First of all, I'm going to admit that this post might upset some folks...but if you're one of them, then it might be a worthwhile exercise to ask yourself why you're upset. The Iraqi Dinar...what? I think we've all heard about it by now. Just in case you've been in a cave for a while, the story is that some document was signed back in 2005-2006 or somewhere around there, that made it legal for Americans to buy and circulate Iraqi Dinar in an attempt to help Iraq. These are very dumbed down and possibly even wrong facts, but the story is something like that.
Then it goes on to say that the Iraqi Dinar was trading at 1 Iraqi Dinar to .30 US Dollars prior to this last war. Now it's trading somewhere in the 1 Dinar = .0008 range and is worth less than the paper its printed on. That means you can buy a cool Million of Dinar for $800 plus the dealers mark up..say an extra $150. For $850 we can invest in the Dinar. The pitch gets even deeper now because we all know that Iraq has oil...and oil will get the country going again..right? So lets say that oil trades back up to $150 a barrel (which it's working on right now) and this helps pull Iraq out of the crapper. Now we're talking. In fact, lets even be conservative and say that the Dinar might trade up to a third of its pre-war value...we like to be conservative.
Quick re-cap: we bought a million Dinars for $950 and we're forecasting it to trade to .10 (roughly 1/3 of its pre-war value). That means our 1,000,000 Dinar X .10 Dollars will become $100,000. Wow, that's a big profit. Turning $950 into $100,000...it almost sounds to good to be...
I'm not going to say that the Dinar play is not going to pan out, but I will comment on what I've noticed. I work in the financial industry and I talk to all kinds of people. Some sophisticated investors/traders, some business owners and some retailers. I thought that the Dinar play was interesting back when I first heard about it in 2007...now I'm not so sure. Maybe it will eventually pan out..like in another 5-10 years...but I doubt that the return will be in the 10,000% range. In the past 6 months, I've had no less that 15 people ask me about the "Dinar" play. They usually begin with, "I heard that you trade currency." To which I reply, "Yes, it is one of my favorite asset classes." Thinking to myself, "Alright, I've found a retail currency trader," which I love to speak with because you can learn so much from them. Currency "Forex" traders are all useful, as they either are examples of great traders, or they are examples of what not to do...generally the latter.
Regardless, after the guy or gal mentions or asks about me trading currency and I mentally gear up to hear about the euro, yen, aussie, kiwi, krona, frank, yuan, or thai bhat...they inevitably say in their most sophisticated low voice, "What do you think of the Dinar?" Uggghh. One guy told me that he's expecting to come into lots of money soon, even though he doesn't have much now, and he wants to have a plan in place. Then he went on to tell me that he was going to cash in with the Dinar.
I think I've pretty much made my point. If it's too good to be true, be very, very very careful. If all your friends at your local Cigar Lounge that you hang out at constantly think that they are all gonna get rich with the Dinar, be very, very very careful. If your counting your chickens before your Dinars hatch and you want to have things in place, be very, very, very careful. Once again, this article is not saying that the Dinar is a scam (although there have been some be reports of counterfeit dinar being sold) and it's not saying that the Dinar will not appreciate SOMEDAY...make note of this because Dinar people get pretty emotional when talking about their golden goose. I'm just stressing that history has shown that when lots and lots of people expect to make lots and lots of money off of something, it's generally the initial sellers and some very lucky people in the beginning that make any money at all. Google any of the following for great examples: Tulips, Ostriches, Emus, South Sea Company, CMGI, or Sub-Prime Mortgages. If you already hold Dinar, should you sell it? Not necessarily, just be realistic with your time frame and your expectations.
Who knows, I've certainly been wrong plenty of times before and this might not be an exception, however, there are some troubling signs in what I'm seeing with this "Dinar" play.
Hope everyone has had a great weekend!
TLT
