News

By Elevation Co.

While no one is an expert on the Iraqi RV in terms of correctly predicting a date and a rate, we try to surround ourselves with people who we feel exercise a great deal of grounded common sense and solid discrimination. From these very few people, we have drawn some conclusions that we feel comfortable with and that might bring some readers a little peace of mind when it comes to waiting for RV.

Mind you, this is only our opinion, but here are two of the most common RV questions and our thoughts on each:

RV Question #1: When will the Iraqi dinar revalue and what will be the rate?

Answer: Many “gurus” predict RV every week based on little more than bad intel. This is frustrating if you actually put stock in what these people say.

At first, we listened to what they all had to say. Soon, it became clear there was a whole lot of BS goin’ on.

Eventually, we settled on getting most of our intel from one person who we’ve found has been extremely consistent, clear, logical, humble and well-connected with contacts close to Iraqi Parliament and the US Embassy in Iraq. That person would be Randy Koonce of Currency Chatter.

Randy’s view is that the rate must allow Iraq to meet their budget. This makes sense to us. In order to meet their budget, their currency rate, based on current oil production and the price the US pays for Iraqi crude oil (around $32/barrel), would need to be a minimum of $3.41. However, the rate could be a little higher with inflation, so maybe $3.50 or so. Thus, this would be our own personal feeling as to where we expect it to come out -- $3.41 to $3.50. And, while we do not anticipate a lower “sucker” rate, we’re open to the possibility.

As far as timing the RV, Mr. Koonce has said for many months that until the Arbil Agreement is officially implemented, we won’t see the RV. He hasn’t changed his tune one bit, even though so many others have announced, “It’s done! Arbil has been implemented! Ministers announced! RV is here!” when, in fact, it wasn’t.

When we actually do see the announcement of a fully seated GOI (government of Iraq), then Iraq will crack open their budget and we’ll see the RV because the rate is in the budget.

Randy feels this could happen at any time, but as the US has apparently taken the threat of a “no confidence” vote against Maliki off the table with VP Biden’s visit a couple weeks ago, the timeline is not as pressing as it was. All in all, he feels that we could see RVbefore Thanksgiving.

As Randy would say, “Good question, next question...”

RV Question #2: Should I cash in ALL of my dinars as soon as it RVs or should I hold some back to see if it goes higher?

Answer: While we expect the dinar to increase in value over the next few years after RV -- possibly doubling or even tripling from it’s immediate post-RV value, we’ll likely be cashing everything inimmediately. That is, providing we don’t feel it’s a “sucker” rate meant to get people to cash in for pennies on the dinar, just days or a few weeks before the rate goes much higher. We doubt this will happen, though.

Personally, if it comes in under $2.75, we may hold off on cashing in everything, depending on what we hear from sources close to the CBI and Parliament. If it comes out at $2.75 or higher, we’ll likely cash all our dinars in, even if it might double or triple over the next 2-3 years.

Why would we do this? Two reasons: 1) We don’t trust the stability of Iraq. 2) We don’t trust the stability of world markets. We’d much rather be in control of the value of our money by converting our post-RV dinars into dollars, paying our taxes, and then reinvesting where we feel more comfortable.

One of the post-RV investments we’ve selected for our own portfolio is expected to produce gains of 27% per year. When compounded, it will only take three years for us to more than double our investment, which should equal what we’d expect to see if we left it in dinars.

The major advantage of putting our post-RV dollars into something else is that our money would be invested into something that we feel much safer with, and yet has a high rate of return. Also, beyond the initial three years, our investment would continue to compound.

In six years, our initial investment will have increased FIVE times…and we don’t have to worry about Iraqi politics. In just nine years our investment would be worth over 11 times what we invested. And finally, if we wait another nine years (18 total), we’re looking at multiplying our initial investment over 122 times. So, we really see no reason to risk leaving our money in dinars.