Whither Iceland

By Roger Nusbaum | October 09, 2008 | 12:21 PM | 3 Comments

I've been writing about Iceland as an investment destination for about two and half years.

It has a lot to offer and a lot of risk (you probably know this). I had exposure via an account at Kaupthing Bank that I closed out in the spring. Also Kaupthing Bank has been accessible  via Stockholm under symbol KAUP.ST, the pink sheet symbol has been KPBIF.

The Icelandic government had to nationize Kaupthing in a confusing episode involving the UK in which the dust has yet to settle. The reason I say confusing is that Kaupthing is almost six times the size of the GDP of Iceland. 

I interviewed the former CEO of Glitnir Bank a few years ago (he was about my age). My wife and I visited Iceland in the summer of 2006 and loved it.

The country realized the need to create a global footprint, did so effectively and efficiently and then like most other parts of the global financial system, it got away from them. On the ground amongst day to day people Icelanders seem to have a better sense of capitalism than do many Americans which leads to me to be confident about a healthy resurgence after this crisis plays itself out. That and the fact that they have essentially free energy.

Iceland is a learning opportunity. The nearest term learning opportunity is bank size in relation to GDP. This issue exists allover Europe, very notable in Switzerland. Here is a link to a graphic at FT Alphaville (a must read). UBS is four times the size of Switzerland, Credit Suisse 2.5 times. There are many European banks that appear to big to fail but may be too big to save.

I don't think it actually will domino like that but it makes the case for not making too big a bet on any one country and being very light in Euroland.

We Might Be on the way WASHINGTON - The government will buy an ownership stake in a broad array of American banks for the first time since the Great Depression, Treasury Secretary Henry Paulson said late Friday, announcing the historic step after stock markets jolted still lower around the world despite all efforts to slow the selling stampede. Submitted by John C Lee on Sat, 2008/10/11 - 1:43am » reply |

The Board of Kaupthing quit The Board of Kaupthing quit after the takeover. The state now owns 3 of the countries largest banks; could we be headed in the same direction? Submitted by Dan Tarte on Thu, 2008/10/09 - 12:47pm » reply |