Financial Stability News

News about financial stability, central banking and theory of money

Denmark is on Verge of Icelandic Style Crash

Luxor Capital – a NY based hedge fund – see an Icelandic crash coming in the housing market in Denmark, and advice its investors to go long on Danish CDS. With the crisis in Europe widening and now Germany even more affected, Luxor notes that ” shorting Danske Bank at this point is an absolute no brainer.” It notes that

… even if one assumes a fairy tale ending in Europe (which is almost impossible) Danske should still be toast given any reversion to the mean in the Danish/Copenhagen housing market, which is a near certainty in my mind. If Europe gets out of hand and the cost of wholesale funding goes up (or away altogether) then Danske is a zero even quicker. The letter notes that Denmark’s banking assets-to-GDP is 454%!!!

Scary thinking indeed, even though they may make a fortune!

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