It’s roughly 4000 miles from the east cost of the US to us here in Zurich, but I think I can speak for most of Switzerland, if not Europe, that we too suffered from US election fatigue in the weeks following the vote.
I’ve been in Switzerland for 15 years now, and each US presidential election understandably grabs more and more of Europe’s attention. What made this one even more exceptional were the participants: Hillary Clinton, whom everyone easily knew from Bill’s two terms in the 90’s, and Donald Trump, whom, well, showed he was completely different than any other US politician ever seen. Even though Europe’s had their share of interesting characters – Sarkozy, divorced twice and married to Italian singer and model, and Berlusconi, well, you name it… just to name two – Trump still represented something very different than what everyone was used to with US politicians.
Since the elections, I’ve been asked quite a few times by clients and friends in the US what Europeans are thinking about the results. I can’t speak for all of Europe, but I know here in Switzerland there seems to be two prevailing thoughts on Trump’s win.
On the one hand, some here are very concerned with Trump’s rhetoric: will we see a mass deportation of immigrants in the US illegally? Will Muslim’s be excluded from immigrating to the US based on their religion? With the slowly changing, anti-establishment mood swing we are starting to see, some are worried that we are going down a dangerous path the likes of which Europe has lived through in the 20th Century.
On the other hand, there are also many that are optimistic that Trump can stand for real change and possibly help to really make “America great again”. Even though some of his ideas seem a bit outlandish or far-fetched, Trump almost represents a completely different political figure. If you really listen to some of his ideas, and don’t get caught up in the way the media has played against him, there might be some real chances for a difference. And, he’s proven that he’s “ready to rumble” without even officially taking office yet.
In any case, even though we now know who the next US president will be, I believe there is a unique winner to the US election.
The real winner of the election? The US investor with assets outside of the US
I wish I could say I invested most of my wealth outside of the US based on some preconceived plan and foresight of what the future would bring. Instead, I got married and moved to Switzerland. Since I was setting myself up permanently here, I naturally needed to have the majority of my assets here as well. Yes, I still own some small IRA assets in the US, as well as an account or two to cover travels or any expenses I might incur when I’m there, but now the majority is “offshore”, here in Switzerland, where I feel it’s safe and sound.
For me, it started off as just pure luck, but I learned over time the importance of having assets at home AND abroad, or “jurisdictionally diversified”. I look at having some assets in the US and most abroad similar to a seesaw, or a teeter-totter. You know, the narrow board supported in the middle by a pivotal point with one or more kids sitting on each end: as one pushes their end up, the other comes down.
To me, jurisdictional diversification works the same as a teeter-totter: if assets in one side move negatively or are at risk (in terms of value, safety, volatility, risks of many different sorts, etc…), having assets on “the other side” lifts me back up again due to opposite forces. They are not in the same danger as those on the other end. For example, if I feel like I wouldn’t be able to move my metals out of the US, then I know I would have some offshore to counter-balances that fear.
And, the teeter-totter is a great analogy for keeping your wealth out of the easy reach of frivolous lawsuits, creditors, or even a desperate government that will stop at nothing to figure out ways of sharing your money. Put yourself at one end of the seesaw, and the creditor at the other end. How easy is it for that creditor to come after you on the other end? The last time I tried it, I was perhaps 12, and I never tried it again!
The need for jurisdictional diversification is always there!
Based on the number of US friends and clients I talked to in the months leading up to the election, it was clear there were concerns that Clinton would have raised taxes and pushed many high net worth investors to look for ways to move wealth offshore based on her tax plan proposals. Alternatively, Trump’s tax plan would cut taxes, and looks like he might try to do it in a hurry. With Trump in office, one or more of the traditional reasons to consider offshore for your wealth could simmer.
With Trump’s election victory, markets are doing better than we could have imagined. And there’s already been talk of a repeal of Dodd Frank and a change, if not complete elimination, of FATCA.
It’s almost as if the good times are ready to roll, but I’m not so sure.
The problem is that If you really think about it, fundamentally, not much has changed in years. To this day, several years after the global financial crisis, the world continues to face sluggish economic growth and constrained government budgets. The result: an overall lack of long-term investment, which has serious implications for global growth. Central banks continue to loosen monetary conditions, monetary conditions that are already very loose. Money continues to find ways to be created out of thin air.
There is still a huge problem in the levels of public trust and confidence in financial institutions. To function efficiently, the system needs to re-establish that trust, but they still aren’t giving us the type of steadfast, long-term signs.
And I’ve read that the biggest U.S. banks collectively have more than 247 trillion dollars of exposure to derivatives contracts, an amount more than 13 times the size of the U.S. national debt. Globally, the Bank for International Settlements puts the nominal value of outstanding derivatives contracts at 552.9 trillion dollars.
Bankers assure us that these financial instruments are less risky than they appear because risk is spread around enough to stop the system from being pulled down. I’m sorry, but no matter how thin you spread peanut butter on your bread, you’ll never eliminate it.
The good news: there’s still time to get into the winner’s circle
The US elections have been decided, but you still have the chance to be amongst the winners – notice, this applies to any investor looking outside of their home country – that have taken the steps to jurisdictionally diversify their wealth.
I’m not saying you HAVE TO invest in Switzerland like I did, or that Switzerland offers the ONLY alternative to where you should invest your assets. What I am saying is that you’ve won if you already took the steps, or will be taking the steps, to internationally diversify their assets, even if just a little. Funny enough, I’m glad I still have those small investments in the US as well.
I’m still American, and I want to believe that Trump will make our country great again. And he very well may. Regardless of how great things get again in the US, it still makes me feel just a bit better knowing I’ve taken the steps to diversify my assets.
I want to know that if I’m down on one end of the seesaw, that my clone is sitting on the other end helping control the balance.-----