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Iceland: Argentina Redux? at Trader’s Narrative




Iceland: Argentina Redux?


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So Iceland is just one giant financial crater. To add insult to injury, someone even put the whole country on eBay. The listing was withdrawn because even eBay has standards.

Here’s a chart of the Icelandic Krona against the US dollar for the past few years:

iceland krona USD price chart

There is nothing but doom and gloom in this tiny half-frozen nation. Just recently their 90th anniversary as a country was marred by protesters breaking into the Icelandic Central Bank. Things ended peacefully because, well, this is Iceland, after all.

But I can’t shake the feeling that this is actually an opportunity for a vulture-minded and deep-pocketed investor. There are many different ways to play an Icelandic recovery. I would avoid a straight play for government bonds or going long the currency (especially since there is little if no trading taking place).

Real estate would be a good alternative. Land isn’t going anywhere and neither will a building disappear. People still need a place to live, after all. Another possibility would be equities - blue chip stocks.

Argentina went through something similar in 2002 - although alone and unaccompanied by the rest of the world. But their currency did recover. From its deep slump, it rallied around 30% actually. And just recently has started to weaken again:

argentine peso USD price chart

Of course, Argentina isn’t doing that hot right now. They were just getting back on their feet (or knees at least) when this new worldwide economic storm buffeted them again.

But I just can’t shake the feeling that Iceland will still be there a year from now, 10 years from now, and beyond. And someone will make a lot of money betting on that.

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2 Responses to “Iceland: Argentina Redux?”  

  1. 1 Bastiat

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    I tried looking for Iceland REITs on the OMX site but the site doesn’t have the best search function. Would you be looking at banks if not REITs?

  2. 2 Babak

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    Bastiat, Iceland has a tiny market so I wouldn’t be surprised if they didn’t have any REITs listed. I was thinking more along the lines of actually going there and buying land/real estate. A bit more complicated than clicking to buy shares but probably more lucrative down the line.

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