This Dangerous Market Is One of the World’s Safest Investments

“A bomb went off just a few blocks from me. What am I doing here?”

Sanjay was out scouting for investments in Baghdad when an ISIS bomb went off nearby. He was having second thoughts about coming to this war-torn country.

That’s no surprise… Iraq is in chaos.

The Iraqi government estimates sectarian violence has caused at least 110,000 deaths since the U.S. invasion in 2003—67,000 of which are civilians.

The fighting has displaced another 4.5 million people. That’s 12% of Iraq’s population.

And terrorist groups like ISIS have made Iraq their home base. ISIS is known for suicide bombings, beheading captives, and using human shields. Its abuses are legion.

The International Institute for Strategic Studies ranked Iraq’s conflict the third-deadliest in the world in 2017—behind only Syria’s civil war and Mexico’s drug wars.

But despite the chaos (or maybe because of it), Sanjay says Iraq is dirt cheap and a screaming deal right now.

I know what you’re thinking… investing in Iraq is a crazy idea.

Yes, Iraq is dangerous. And investing there is not for everyone.

But taking a small position in cheap foreign stocks can help bulletproof your portfolio. And a diversified portfolio is a part of any sensible wealth-building strategy.

The Iraqi Stock Market Is Safer Than You Think

I met Sanjay at an exclusive investment conference in Pawleys Island, South Carolina. (To protect his privacy, Sanjay didn’t want to give out his last name.)

We started talking over a drink at happy hour after a full day of presentations. That’s when I get some of my best ideas—happy hour.

Sanjay’s stories about Iraq were captivating. But even more captivating was his reason for investing in a frontier market like Iraq.

You see, Iraq’s stock market is one of the cheapest in the world (if not the cheapest).

One way to tell if a country is cheap is to find the ratio between the value of its stock market and GDP. Iraq’s ratio is 3%.

We consider frontier markets to be cheap if the ratio is 20%. That means Iraq needs to go up 600% just for us to call it cheap.

Stock markets rarely get this cheap. When they do, that means just about all the bad news you can possibly think of is already priced into the market.

And unless someone drops nuclear bombs on Iraq, things can’t get any worse there. (Just think about it… ISIS already controls entire cities in that country.)

I’ve only found two stock markets that have gone to zero over the years: Russia in 1917 and China in 1949. And both of those countries became communist.

There are only two ways you can lose money investing in Iraq—if the country turns communist or gets nuked.

I doubt either scenario will happen.

For Iraq to get any cheaper, it would have to go to zero. And there’s almost no chance of that happening.

In fact, if Iraq just remains like it is today, its stock market should shoot higher on growth alone.

How to Invest in Iraq (Without Going to Iraq)

The small companies that trade on the Iraq Stock Exchange do little or no business in the United States… or anywhere else outside of Iraq.

And there’s no exchange-traded fund (ETF) to invest in Iraq.

So, it takes a little extra work.

Sanjay told me that you need an Iraqi broker to open an account. He assured me a couple of them speak English… and will help you set up an account over the phone.

From my little research, Rabee Securities seems to be the Iraqi broker that handles the largest amount of foreign investment. But we haven’t vetted them, so do your own research.

The minimum investment is $10,000. Just wire the money over there to get started.

I wouldn’t put much more than 1% of my capital into Iraq, though. The country may be cheap, but there’s still some risk.

Nevertheless, I think Iraq is a market where you could turn $10,000 into $100,000 or more in 10 years.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. I’m thinking about opening an Iraqi brokerage account myself. And if I do, I’m looking to invest in large banks, food, and beer companies. Those are probably the safest. I’ll keep you updated.

If you’re thinking about investing in Iraq or other conflict zones, let us know right here.

The Solar Industry Is Taking Off

In the October 25 Daily, we told you solar power had become one of the world’s cheapest energy sources.

Just a week later, First Solar, the biggest U.S. solar company, reported blowout earnings. Profits and sales were both up 60% from a year ago.

And First Solar raised its revenue and earnings expectations going forward. This sent prices skyrocketing.

This is just further proof that the solar industry is starting to catch on.

—Nick Rokke