Tuesday, June 18, 2013

John Jagerson Videos

It's been awhile since I talked about these, but it's always a good idea I think to go back to basics from time to time. Every time I watch these videos I get something new out of them. I only wish that I'd grasped what John was saying when I first watched them.

Now I'd like to offer a few observations.  John created these videos four years ago, and since then he has been subjected to name calling, threats, ridicule ... etc.  He's been accused of everything from reverse pumping to hypocritically owning dinar while he's bashing the dinar investment.  And yet since 2009 the IQD's official value has only increased about a third of 1%.  Meanwhile according to the financial report on the CBI website, the amount of currency in circulation has gone from 21 trillion to 31 trillion dinar and the M2 has gone from 45 trillion to 75 trillion dinar.  Also during this time banks have quit handling the dinar, the CBI has announced their "delete the zeros" currency reform plan which is a redenomination (lop), cease & desist orders have been issued on at least four dinar dealers in Colorado, Illinois, and Arkansas, and five men have been indicted (two of whom have now plead guilty) for dinar fraud and other related crimes. 

John has pretty much been vindicated at every turn, unlike the gurus.  That's because he's a professional and he knows what he's talking about, unlike the gurus.  And he offers his real name and his credentials, unlike the gurus.

In these videos he makes several valid points.  He starts off by addressing the difference between real investing principles and common denominators in all scams.

1. Fraud, misleading information, and no disclosure of risk
   a. Dinar dealers are marketing an investment without proper registration (thus the cease & desist orders above) which would require equal emphasis on risk and potential returns.  How often do you hear dealers or gurus honestly discussing the history of redenominations and the obvious potential of a redenomiation with the dinar?  How often do they discuss the potential for civil war or a coup or a failed state scenario?  No, it's usually just "we're almost there ... everything's in place ... looking good!"
   b. The German deutschmark didn't revalue or appreciate after WWII.  It replaced the previous currency the reichsmark in a redenomination.  The Kuwaiti dinar didn't revalue or appreciate after the first Gulf War.  It was reinstated as the official currency at the same pre-war valuation and has since been replaced with a different currency on two occasions.  How many times have we heard about Germany and Kuwait as justification for buying dinar?  "Millionaires were made overnight with the Kuwaiti dinar!!!"  Really?  Prove it.  Give me one name.  Just one! 
   c. The $3+ value of the dinar before the first Gulf War was set by Saddam Hussein, and it wasn't the result of market forces.  Even prior to Saddam's reign the dinar's value wasn't the result of market forces but was established by policy.  As John states it's possible to establish a high value for your currency but it's very expensive to do so, and the trend toward globalization since the pre-Saddam era has caused most countries to prefer a lower value which helps them with developing exports and paying debt obligations.

2. Risks
   a. Illiquidity - You can't spend the dinar outside of Iraq.  Banks are no longer handling it so your only options for exchanging it (outside of flying to Iraq or Jordan) are dinar dealers and public trading sites like Ebay or Craigslist.  If Iraq redenominates like they say they will, those trading sites will no longer be an option and the dinar investors will be at the mercy of the dealers.  If the dealers disappear the investors are screwed with a capital S.  And as John mentioned the spread has been around 20%, so if you are able to exchange for the new dinar or USD you have to add the new spread to the old spread to determine your total cost. 
   b. Currencies aren't stocks.  The idea that the dinar's value will increase as Iraq's economy grows is based on the flawed view that currencies behave like stocks.  They don't.  People who make money speculating on currency do so with electronic currency on Forex and profit off of the slight fluctuations with high volume, leveraged purchases.  They don't make money by buying physical notes and waiting for them to increase in value by more than 20% because currencies rarely do that.  In fact the largest revaluation in history was less than 40%.  If the dinar increases in value by 27% as it did from 2006-2009 you'd be lucky to make any profit at all going through a dealer.  And since the CBI's policy is a stable exchange rate the likelihood of even a 27% RV seems fairly remote.  The fact is currencies that have deprecitated due to hyperinflation either retain their lower value post-hyperinflation or they redenominate. They never appreciate back to their former value. It would destroy the economy.
   c. Inflation - Developing economies like Iraq tend to have problems with inflation.  While the effort to bring inflation down is responsible for the only increase to the dinar's value since 2006, a resurgance of inflation could send the dinar's value into a downward spiral.  I've heard dinar investors say things like "how much lower could the dinar's value go?  It's already a tenth of a penny."  Well look at Turkey's old lira.  Prior to redenomination it was worth less than that.  A lot less.  In fact it would have taken almost 1500 lira to buy one Iraqi dinar.   When Zimbabwe redenominated they removed twelve zeros from their currency. It would have taken over 250 billion Zimbabwean dollars to buy one IQD.  So yes, the dinar could go quite a bit lower in value.  As of now inflation is relatively low, around 2%.  But as John points out it wouldn't take much in an unstable country like Iraq to trigger another round of hyperinflation, and if that occurs they won't be able to do much to control it. 

John has stated that he made these videos because he saw so many people being misled about the potential for the dinar's value.  He witnessed countless military personnel returning from Iraq and Afghanistan who had purchased dinar, believing that it had the potential to make them millions.  Since he wrote the article on the dinar scam and published these videos literally thousands have been spared the financial and emotional devestation that comes with being defrauded.  One day the dinar world will have to acknowledge John's foresight and superior assessment of the dinar "investment", but I'll gladly do so now.  Kudos, JJ.  

