Playing the Spread

How low can it go? That depends on how many they print up. As the United States seeks to keep the credit taps open and the economy going, the Federal Reserve has been working overtime cutting interest rates, bailing out failed investment banks and so on. That means more dollars floating around; hence the plunging exchange rates of the dollar against almost all world currencies.

That includes the shekel, which over the past year has lost a huge chunk of its exchange value versus the dollar. A year ago the exchange rate was about NIS 4.20 per dollar; today it is hovering around NIS 3.50 (actually, as I write this, it is NIS 3.39 per dollar).

International finance is a complicated subject – a lot more complicated than computers! Far be it for me to speculate on the reasons for the dollar’s doldrums, much less to predict on where it is headed. What concerns me is the very real issue of what my money – shekel or dollar – can buy.

As everyone who does business in Israel with dollars knows, a stronger shekel versus the dollar means a disadvantageous shekel exchange rate – i.e. fewer shekels for your dollars. If you sold your house for the shekel equivalent of $200,000 a year ago this week, you received NIS 840,000 for your property; today you’d only get NIS 700,000.

The converse is true, too – or should be; prices for products imported from the US (or from China, since they are usually denominated in dollar terms) should be sinking in shekel terms. An item that cost $1,000 a year ago – NIS 4,200 – should now cost only NIS 3,500.

I haven’t noticed a rash of price cutting for products imported from the US, or usually sold in dollars. At 4.2 versus 3.5, the dollar has lost about 20 percent of its value against the shekel; hence, we should see prices on a wide array of products being cut by 20%

But we have not. In many cases, prices on dollar-denominated goods quoted in shekel prices have actually risen. That means, in some cases, prices on these goods are as much as 25% higher in shekel terms than they were a year ago. The folks selling these goods – as diverse as computers, brand-name clothing and footwear, and industrial products – really have a nerve, if you ask me.

When things are moving in the other direction – that of a strong dollar – they don’t hesitate to raise the price of their goods in shekel terms, with the excuse that they have to pay the same dollar amount regardless of the shekel’s value. The same thing should apply when things swing the other way, and the shekel cost of the dollar-denominated goods goes down!

In fact, the gap between what the price is in shekels and what it should be in dollar terms has blown wide open – which gave me an idea. What if you were to take a quick hop over to New York – say for just a couple of days – and go shopping? For one night, I guess you could get away with sleeping on the subway. But even if you wanted to stay for a week or so, you could find a reasonably priced motel (like for $50 or $60 a night) for the price of a train ride to the suburbs, and really have a nice time. And if you have relatives or friends to stay by, this would be a good excuse to visit.

Could you save enough money on the dollar/shekel price “spread” – the extra discount you get by buying things at the real dollar price, as opposed to the now-artificially hiked up shekel price – to make such a trip worthwhile? Such was the question I posed to myself, and here are my findings.

• A cursory examination prices for the same or very similar products here in Israel and at Amazon.com revealed some major price differences. At an Israeli auction site, for example (http://tinyurl.com/2pokzm), a Toshiba Satellite Core 2 Duo 1.5GHz 120GB laptop with 2 GB of RAM was going for NIS 4,568 (plus NIS 69 shipping and handling). At NIS 3.50/dollar, that comes out to $1,325. That doesn’t sound too bad, unless you consider that a better model (with a 200 GB HD) is available at Amazon.com (http://tinyurl.com/34rwwd) for $730. So, if you were buying a Toshiba Satellite laptop, you’d be $595 ahead if you bought it in the US.

• What about an HP laptop? This one (http://tinyurl.com/32yttf) at another site is being offered for NIS 5,999 – $1,714 at current rates. It’s got a Pentium duo-core processor, 2 GB RAM and a 250 GB hard drive. I couldn’t find the exact model and specs at Amazon, but this one (http://tinyurl.com/34jq5m), if you don’t mind an AMD duo-core processor, is pretty close – and it’s only $1,000. If, however, you must have an Intel processor, try this one (http://tinyurl.com/2v9ek3) – for $1,100. It’s got a 240 GB hard drive, Duo Core Intel Processor and a fingerprint reader to boot. Savings on this item – at least $614.

• Let’s move on to the Macbooks (you know you want one). The Israeli agent for Apple products, iDigital (http://tinyurl.com/386vzd), sells the basic 2.1 mhz white Macbook (1 GB RAM, 120 GB hard drive) for NIS 6,199 – or $1,771. Compare that to the price you can get it for at Amazon – $1,094 (http://tinyurl.com/3dvk93). They’re even offering a $75 rebate on this item, which would bring down the cost to $1,019. But we won’t count that. Savings on the Macbook – $677.

And if you’re in the market for the newest edition of Apple’s laptop, the Macbook Air, you’ll save even more – NIS 10,000, or $2,857 for the iDigital version (http://tinyurl.com/2vahb8), compared to $1,794 for the same one at Amazon (http://tinyurl.com/2wl9lq) – a full $1,063 less.

• What about an iPhone? Well, they don’t officially sell it in Israel yet. However, a friend of mine (who couldn’t get a visa to the US and decided he couldn’t wait) told me he spent NIS 3,500 on one – a cool $1,000 – for the same phone the Apple store sells in the US for $399. To be fair, however, if you do buy an iPhone in the US, you have to unlock it to use it with local cellphone networks – a process I’ve seen widely advertised for NIS 249, or $71. Still, for the $529 you save on the iPhone, you could get two of them for the price of one here.

If you were to use my modest shopping list as a purchase guide, then, you could buy two laptops – the HP and a plain white Macbook – and an iPhone (with the Israeli conversion fee factored in) for $2,663 in the US, compared to $4,485 in Israel. That means to make a trip to buy these three items worthwhile, you’d have to spend less than $1,822 in airfare and expenses. Can it be done?

I checked the Web sites of several airlines for prices on flights between today and tomorrow, returning in a week (you could return in as little as three days on all of them, actually). On Turkish Airlines, with a stop in Istanbul, a round-trip ticket this week is $1,032.26, and on Lufthansa it’s $1,033. Cheapest ticket: Olympic Airways, which will get you to New York and back for $987. I checked El Al, of course, but for some reason their Web site doesn’t let you price round-trip flights leaving from Israel.

If you take the Olympic flight, you’ve got $835 to spend for the vacation part of your trip. But of course, we haven’t factored in staying by relatives, buying other expensive stuff (maybe your friends will want to give you a list), frequent-flier miles toward your ticket, etc. Whatever is on your list, remember: the spread can be your friend!