Investing in the Iraqi dinar: Update
Do you still consider an investment in Iraqi dinar too risky? The Expert says: Are you kidding me?
By Walter Updegrave, MONEY Magazine senior editor

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NEW YORK ( - Could you do an update to an earlier article you wrote on investing in the Iraqi dinar? There are rumors some big announcements are coming this year that will boost the value of the dinar and I know several people who have invested. I'm always willing to take a gamble, but I don't want to throw my money away. Do you consider an investment in Iraqi dinar too risky?

-- Jeff Dobbins, Nashville, Tennessee

More information on Updegrave's new book.

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.

No market for dinars

At this point, there is no actual market or other mechanism by which individual U.S. investors can trade the dinar. You can buy it all right. Plenty of web sites will sell it to you online and eBay is swarming with people who will sell you anywhere from a 50-dinar note to several million dinars (usually in 25,000-dinar notes).

But I don't know of anyone who will buy dinars back from you after you've bought them. (I contacted a couple of online sellers who seemed surprised that I would even expect them to both buy and sell the currency.)

The fact that there's no real market for the dinar -- that is, buyers and sellers -- tells me that we're not talking about an investment here, or even a speculation. We're talking about gambling, at best. I mean, seriously, would you buy stock from a brokerage firm if it didn't stand ready to make a market in that stock? Of course not, because that's the sort of behavior you see with firms that tout worthless penny stocks.

Now, the advocates of "investing" in dinars -- who, not surprisingly, are often the same people who will sell them to you -- say that the big profit opportunity will come in the future when things settle down in Iraq and the currency begins trading on currency exchanges as the U.S. dollar and other currencies do.

An investment in rumors

Who knows, maybe now that elections have been held the country will move toward a more stable political system. I hope that's the case. And, if that happens, I would expect that the country's currency might begin trading on world exchanges. But no one knows how long that may take. And even if it does happen, it's not a given that the dinar's value will be higher then than it is today.

As to rumors about "big announcements," well, it doesn't surprise me at all that there would be all sorts of gossip circulating about this currency. After all, you've got conditions that are perfect for creating a rumor mill: people who sell the currency stand to gain if there's a promise of good news on the horizon, and the people who bought the currency are eager for even the slightest scent of information that suggests their investment might pan out. Throw in the general uncertainty surrounding the economic and political future of Iraq, and you'll hear all sorts of buzz. But buzz doesn't make a good foundation for evaluating an investment.

If you want to track the latest rumors about the dinar, feel free to go to sites like Investors Iraq Forum, and Google's Iraq currency section. For what it's worth, you can also get quotes on the dinar by going to Bloomberg's Currency Calculator.

But if you're thinking of anything beyond putting a few bucks you can afford to lose into dinars as a flier, I strongly caution you against it. Otherwise, I fear you may end up doing exactly what you say you don't want to do -- throwing your money away.


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