This post is part of our feature on Money Losers of 2008. See all 20.
Almost every investor might be counted as a Money Loser of 2008, but anyone who is not living in or invested heavily in Iceland should thank their lucky stars (or anything else they might like to thank). With the global economic situation called as a financial crisis, then I can only assume that the Icelandic meltdown would be a supercrisis or maybe ubercrisis.
Iceland's three largest banks essentially failed in early October of this year, partially as a result of the crisis in U.S. financial markets. As interbank loans were getting tougher and tougher to acquire, Iceland ran into trouble because its banks were too large for the country's central bank to backstop.
From January of 2008 through September, the krona, Iceland's currency, had lost about 35% against the euro. Over the past few years, the U.S. dollar has lost about half of that amount, and it was still a big deal. However, this was just the precursor to Iceland's problems. At that point, it was roughly 130 krona to each euro. By the second week of October, the currency had collapsed and the last trade was at 340 before the government takeover of the banks halted trading. Currently, the system has been stabilized, but it is still 150 krona to each euro.
Investors in the Icelandic stock market have fared even worse. The overall market's value peaked just above 9,000 in mid July of 2007, which was the same time as the U.S. markets peaked the first time. From that point, Iceland was hit hard because its major stocks were financial in nature and the overall value plunged to 4,000 by October. When trading was halted after the bank takeover, the number was 3,000. When they reopened, it was down to 678 and has since dropped below 400. From the top, that is more than 86% drop, and when you factor in the value of the currency it gets even higher.
Iceland has received loans of $2.1 billion from the IMF and $2.5 billion from Sweden, Norway, Finland, and Denmark. These actions have helped to stabilize the country's banking system, but the final chapter has yet to be written. All I know is that thinking about these losses puts my own financial fortunes in a whole different perspective.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about .
Be sure to check out more Money Losers of 2008.
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
12-24-2008 @ 9:25PM
Max said...
Money just doesn't disappear, so what I'd like to know is "Who has won all those billions that have been lost?"
12-25-2008 @ 3:16PM
TX CHL Instructor said...
Money does indeed disappear -- and appear out of nothing. That's because the existence of money in the 'modern' economy is not tied to anything real.
--
www.chl-tx.com Without the 2nd amendment, the rest of the document is only wishful thinking.
12-26-2008 @ 2:23PM
Chris said...
I'd like to just have access to the interest earned on a billion$ for a year!! My families finances would be straightened out forever! There are alot of helpful agencies out there like Catholic Charities that offer free advice/ help when needed, beware of the scamming debt companies & people that just want to profit from others financial misfortunes!