you know, kind of cost of doing business, telecom, access to bandwidth, actually very cheap. And with the Shekel being so strong, and that's sort of the tail end of that, the government will have to defend against people leaving the country. Because if it's too expensive here and your Shekel is strong and they sell, you know, a Tuscany master house, right, for cost of an apartment in Netanya because they have no kids in Italy this year, 2025 is going to be the lowest birth rate from 1860. Right. And the Shekel is so strong and groceries there are very cheap. To me, the biggest threat is we don't get our act together budget wise. And if there's going to be deterioration in public services and Shekel is going to be strong because the overall dynamic of the economy is like super positive, the incentive to emigrate is going to be increased and Israeli society cannot sustain that and the economy cannot sustain that.
- [33:17]
B
All right, we began our show with the numbers of the week and we are going to end with the words of the week. And you can probably guess who said these words. I don't need to tell you, I estimate that around this table, in this room, I've passed at least 23 budgets. I don't know the exact count as prime minister or as finance minister, but I can hardly remember passing a budget in such harmony. Of course, that was Bibi speaking after the budget passed again, just within the cabinet. I want to hear from you, Yonatan, what do you make of this harmony?
- [33:52]
A
Look, I'll say two quick things. First of all, the harmony is an indication that the budget will not pass in the end, right? Like Everybody's saying yes because they want to move on. There's the ultra orthodox vote to reckon with. But there is something to be said about Prime Minister Netanyahu in terms of his real dominance in the Israeli political scene. Right. Passing 23 budgets is no joke. Most of them applauded globally, most of them delivering the last 15 years of growth. Looking at the numbers, it's really crazy. Balancing the defense budgets and that and the end of the day macro, balancing the war and the way it was conducted in Iran and in Syria and other places and in freaking Yemen. Right. And making sure that he has the backing of both the Biden administration and then the Trump administration. So he had a steady hand at the wheel. And you see it in the polls. The polls are favorable to Netanyahu and there is merit to that. There's definitely more merit to that than there was for Golda Meyer to get reelected in 1974 after the Yom Kippur War. It's 51 mandates, which is almost half of the parliament. Right. So I think that those who think there's going to be significant political change in Israel are going to find it actually difficult. And I would venture to say that the harmony is fata Morgana, as we say in Hebrew. I think he and the government will discover that when they try to pass further. There will be a lot of challenges.
- [35:15]
B
Well, we will end it there. That is it for today's show. Thank you for tuning in to Ark Media's what's yous Number? We hope you found it interesting. And if you did, please be sure to, like, subscribe. Subscribe. Rate, review. You know the drill. Most importantly, please share it with others who you think will find it interesting. And if you want to make suggestions or share your feedback with us, please reach out to us @whatsyour numberc media.org.
- [35:48]
A
What's your Number Is produced by Adam James, Lavina Reddy. Sound and video editing is by Martin Huergo. Our theme music is by Midnight Generation. I'm no longer in Mallorca, so I cannot comment on the popularity of our theme song here in Israel. Yonatan and Dearie. See you next week, Michal.
- [36:03]
B
I'm Michal Avram. See you next week, Yonatan and everybody listening.
- [36:11]
This podcast offers general business and economic information and is not a comprehensive summary for investment decisions. It does not recommend or solicit any investment strategy or security.