Milestones for Iraq
The government of Iraq understands that dramatic steps are necessary to avert a downward spiral and make progress. Prime Minister Maliki has worked closely in consultation with the United States and has put forward the following milestones in the key areas of national reconciliation, security and governance:…

GOVERNANCE
By the end of 2006:
The Central Bank of Iraq will raise interest rates to 20 percent and appreciate the Iraqi dinar by 10 percent to combat accelerating inflation. Iraq will continue increasing domestic prices for refined petroleum products and sell imported fuel at market prices.

RECOMMENDATION 24: The contemplated completion dates of the end of 2006 or early 2007 for some milestones may not be realistic. These should be completed by the first quarter of 2007.

Now, if they can only develop a market where we can buy and sell dinar currency without huge dealer markups…

Might the same be true for Iraqi dinar?

The British company that prints Iraqi dinar under contract with the Iraqi government- De La Rue - has been doing quite well recently, according to recent newswire reports:

De La Rue Plc (DLAR LN), which prints paper money including the Iraqi dinar, gained 16.5, or 3 percent, to 569. The company said higher volumes of banknotes contributed to better-than-anticipated trading in the fiscal first-half.

Indeed, a quick search for De La Rue’s stock fortunes reveals an impressive monthly stock chart that any Iraqi dinar investor would love to emulate:

Of course, the company does more than print Iraqi dinar. According to the company’s website:

De La Rue is the world ’s largest commercial security printer and papermaker, involved in the production of over 150 national currencies and a wide range of security documents such as travellers cheques and vouchers. Employing over 6,000 people across 31 countries, the company is also a leading provider of cash handling equipment and software solutions to banks and retailers worldwide helping them to reduce the cost of handling cash. We are also pioneering new technologies including tailored solutions to protect the world ’s brands through to government identity solutions in secure passports, identity cards and driver’s licences.

It’s not known what share of De La Rue’s business comes from Iraqi dinar trade. But it’s probably safe to say that De La Rue doesn’t at all mind seeing American speculators hoarding Iraqi dinars in their closets. After all taking Iraqi dinar currency out of circulation simply means more demand for printing new bills.

We’ll keep an eye on this company’s stock in future months to see how it fortunes compare to a straight-up investment in Iraqi dinar.

Technorati Tags: Iraqi dinar, Iraqi dinar investor

Looking for investment opportunity? Try the Iraqi dinar
by Shlomi Shefer

Despite Trading with the Enemy Act prohibiting trade in enemy currency, finance minister approves trade in Iraqi dinar for another year. Buying Iraqi dinar at unprecedented lows could prove enormously profitable if and when war-torn nation returns to economic prosperity

Despite the Trading with the Enemy Act, which forbids trade in enemy currency, Finance Minister Abraham Hirchson renewed authorization to traffic in the Iraqi dinar for another year this week.

The CashFlow Club Israel, which unites entrepreneurs and investors in various financial sectors, said the extension constitutes an investment opportunity with potential for significant profits.

The guiding principle in the move can be traced back to World War II, when the German mark collapsed. The few people who purchased German currency at its low point and held onto it for a few years were rewarded with astronomical profits when the mark regained strength a few years later.

The same went for the Kuwaiti dinar, which slumped during the Iraqi invasion of the country and soared when the economy restabilized.

The forecast that Iraq will someday return to economic prosperity is based on the nation’s tremendous oil reserves.

Bibi okayed trade

After the outbreak of the war in Iraq, the Iraqi dinar plummeted to all time lows. For the sake of comparison, before the war one Iraqi dinar was equal to USD 3. Nowadays, one American dollar is equal to about 1,000 Iraqi dinars. In other words, the value of the dinar plunged over 99 percent. According to historical trends, the purchase of 100,000 dinars for USD 100 could bear significant yields if and when Iraq stabilizes.

The current situation in Iraq precludes electronic foreign currency trade in dinars, and therefore dinar bank notes must be directly purchased and kept. Since the days of the British Mandate, Israeli law prohibits trading with the enemy and bans, among other things, trade in the currency of enemy countries like Iran and Syria.

Until three years ago, Iraq was also on that list. However, since Saddam Hussein’s regime was deposed and the United States gained control in Iraq, then-Foreign Minister Benjamin Netanyahu decided to okay trade in the Iraqi dinar.

The go-ahead is only temporary and must be considered for re-approval every 21st of July. This week, despite the war in the north, Hirchson decided to extend the authorization for another year. As a result, the CashFlow Club Israel brought hundreds of millions of dinars, in cash, into Israel from Jordan.

After reading this report, it’s hard not to wonder whether Israelis - closer to Iraq and with more at stake than most - have a better feel for the investment potential of the Iraqi dinar than we Americans do. Time will tell.

Technorati Tags: Israel, Iraqi dinar, investment opportunity, Iraq, foreign currency trade, dinars

Nonetheless, there is exchange rate pricing data available which provides some guidance as to how well the dinar is doing. It also provides rough indication for assessing investment performance if the new Iraqi dinar was traded and exchanged actively.

The following chart was prepared using the average Interbank “ask” price as reported by Oanda.com. The “ask” price is the price at which sellers are willing to sell a currency. The “bid” price is the price at which buyers want to buy a currency. The ask price is always higher than the bid.

According to this data:

• the 6/30/06 price ($1540.70) is 5.52% higher than the price on 7/1/04 ($1460.00). This represents a 2.8% annual rate of gain if the dinar could have been freely exchanged in a market environment at these rates.
• As comparison, the S&P 500 stock index increased from 1128.94 to 1270.20 (12.5%) for the same period.
• the average “ask” price over this 730-day period was 1493.06925
• the highest “bid” price during this same period was1473.8000
• the lowest “bid” price during this same period was1384.7000

Of course, most people who buy Iraqi dinar realize it is long-term (5+ years) prospect. Still, a two-year review provides useful information for buyers (and prospective buyers) to consider.