Monday, June 3, 2013

June Update

Well another month has come and gone and darn the luck .... still no RV!  Still no free float up to $1.  Still no "pipping it up", either.  What gives?  Why, it's as if they intend to keep it right where it is!

On the heels of last month's list of articles and statements about the Iraq Dinar Scam comes another Forbes article entitled Dinar Deception Driven by False Hope.  The author discusses the faltering value of the dinar within Iraq which prompts the question, if a substantial revaluation of the dinar is imminent why are so many Iraqis abandoning the dinar for the US dollar?  Some of the gurus might suggest that this was their plan all along, to get the dinar out of circulation in Iraq by having Iraqis turn to the US dollar.  But another article tells us why.

During the past month of violence, the Iraqi dinar’s value has fluctuated radically. Now black market money men are using Iraq’s poorer passport holders to take advantage of a government measure to stabilise currency.

In the middle of a long queue waiting to enter a branch of the Rafidain Bank, Iraq’s state bank and its largest, is Baghdad woman who wished only to be known as Sadoun.  She’s waiting in the queue to exchange her Iraqi dinars for US$500. Although she’s not saying so now, when she gets in there to the tellers, she may well pretend she is going overseas. She may even show her passport with a forged international visa stamped inside it. This allows her to take advantage of a recent government subsidy meant to artificially maintain the Iraqi dinar’s value; the state bank buys the dinars at a higher rate.

In Sadoun’s case, she will exchange IQD1,900 for one US dollar. In the unofficial exchange shops, which are found throughout Iraq, she would exchange around IQD 1,200 for one US dollar. So that difference of around 10 percent makes the waiting in this queue worthwhile.

Sadoun is not the only person doing this. The fresh round of violence in Iraq which has seen over 500 dead in May, among other factors like politics, unresolved financial issues and regional conflicts, has caused dramatic fluctuations in the value of the dinar against the US dollar. Most Iraqis use dinars for small purchases, like groceries, but use US dollars when buying bigger ticket items – one of the main reasons for this is that they don’t need to carry around bags of cash in dinars, they need only take several bills in a wallet.

As local economist Majid al-Suri told NIQAS, “the decline in the dinar against the US dollar since April can be attributed to many political issues, as well as security and financial administration problems. This has seen many merchants and businessmen transfer money outside the country, exchanging their Iraqi dinar for dollars because they’re afraid the dinar will only become more unstable. A few months ago, Iraq’s central bank was selling around US$50 to US$150 million a day,” al-Suri explained. “Now demand has increased and it’s selling more than US$400 million a day. That’s a huge increase.”


So the author tells us that violence has contributed to the decline in the dinar's value within Iraq, and the popularity of the USD.  He goes on to discuss the smuggling of US dollars into Iran which is also affecting the market value of the dinar.  So unless you think that "The Plan" included hundreds of people being killed by terrorist bombs and US dollars being smuggled into Iran, I'd say that it's not very likely that this is all leading up to a huge increase in the value of the dinar.

I’d like to offer a few observations on the article.

First, it’s obvious from the article that Iraqis still have dinar, and plenty of it.  (Cash outside of banks for April is tentatively showing 33.4 trillion.  By the way, the M2 is still climbing as well - at 78.8 trillion as of March.)  All the talk we’ve heard from gurus about how there’s nothing but US dollars being used on the streets of Iraq is BS.  Some claim that only wealthy Iraqis have dinar, but here we see that poorer Iraqis have access to dinar as well.

Second, we have heard a number of gurus assuring their followers that everything in Iraq is just peachy keen.  Sure, there’s a few bombs going off but so what?  More people are murdered in Chicago every year than in all of Iraq (which isn’t true, by the way).  But this article points out just how volatile a situation Iraq is currently dealing with.  Contractors are pulling out until things calm down.  Construction has stopped.  All of this affects the market price of the dinar, of course.  And yet the gurus insist that everything’s pointing to prosperity for Iraq and a higher value for the IQD.  Why do they say that?  Because if they told their followers the truth their numbers would go down, and that’s what it’s all about.  Keeping the faithful on board so they can carry on the con as long as possible.

And finally, when Shabibi was removed the dinar world was subjected to endless guru babbling about what it meant for the RV.  Some said that Shabibi wouldn’t RV so Maliki replaced him.  (Apparently that was wrong because Shabs has been gone for over half a year and no RV yet.)  Some said that Shabibi wanted to RV but Maliki wouldn’t give up any power and Shabs didn’t want Maliki to become a dictator with all of Iraq’s post-RV newfound wealth.  Others just thought that Maliki didn't want to RV because he is evil and wants to keep his people poor.  But here we see what Shabibi’s removal was really all about.  There was a dispute between Maliki and Shabs over how to deal with the issue of dinar being smuggled into Iran.  It now appears that by removing Shabibi Iraq is left with a chaotic situation that is taking a toll on the dinar’s value in country.  If they bring Shabs back it might help them to get the smuggling under control and bring the market price up, but it likely won’t raise the official value of the IQD one iota.  Once again, the gurus are proven to be clueless.

Also, in May a reader sent me some very interesting links.  You can draw your own conclusions.





I then did a bit of digging on my own and found these links.






Until next time .....