Iceland really is in a scary spot. True, the small nation has sort of been asking for it by pushing their carry trade these last many months, and inviting the scrutiny of any number of large macro players, any one of whom could, at least in the short term, whipsaw the currency around, and any three of which could cause rather serious medium-term shocks, but we are sort of collectively charmed by the urge Iceland has to swim with the big fish- even when sharks are in the water.
It's one thing for your market to be down 77% on the day. (A rather serious thing-- interesting comment on the usefulness, or lack thereof, of trading halts). It's another all together when the supermarkets are bare. And this time, it seems they really are. Rumors to this effect before seemed overblown, but our friend in Reykjavik told us by telephone last night that shortages are quite frightfully real, and that the run on the currency makes the obviously import-dependent nation a scary place to be.
Norway, in response to the bank failures in Iceland, had an interesting "mark-to-market" approach for assets in which no ready market exists. To wit:
The OMX Nordic Exchange said in a release late yesterday that it set the prices of the three nationalized banks to zero in the index after ``not being able to receive valuations from market participants.''
Take that, Rule 157. Between this and their bank re-capitalization plans, Scandinavia seems to know how to deal with a crisis without pussy-footing around, and without creating fictional marks to support flagging institutions. (It may help that in this case it is Norway setting marks on Icelandic banks, rather than Norway setting marks on Norwegian firms).
In any case, do keep Iceland in your thoughts? You do like rooting for the underdog. Right?
Icelandic Stocks Drop 77% as Trading Resumes After 3-Day Halt [Bloomberg]
Unfounded Rumor Of The Morning: Bankrupt Bjork-ville Edition
Well, Can I Get A Slushee At Least?
Like, The Shortest Peg Ev-arh?
Who Couldn't Go For A Quick Jaunt Up North?