Technorati Tags: Iraqi dinar, e-Bay, exchange rate, investment performance, Interbank

But finding truly independent and clear advice from acknowledged personal finance experts is more difficult. Few of the best-known personal finance gurus have expressed clear opinion on this topic, but the few who have are decidedly negative on the idea:

Sandra Block - USA Today
Article (Date):	USA Today Talk Today Chat Room
Representative Quote:	"PARKERSBURG, WV: WHAT IS ALL THE HYPE ABOUT BUYING THE IRAQI-DINAR? DO YOU FORSEE A SUBSTANSIAL INCREASE OF THIS CURRENCY IN THE FUTURE. DO YOU BELIEVE IT TO BE A GOOD INVESTMENT? THANKS, BOB Sandra Block: Somehow I missed that hype, but maybe it's because I go to bed early and miss the late-night infomercials. Right now, it takes 1,471 dinars to equal $1. Dinars are suitable for framing, though."
Bruce Williams - Radio Personality & Columnist
Article (Date):	Smart Money with Bruce Williams (August 27, 2006)
Representative Quote:	"Currency speculation can be a very rewarding enterprise-but it is fraught with peril. The Iraqi dinar is extraordinarily speculative and has nothing behind it. While it can be observed that Iraq has lots of oil, with the huge amount of turmoil that is currently embroiling that nation and so many amateurs, military personnel and some civilians working there and getting involved in this, it is one of the last currencies I would speculate in just now. "
Chris Farrell - NPR/American Public Media Marketplace, Economics Editor
Article (Date):	Markeplace Money Mailbag (November 6, 2004)
Representative Quote:	"Steer clear of this. Don't play this game. I mean, if you want to put $100.00 in and see what happens, you know, it's not the worst thing in the world. But this is a real flyer. Beyond a flyer. This has got nothing to do with rational speculation...A hundred dollars? You know, that's like uh, going to Atlantic city, so why not? But anything more than that, forget it. "
Walter Updegrave - MONEY Magazine
Article (Date):	Stupid currency tricks: Iraqi dinar (August 10, 2004)
Representative Quote:	"My take is unequivocal. Given the difficulty of predicting currency movements, I'm not even a big proponent of investing in established currencies like the euro or the yen....And when it comes to buying and selling the fledgling currency of a fledgling government in one of the most chaotic parts of the world, that goes beyond mere speculation. I'd call it gambling. " January 2006 Update:"In my mind, at least, nothing has changed since I first warned people about investing in the Iraqi dinar in a previous column -- except, perhaps, that individuals still seem willing to buy this currency despite any credible evidence that people who buy it as an investment have earned any sort of return. So my position today is the same as it was before: putting anything more than a few token bucks in dinars as an investment is a lousy idea. Indeed, I don't think you can call it investing at all, since investing implies having some knowledge of the actual value of what you're buying and some reasonable way of calculating an expected return."

If you are aware of other experts expressed opinions, please leave a comment and we’ll include them. For now though, the scoreboard looks like this:

Expert's Scoreboard
Popular finance experts' views on investing in Iraqi dinars
0	4

Technorati Tags: Iraqi dinar, selling dinar

A number of people have begun touting so-called “investment” opportunities in the Iraq Dinar as a “sure way” to make a lot of money with little or no risk. Many of our clients have asked our opinion on the legitimacy of this.

Is ”investing” in the Iraq Dinar a sure way to profit? We don’t think so. In our opinion, buying the Iraq Dinar is a high risk investment with a poor outlook.

If you’re considering buying Iraqi dinar, you should take a look at the information they’ve brought together on this page.

Technorati Tags: foreign exchange, Iraqi dinar, ”investing” in the Iraq Dinar, considering buying Iraqi dinar

MY DUMBEST INVESTMENT

Last year, I spent about $1,500 for approximately 1.7 million Iraqi dinars. At the moment, one U.S. dollar is worth approximately 1,450 Iraqi dinars, making my investment worth around $1,170. Even a modest increase in the value of the dinar would result in significant gains. Time will tell if this investment is Foolish or just plain foolish. B.E., Killeen, Texas

The Fool Responds: Speculating in currencies � even those of major, stable nations has burned many investors. Iraq is an especially unstable place right now. Inflation is just one of many risks facing the currency. Don�t look to the dinar’s past performance, which is largely irrelevant now. Focus instead on the country�s future prospects. Or better still, consider investing in the U.S. stock market. Many of our companies offer international exposure through their global operations.

What I find interesting is that neither the reader nor the MF reponse are unequivocally negative on the Iraqi dinar.

Technorati Tags: Motley Fool, Iraqi dinars, dinars, Iraq

Amir Taheri, writing in the June issue of Commentary magazine, offers a catalogue of progress in Iraq that is almost impossible to find in our principal news outlets. For example, he notes that there have been no queues of refugees streaming out of Iraq. To the contrary, 1.2 million have returned home since Saddam’s ouster. Muslim pilgrims are flocking to the holy sites in Karbala and Najaf. The Iraqi dinar, which had been in free fall during the final period of Saddam’s misrule, has risen by 17 percent against the Kuwaiti dinar and 23 percent against the Iranian rial. (bold added) Iraq’s GDP has rebounded since the invasion, and inflation has dropped from 70 percent to 25.4 percent.

Technorati Tags: Iraqi Dinar

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.

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 longshot 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.