Iceland Stocks: Capitalizing on Iceland’s Booming Financial Markets

by Dr. Steve Sjuggerud, Investment U Advisory Panelist
Friday, January 9, 2004: Issue #303

It was pitch black at 6:30 a.m. as my plane approached Iceland Wednesday morning. The first things I saw were what I thought were patches of snow on the ground only they’d disappear after a few seconds. Then I realized we were over the ocean, and those were large waves breaking everywhere…

As we got closer, I started to see lights. Was that the city? No those were fishing boats!

It´s January in Iceland and it’s freezing outside. The wind is probably blowing gale force, and the seas are a nightmare. And yet these industrious Icelanders are out there, fishing – in the middle of what appears to be an outright storm.

This kind of vitality and fortitude might help explain why the Icelandic stock market crushed even the Nasdaq last year But more importantly, what lesson can we as investors take from the fact that Iceland stocks have been booming in relative anonymity? Read on…

How Iceland Stocks Crushed the Nasdaq

I went out to dinner with a few local brokers on Wednesday night. They were nice folks, mostly in their 30s, and they were more than willing to discuss Iceland’s amazing economic situation.

As I said, Iceland’s stock market has performed almost miraculously in recent years. In 2003, Icelandic stocks nearly doubled in U.S. dollar terms. Most of that is due to the government’s continually decreasing role in economic (and other) affairs.

In the mid-1990s, Iceland started a process of free-market reforms. Those reforms were essentially completed in 2001, when the government let go of the currency (allowing it to trade on market forces) and gave the Central Bank autonomy. That got the government out of the financial markets, which was the most important straw of removing government from everyday life.

Since then, investments in Iceland’s financial markets have boomed. Both prices and volumes on investments have soared. Even though Icelandic investments can be difficult to buy (you have to go through Icelandic brokers), the fact that they have been so profitable recently teaches us a valuable lesson…

And that lesson is this: Sometimes, going the extra mile to find a profitable investment outside of plain old U.S. stocks–investments including but not limited to Icelandic stocks – is exactly what we should be doing to maximize our portfolio’s returns.

You don’t always have to go to exotic places like Iceland (or even leave the confines of the U.S.) to find the best-returning investments that don’t happen to be traded on the NYSE. Just take a look at gold coins, which I’ve been recommending to Investment U readers for months.

Why Iceland Reminds Me of Gold Coins

While Icelandic stocks might not be all the rage, despite their profitability, neither are gold coins – despite their profitability. Both of these “thinking outside of the box” investments take a little research to understand.

Yet Icelandic stocks and gold coins have both outperformed the NYSE over the past 12 months and done so convincingly.

The three different gold coins I’ve recommended to readers of my newsletter are up roughly 44% on average since I first recommended them six months ago.

Simply put, out-of-the ordinary investments, things like gold coins or Icelandic stocks, could continue to lead to extraordinary returns over the next few years.

Be willing to consider them. It takes more time and effort to understand investments that ordinary, but the returns extraordinary, and worth the effort.

Good investing,

Steve

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