Iraqi Bonds Draw Interest from Wall Street Investors

The Wall Street Journal reports (Friday, March 17, 2006) that emerging market mutual funds are snapping up risky bonds issued by the Iraqi government earlier this year. The bonds were originally issued to banks - such as Citigroup and JP Morgan Chase - to refinance commercial debt accumulated under Saddam. The Banks began selling the bonds (about $2.8 billion in total) to investors in January.

The implications for Iraqi Dinar are not discussed in the article, but it is clear that some serious Wall Street investors believe Iraq may indeed have a bright future.

If things go right, Iraq could be a very wealthy country, say both Mr. Peta of Standish Mellon and Mike Cornelius, portfolio manager of Emerging Market Bond Fund at T.Rowe Price. They believe that if Iraq stabilizes, the country will have more than enough in oil revenue to meet its debt obligations from its 115 million barrels of proven reserves,the third largest in the world behind Saudi Arabia and Iran.

Iraqi Dinar and the Odds

Thinking about investing in dinar iraqi? Here's some food for thought:

Why not take the chance? The only thing you have to think of, is how much can you afford to "gamble". Myself, I have been to Las Vegas, and lost over $1,000 in two days. No big deal, I knew I could afford to lose it, oh well, it was fun trying.
This dinar is the same thing, in the fact that what if. I would hate to be sitting in my living room, watching the news five years down the road, and see that Iraq has been stable for a couple of years, producing unbelievable amounts of oil, and the dinar is worth 2 dollars for one dinar. Now that million dinar i COULD have bought could have made me a millionair.
The thing is, even if it stays the same as it is now, I am not losing any money, and have just made a possible long term investment. Hey, I will be laughing all the way to the porsche dealership!
Comment by Russell at June 27, 2004 06:39 AM

The above comment by Russell on the Truck & Barter forum probably reflects the feelings of 90% of Dinar Iraqi investors. But a recent article in the Wall Street Journal - draws an interesting analogy between investing and basketball and shows just how easy it is for rational decision-making to be trumped by investor emotion and optimism.

Suppose a team is down by two points and it has time for one last shot. What play should the coach call? Let's say there's a 50% chance of scoring on a two-point shot and pushing the game into overtime, but only a 33% chance of making a three-point shot and getting the immediate win.

Most fans (and coaches) choose the 2-point play as the "right" thing to do. But this is not the rational choice. Why? Even if the two-point shot is made, the team still has to win in overtime where the chances again are only 50/50. The overall odds of coming out on top in two consecutive 50/50 gambles is only 25%. The rational choice is the three-pointer, where the odds are 33%.

How does this fit into the world of Iraqi Dinar investing?

Not entirely sure. I've not found anyone who's actually placed statistical "odds" on the chances of Iraqi Dinar skyrocketing, but it would be an interesting exercise. In the meantime, consider the following scenarios as you ponder whether to invest in Iraqi Dinar.

Which of the following choices has the better odds of "hitting it big" with a $1,000 investment:

1. $1,000 invested in Iraqi dinar or buying $1,000 worth of state lottery tickets?

2. $1,000 invested in Iraqi dinar or a $1,000 bet on the long shot in the in the NCAA tourney?

3. $1,000 invested in Iraqi dinar or $1,000 invested in a randomly selected "penny stock"?

4. $1,000 invested in Iraqi dinar or $1,000 invested in a "penny stock" you've taken time to research?

5. $1,000 invested in Iraqi dinar or $1,000 wagered in Vegas?

I don't have the (statistically) correct answers to these questions, but am pretty sure these are the type of questions that should be mulled over before committing an investment. Of course, you can always take the safest route and earn 15% or so by paying down any outstanding credit card debt.

Iraqi Dinar Dealer Markups – There are Options

If you buy Iraqi Dinar from an internet dealer you will pay a very stiff markup. For example, pricing on a recent day showed one established dealer selling one million dinar for $1,095.00. The Central Bank of Iraq auction price for that same day showed the value of 1 million Iraqi dinar to be $677.50.

The dealer markup in this case was about 62%. The lowest markup I could find was at Safedinar.com which was selling one million dinar for $775.00 - a 14% markup. Dealers argue the markup is necessary to cover their transportation costs, overhead, risks, and provide a reasonable margin of profit.

As with any commodity, the smart consumer will shop for the best price. Our daily Iraqi Dinar pricing guide is a good place to start.

If you want to completely avoid the costs and risks of dealing with internet Iraqi Dinar dealers, another option is to electronically deposit funds (US$) in a bank doing business in Iraq and then convert the US dollars into Iraqi dinar. This method is more complicated and you don't take physical possession of the Iraqi dinar.

Still many Iraqi Dinar investors feel this is the most efficient route to take. Here is a forum link where this procedure is discussed in great detail.