Day: 11 November 2016

Will Hobbs, Head of Investment Strategy in UK & Europe, Barclays Wealth and Investment Management, comments on Wednesday’s outcome of the US Presidential election.
“Donald Trump has been confirmed as the 45th President of the United States,” says Mr Hobbs. “Investors are currently running scared, with perceived safe havens such as Treasuries and Gold finding plenty of support and equity markets finding little. Naturally, we can’t predict when this dust will settle, but when it eventually does, we expect markets to remember that there are good reasons for believing that little of President Trump’s campaign trail rhetoric will make it to actionable policy.
“Superficially, the congressional make-up looks to be one that would support the President, with the Republicans retaining control of both the Senate and the House of Representatives. However, the reality is likely somewhat different following a bruising and divisive campaign characterised by Mr Trump falling out of favour with an important chunk of the GOP (The Republican Party) representatives. In any case, immediate action will likely be constrained by the laborious process of setting up a new administration.”
Mr Hobbs points out that, according to one commentator, as many as 4,000 political appointees must be selected, and that over the last few decades new cabinets have tended to be in place between February and May of the year following the election, but many of the other appointees didn’t make it into the seats before autumn the following year.
“Even after this is all done, we see scant prospect of a dramatic policy shift in the wake of these elections,” the Head of Investment Strategy adds. “We’ve argued at length that campaign trail threats and promises are more likely than not to wilt in the face of a reluctant legislative branch – neither candidate looks to be the unifying figure that history tells us is necessary for words to become domestic policy. There is admittedly more scope for the President to use unilateral power with regards to foreign and trade policy, as mentioned in a September 2016 briefing by the Peterson Institute for International Economics entitled ‘Assessing Trade Agendas in the US Presidential Campaign’. However, the prospect of President Trump unilaterally applying tariffs to Mexico and China seems unlikely to us. The gap between fiery campaign rhetoric and actual policy implementation is routinely wide and in this case we think that economic self interest will prevail.”
Mr Hobbs is confident: “Investors remain likely better served by focusing on the fundamental backdrop to the US economy, rather than who presides over it. That backdrop continues to look encouraging for those who would lean their investment portfolios towards stocks and away from bonds as we currently advise. The most reliable cyclical lead indicators are consistent with trend economic growth in the world’s most important capitalist economy. Meanwhile, the labour market is starting to more visibly tighten, with nominal wages finally starting to pick up a little more forcefully. Inflationary pressures are finally returning to the US economy, a factor which informs our belief that government bonds at current levels may offer more return-free risk than risk-free return.”
The Barclays strategist concludes, “As ever, there remains plenty to worry about for investors, with European politics now set to take centre stage in the form of the Italian referendum on constitutional reform. Nonetheless, we want to be careful of exaggerating the threats of bumps we can see in the road ahead, just because we can see them. Diversification remains the best defence against that ever unknowable future. The simple act of showing up and getting invested remains the most profitable ‘theme’ to invest around – the forces of growth and inflation continue to be underestimated, albeit a little less than earlier in the year. Neither the election of President Trump, nor (if it comes to pass) a ‘no’ vote in the Italian referendum, changes that belief – the highly evolved constitutional defences that have made change so difficult to effect in many developed world economies in the last several years may well prove a source of comfort for investors in the months and years ahead.”
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Monaco resident and vintage car fan Xavier Lamadrid returned last week from Mexico where he participated for the first time in La Carrera Panamericana Rally and placed second in his category.
“This is a proper motor race, difficult and dangerous,” Mr Lamadrid tells Monaco Life about the race, which covers 3,500 kilometres over 7 days in October with cars reaching speeds of 220 km/h over 700 km of special stages. “It’s one of the coolest things I’ve ever done.”
The original La Carrera Panamericana course, in the early Fifties, crossed Mexico from South to North (North to South in 1950) to celebrate the inauguration of Mexico’s Panamerican highway. Motorsport’s biggest names at the time raced but eventually the event ended because the course was too dangerous.
“It was revived in 1988 as an ‘historic event’,’ explains Mr Lamadrid. “I use the term historic because this race is nothing like the old man, hobby driving, and typical kind of historic racing practiced in Europe or America.”
La Carrera Panamericana is ranked as one of the “Top 5 Toughest Races in the World” by Red Bull, just after the Dakar and the Nürburgring 24 Hours. There are 100 cars participating from every nation.
“The first few days, I was thinking ‘what am I doing’. It’s like the first few hours of Nürburgring 24 Hours, you want to stop and get out of the car. But then by the end, it’s so emotional you don’t want the experience to end.”
Mr Lamadrid, who was born in Mexico, had a team of 14 mechanics, with two other cars and two additional drivers. His Mustang is kept in Mexico so unlike his Swiss and German competitors in the same category, he didn’t have to worry about the logistics of transporting his car to Mexico. “I am aware this is a life event for me, and possible as I have the support of the Mexican region of Durango, Akron Lubricants and ABOX Storage from the UK. Otherwise an adventure like this would be too expensive.”

Mr Lamadrid drove a 1965 Ford Mustang with 550 horsepower and raced in the Historic C category. “My car paled in comparison to the Open Class Studebakers with 800 horsepower, but I was excited, it was my first rally,” he says. “I have circuit experience, as years ago I decided I was only doing real motor racing events, so I race at the Nürburgring, VLN and the 24 Hours Le Mans.”
Recalling how each city the racers pulled into was wall-to-wall locals lining the streets to welcome them – “in some of the towns it was a holiday so schools were closed and kids could come out to see the cars” – Mr Lamadrid says, “La Carrera is something special. It’s a real event, with suffering, joy and danger. It plays with your mind. It’s something that should be done by real motorsport enthusiasts … posers, stay away.”
Next year La Carrera Panamericana celebrates its 30th edition.

