Bullish on Iraq:
Average Joes Place
Bets on the Dinar

Mr. Burbank Sells Stacks
To American Amateurs;
Early Snafu at Customs
April 23, 2004; Page A1

CORONADO, Calif. -- On a cool January evening, John Rodinec approached an outdoor cafe, looking for a man with a manila envelope bulging with cash.

He handed over a personal check for $2,000. Bill Burbank gave him the envelope. It contained one million freshly minted Iraqi dinar, the currency that replaced the one bearing the likeness of Saddam Hussein.

"It feels strange buying foreign money from a guy at Starbucks," says Mr. Rodinec, a disc jockey and music-equipment salesman.

Plenty of amateur investors -- policemen, construction workers, a dentist, even a college student -- are taking the dinar plunge. As tension rises in Iraq, these people are making a bet most professional currency traders wouldn't touch -- that the dinar will appreciate.

For Mr. Rodinec and hundreds of others, Mr. Burbank is the dinar man. A 48-year-old former Navy SEAL with a middle linebacker's physique, Mr. Burbank says he has sold more than $500,000 in dinar since he started his business in October. The recent violence in Iraq caused the currency's value to fall modestly but hasn't hurt sales, he adds.

"I never thought of myself as a currency trader," says Mr. Burbank, who still works three days a week as a fireman in San Diego. "But I called the smartest people I know -- a corporate lawyer, a Wall Street guy -- and they said it sounds pretty viable."

Today, he sells dinar on his Web site, Daystartrading.com. Prices are negotiable, depending on the size of the order and whether payment is in cash or check. But Mr. Burbank generally hands over about 500 dinar in exchange for one dollar. He gets his dinars from three Middle Eastern suppliers, who give Mr. Burbank a rate of about 950 dinar to the dollar. (In Baghdad, the standard rate is currently 1,430 dinar to the dollar.)

This means Mr. Burbank is getting nearly two dollars for every one that he invests, although his final profit is smaller because of the cost of transporting the dinar to the U.S. and advertising in newspapers and on the Internet.

Mr. Burbank tells customers that the Saddam-era dinar traded at three to the dollar before U.S. troops invaded last year and was valued at more than $3 before sanctions were imposed in 1990. "It is now legal for Americans to own dinar at this 100-year low price," his Web site proclaims.

Century-old comparisons don't necessarily make sense when a country has undergone a violent regime change. The six-month-old currency has no official value outside the Middle East and a new Iraqi government could decide to invalidate it, making it worthless.

Iraqi dinars

While Kuwait's dinar rallied after Iraqi troops were expelled in 1991, the history of other war-torn countries isn't encouraging. Italy's lira went from 3.3 lira to $1 before the war to 620 to $1 by 1950. The lira kept losing value in subsequent decades before it was replaced by the euro in 1999.

"I think it's not even a good speculative play," Marc Chandler, chief currency strategist at HSBC Bank USA, says of buying dinar.

While Iraq's central bank is on the verge of approving three foreign banks to offer financial services such as foreign exchange, Mr. Burbank and others are already hawking dinar to investors over the Internet. The U.S. Treasury Department says the trade is legal.

Mr. Burbank's interest began last year when he bought 1.25 million dinar for $3,000 on eBay. He struck up a relationship with the Jordanian who auctioned the new currency and began buying directly from him.

Several competitors have sprung up in recent weeks, outfits with names such as dinarsforless.com and IraqDinarInvestment.com. Some post photos of the new currency. The red-tinged 25,000 dinar note features a Kurdish farmer on the front and a drawing of Hammurabi, ruler of Babylon from around 1792 to 1750 B.C., on the back.

Like Mr. Burbank's site, his rivals' Web pages are filled with encouraging press clippings about Iraqi job creation and the development of Baghdad's financial markets. Several also include press releases from the Coalition Provisional Authority, Iraq's temporary governing body, that paint a sunnier picture than articles in the mainstream media.

The Dinar Trading Company Web site links to the White House's site, which offers a bullish forecast for the currency. "As oil exports increase and more funds are invested in Iraqi goods and services," Hugh Tant III, the coalition's point man on Iraqi currency, wrote last fall, "it is expected that the new Iraqi Dinar will appreciate in value over the long-term."

Now back in Mt. Pleasant, S.C., where he is a senior vice president at Southcoast Community Bank, Mr. Tant says the currency's value, as measured by the rate in Iraqi central-bank auctions, has already gone up more than 35% since November.

Len a 29-year-old dinar multimillionaire who works in information technology in Potomac, Md., says that at 2/10 of a penny, "there's no way" the dinar could lose any more value.

"I've got enough so that if it goes up to a nickel, I'm a millionaire," says John Meeks, a 50-year-old mortgage broker in Mission Viejo, Calif., who's bought 20 million dinar.

Mr. Burbank is one of the biggest dinar investors. He started the business as a way to fund his own big bet on the Iraqi currency. He says he's amassed 100 million dinar at a cost of nearly $90,000 and continues to plow as much of his profits as he can into the currency, believing that as the country gets its footing and oil starts freely flowing, a big currency rally awaits.

Mr. Burbank met last week in Coronado with Lew Knopp, another former Navy SEAL. Mr. Knopp, solidly built in a blue suit with wraparound black sunglasses, runs a company that provides security for corporate executives. He also works for Mr. Burbank as the result of a bad experience Mr. Burbank says he had at the start of his business. A 35 million-dinar shipment in four bags was confiscated by customs officials in another Middle Eastern country. The bags arrived a few days later, short five million dinar each -- for a total loss of 20 million dinar, Mr. Burbank says.

Since then, Mr. Knopp and his employees have been flying to Jordan to retrieve the currency bundles personally. One trip can cost Mr. Burbank more than $7,000. Mr. Burbank says it isn't any problem getting the cash through U.S. Customs so long as he makes the declaration required by U.S. law.

After chatting with Mr. Knopp about the next expedition, Mr. Burbank popped into the UPS store to check his postbox. There he found a check for $2,000 from a prospective dinar investor in Chicago and another for $10,000 from Gaithersberg, Md.

Not a bad take for one day. But Mr. Burbank believes his business has an expiration date of sometime this year. Once foreign banks start making a market in dinars, he figures, there will be no need for Web sites such as his. "Then people will be able to do it electronically," he predicts. "And it will be just like any other currency."

Write to Craig Karmin at craig.karmin@wsj.com