Two distinguished American researchers, Prof. Robert J. Jackson, Jr. of New York University, and Prof. Joshua Mitts of Columbia University, on Sunday published an extensive report titled, “Trading on Terror?” That suggests someone profited from the planned Hamas attack on Israeli civilians on October 7, through what appears to be a bet on a fall in the value of Israeli companies on the New York Stock Exchange and the Tel Aviv Stock Exchange.
Their study indicates a very likely possibility that the information that led to these transactions shorting Israeli stocks had come from Hamas. Shorting a stock means investing in such a way that the investor would profit if the value of the stock falls. This involves borrowing shares and selling them at market value. Later, when the share’s price drops, the investor will purchase the same number of shares at a reduced price. The investor’s profit is the difference between the original and the later prices.
I borrow 100 shares of Something at $10 a share. I earn $1,000. The next day, Something’s share price falls to $1. I buy back 100 shares of Something for $100, having made a $900 profit.
“Recent scholarship shows that informed traders increasingly disguise trades in economically linked securities such as exchange-traded funds (ETFs),” Jackson and Mitts write in the abstract section of their research. “Linking that work to longstanding literature on financial markets’ reactions to military conflict, we document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack.”
The shorted shares included the heaviest Israeli shares in both the Tel Aviv and New York stock exchanges: Check Point, Nice Systems, Bank Leumi, Bank Hapoalim, Bank Discount, Bank Mizrachi Tefahot, Teva, ICL and Elbit.
“The short selling far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic,” write the two researchers. “Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv.”
“For one Israeli company alone, 4.43 million new shares sold short over the September 14 to October 5 period yielded profits of NIS 3.2 billion ($890 million) on that additional short selling,” they report.
“Although we see no aggregate increase in shorting of Israeli companies on US exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks,” they state. “We identify similar patterns in the Israeli ETFs at times when it was reported that Hamas was planning to execute a similar attack as in October.”
“Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in the gaps of US and international enforcement of legal prohibitions on informed trading.”
Jackson and Mitts recommend that policymakers “concerned about profitable trading on the basis of information about coming military conflict” take steps to investigate the most recent shorting.
We recommend that the stock exchange players who got their information from Hamas be tarred and feathered.
THE BIGGEST SHORT
Back in 1992, a renowned enemy of the Jewish State, billionaire George Soros, famously shorted the British pound, reportedly making a profit of $1 billion. He sold billions of pounds during the days preceding the British government devaluing the pound sterling in September of 1992, most of it borrowed. After the pound was brought down to its knees, Soros bought back pounds, paid his lenders, and celebrated his huge killing.
He became known as the man who broke the Bank of England.
I stop short (pun not intended) of taking this anecdote to its logical conclusion. However, you may be interested to learn that Israel’s UN ambassador Gilad Erdan told Fox News on Sunday that Soros pumped more than $15 million into a network of pro-Hamas NGOs.
“For years, Soros has backed and transferred money to organizations supporting BDS that want to isolate Israel,” Erdan said. As to Hamas, he said, “They have never been about real peace or any solution to the Israeli-Palestinian conflict.”
Rachel Ehrenfeld, author of The Soros Agenda, told Fox News that “Support of pro-Hamas, pro-Palestinian groups in the US is not limited to foreign entities. It also comes directly and indirectly from U.S.-based foundations. George and Alexander Soros’ Open Society Foundation (OSF) is one of them.”
December 4, 2023 Published by The Times of Israel.