Durable Goods Orders! Jobless Claims!

We've got two major sets of data points out now, so let's see if there will be more joy in the US than in Japan this morning.

First off, Durable Goods Orders. We're about to look at the December 2010 figures, and analysts are looking for substantial improvement. November saw a revised decline of 0.1% in orders, or a revised increase of 4.5% in ex-transportation orders. For December, the analysts are burning incense to Plutos Catachthonios and hoping for a 1.5% increase in new orders. And does the US Census Bureau disappoint us? Yes. Yes it does. Durable goods orders declined 2.5% for the month (ex-transportation, they were up a tepid 0.5%). The transportation sector was the biggest loser (new orders down 12.8%), with nondefense aircraft the biggest loser in the sector (down 99.5%[1]).

So, what about First Time Jobless Claims? Will that make the markets happy? We did really well last week - even after revising the figures, we had a better than expected seasonally adjusted 403,000 new claims. Unfortunately, there is no joy to be found in the news from the US Department of Labor, either. Seasonally adjusted, the week ending January 22 saw 454,000 initial jobless claims[2]. The seasonally adjusted insured unemployment level[3] is 3,991,000 (up 94,000) as of the week ending January 15, with the insured unemployment rate at 3.2%.

In domestic news, does anyone remember me talking about the Iraqi Dinar? Good. There is related news, with the US Commodity Futures Trading Commission using provisions in the Dodd-Frank Wall Street reform law and the 2008 Farm Bill[4] to file suit against 14 foreign exchange dealers. The suits allege that the firms named illegally solicited members of the public to engage in foreign currency transactions, and that they operated without being registered with the CFTC. The CFTC is looking for civil monetary policies, as well as trading and registration bans. DinarTrade is not one of the companies named.

[1] Not a typo.

[2] Interestingly enough, the unadjusted numbers came in at 482,399 for the week ending January 22. That's down from the week ending January 15, and also down from the 502,710 initial claims for the comparable week in 2010. Go figure.

[3] I haven't really discussed this figure before. The insured unemployment level is the number of persons who are currently receiving state unemployment insurance payments. It is not used in any way as a measure of actual unemployment, because not everyone who is unemployed receives unemployment insurance benefits.

[4] No, I'm not sure what farming has to do with it either.

The Iraqi Dinar: Penny Stock, FOREX Style

Apparently, the new hotness for the get-rich-quick schemes on teh intarwebz is investing in the Iraqi Dinar. A representative web site for this may be found at, say, DinarTRADE[1] - which also offers investments in the Korean Won, the Chinese Yuan, the Vietnamese Dong, and an Afghanistan currency they can't even be bothered to name[2]. For what it's worth, DinarTRADE guarantees that the Dinar they sell "are 100% authentic and of non-criminal origin."[4]

So how does investing in Dinar make you richer than Croesus? Here's how DinarTRADE pitches it: "Picture Iraq as a company selling stock. Each Dinar you purchase represents a share in Iraq's bright future. As Iraq recovers from the removal of Saddam Hussein, and starts rebuilding, the country's infrastructure resumes production. Boasting the 3rd largest oil reserves in the world, Iraq's economy can only improve. The Dinar will appreciate in value as the oil driven economy booms." They then show an approximate exchange rate (as of 12/30/2010) showing $1 = 1168 Iraqi Dinars[5], and then show a chart showing how you can get fabulously wealthy if the value of the Dinar leaps upward to $0.01, $0.10, $0.20, $0.50, and $1.00.

They also, in an attempt to assure you that they are legitimate, give you a link to their registration with the US Treasury. All this means is that they have filed the Registration of Money Services Business form (FinCEN Form 107). A money services business is defined by the Financial Crimes Enforcement Network of the United States Department of the Treasury as "any person doing business, whether or not on a regular basis or as an organized business concern, in one or more of the following capacities:

1. Currency dealer or exchanger
2. Check casher
3. Issuer of traveler's checks, money orders or stored value
4. Seller or redeemer of traveler's checks, money orders or stored value
5. Money transmitter
6. US Postal Service"

Notice that it says nothing about acting as a FOREX solicitor. That's because FinCEN form 107 has nothing to do with FOREX trading. All persons and organizations that intend to do business as futures professionals must, under the Commodity Exchange Act, register with the National Futures Association (NFA). If a group - like DinarTRADE - is only citing their completion of FinCEN form 107 while selling you a story about how you will get rich through investment in Dinars, they are vigorously exploiting a loophole. They are not legitimate Retail Foreign Exchange Dealers.

Now, I could continue to make fun of their web sites and their advertising pitches and the fact that they really aren't what they imply through their ad copies[6]. But really. That's like taking candy from a baby. A small baby. One that hasn't learned to walk, yet. Instead, let's review their claims, which boil down to "if the Iraqi Dinar goes up in value, you will be mad bags of money, filthy disgusting rich!"

Technically, this is true. However, using their own $1 to 1168 IQD figure, buying Iraqi Dinars is something like buying a pink sheet stock trading at $0.0008561 per share. Sure, if it goes up, you stand to get rich. If it goes up. If Iraq doesn't dissolve into civil war. If Iraq doesn't begin to experience massive bouts of hyperinflation. If the United States doesn't just pull out, leaving their infrastructure shattered and their nation vulnerable to attack by Iran. Assuming they don't revalue the Dinar, making the old notes worthless.

Their claims also include a second serious flaw: "Picture Iraq as a company selling stock." This is not actually true. Paper money is constantly being printed, in whatever quantities the government needs, for whatever purposes they want. It would be slightly more accurate (well, slightly less inaccurate) to compare Iraq to a mutual fund company, because Iraq stands ready to constantly issue new shares. But not to redeem existing shares. Or to pay dividends. Or do anything else a mutual fund company would do.

In a nutshell, investing in the Iraqi Dinar is not a guaranteed get-rich scheme. At best, it is to FOREX trading what penny stocks are to equity trading. At worst, it is a scam.

[1] "Investing in your future"

[2] Two things here: first, the Afghanistan currency is the afghani. Second, if your foreign currency supplier can't even tell you the name of the currency, think long and hard about how wise it is to buy from them.[3]

[3] Answer: not very. (And yes, I'm aware that I've footnoted a footnote.)

[4] Well. I feel better now.

[5] Oanda, a real FOREX site, shows the Interbank exchange at 1181.530 Dinar to the dollar for 12/30/2010. So that's a 1.15% premium.

[6] Remember, DinarTRADE isn't the focus of this article. It's a representative sample.