Iceland, apparently, was one giant hedge fund. Young fishermen became currency traders overnight. At first, they would just pitch the Nordic version of the now-infamous carry trade to their clients: borrow in yen, buy krona assets. Then they figured, "what the hell, this is easy money" and started trading their own and their bank's money. And now, after the wreckage, each of the 300,000 citizens of Iceland is, on average, about $330,000 in debt.
One of the most devastating excerpts of the piece? This exchange between the author and a once-fisherman-turned-trader-turned-fisherman-again:
“You spent seven years learning every little nuance of the fishing trade before you were granted the gift of learning from this great captain?” I ask.
“Yes.”
“And even then you had to sit at the feet of this great master for many months before you felt as if you knew what you were doing?”
“Yes.”
“Then why did you think you could become a banker and speculate in financial markets, without a day of training?”
“That’s a very good question,” he says. He thinks for a minute. “For the first time this evening I lack a word.”
It's funny, this is not the first time the fishing metaphor has been applied to the financial markets. For Iceland, though, this is no metaphor, it's a cold hard fact.
If you need solid reasons to buy this market for the long run, read Toro's blog in general and this recent piece on 10-year returns in particular.
If you need extra insight into the GE mess, read this and this by Bronte's John Hempton or this in the Accrued Interest blog.
You know we're in deep shit when two successive headlines from Dow Jones Streaming News feature two prominent and potent public figures proposing two opposite solutions to the financial crisis:
17:45: Fed's Lockhart: Securitization Markets Must Be Revived.
17:47: US Rep Frank: Securitization Should Be Curbed.
The scary thing is that each statement builds on two opposite views of reality. The first presumably implies Mr. Lockhart believes the securitization markets are dead and that it's a bad thing whereas Mr. Frank apparently believes they are all too alive but shouldn't be. I would tend to think the latter view is not only a bit late to the game but potentially very dangerous.
And finally, check out Jon Stewart's well-deserved definitive destruction of CNBC:
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