La Carrera Panamericana: A Race Report by Monaco’s Xavier Lamadrid

This year, the race looped around Mexico as the teachers’ union in the state of Oaxaca threatened to block the roads.
La Carrera is a huge event in Mexico as there is real motor sport following across the country. We started in the city of Queretaro, where we crossed the ceremonial start on the night on Day 0. I started to understand what everyone was saying about “thousands of people cheering”.
Day 1 took us from the city of Queretaro over the Sierra Gorda. Forget Col de Turini, near Sospel, or anything I’d ever seen. This is fast, dangerous with 500-metre drops. Jaime Huerta, my co-driver kept us on the road and we finished the day in the city of Puebla by nightfall. I stared to process just how difficult this race is. We barely made it to Puebla with an agonising clutch.
We were in contention and in the Top 20, which is better than I could have ever dreamed of. The team, headed by Jorge Cisneros, repaired the car overnight and we were ready for the start of Day 2 at 6 am.
We kept heading south into a part of Oaxaca and then into the town of Tehuacan. There’s a long tradition for la Carrera in Tehuacan, but I never expected the tens of thousands of people who turned up. We couldn’t even get out of the car!
Carrying on to Mexico City, and experienced another peculiarity of La Carrera, the crazy quick transit stages. We descended into Mexico City doing an average of well over 200 km/h … escorted by Federal police!
We enter the capital through the city centre and by the National Arts Institute where an estimated 256,000 fans – that’s correct, 265,000 – were present. Incredible. We were still in contention and the car was perfect.

Day 3 we headed for Toluca over the mountains. At some point you felt as though you were in Switzerland. Beautiful stages, very fast, and we did well. Our front right suspension was ready to break and the team did a phenomenal job welding it. We finished that evening 2nd in class. We were doing very well.
Day 4 started at 5 am. New brakes and we made our way to Morelia. We had to pass through Mil Cumbres. What a place. God made this place after watching a rally. We entered Morelia, a fantastic city, and I was ecstatic with our results.
Day 5 started well, again through Mil Cumbres, but on the 3rd special stage, on a fast right hander at a GPS speed of 237 km/h, the bonnet parted company with our car. We were lucky it didn’t break the windscreen. We finished the day in Guanajuato still ahead.
Day 6 began towards Zacatecas. It wasn’t easy to find a new bonnet but the team did it. Incredible.
The roads were opening up at this point and it was fast, fast everywhere. The transits were getting quicker and we finished well, looking forward to the last day in Durango. We had to finish for our sponsors.
Day 7 kicked off at 5 am. Beautiful drive through the desert, I felt like I was David Carradine in the “Cannonball” movies.
We carried on to the mountains around Durango and to the Devils Back, which were the toughest roads on the race. Our clutch started going again, but after a long day we managed to conserve the car and finish. There was an incredible reception in the centre of town in Durango. The governor received us, the party begins. We finished 12th overall and 2nd in class.
Article first posted November 6, 2016.

UPDATE 11 am: Just back from Democrats Abroad breakfast at the Negresco (there is no equivalent Republican organisation for expats), where shocked Americans arrived steadily across the morning, many to share their sadness and disbelief with fellow countrymen. Heads were lowered when the official announcement was made just before 9 am in Nice, and many tears shed.
“I had planned to return to the US in a few years, to raise my family,” one attendee told Monaco Life. “Now I can’t imagine I’ll ever go back. The US has become an embarrassment.”
Monaco Life wants to hear from Republicans and Democrats about your thoughts on this morning’s election results. Send your story to editor@monacolife.net
UPDATE 2:16 am: With Florida too close to call, I’m calling it a night. The brave souls left are wondering if Trump could indeed pull off an election victory. Good luck to Neils Brinelli from M6 who is hanging on until the official announcement some hours from now.
What an incredibly lively event this evening turned into. While Americans may be divided bitterly between the two candidates, the more than 100 people who gathered tonight at Stars’n’Bars in Monaco had animated and intelligent discussions about what the future might hold (and even talked politics!) all over the course of amazing Tex-Mex. Thanks to Annette (whom I leave entertaining the small crowd), Kate and all the staff who worked their butts off.
UPDATE: We are hearing about tampering with ballot boxes so while the partiers have moved on for the night, the die-hards remain at StarDeck, knowing it’s going to be a long night.
UPDATE: 00:12 am: First results coming in. I am shocked there were cheers.
UPDATE: 11:30 pm: The room at StarDeck is thinning, although the volume is not, as some 50 anxious people keep one eye on CNN on the giant screen, with reports of early exit polls being delayed from “in five minutes” to in a few hours.
There haven’t been too many Trump supporters here tonight, although the President of MonacoUSA was sporting a “Hillary for Prison” T-shirt, but without too much comment on the possible outcome.
A CNN poll shows that 38% of voters are looking at the candidate who can bring change, while only 22% are casting a ballot for the candidate with most experience.
“I will be so embarrassed if Trump is elected,” one Clinton supporter told Monaco Life. “How did it get this far?”
BFM-TV, France’s rolling news channel was at Stars’n’Bars earlier today and tonight, Neils Brinelli from French TV M6 is covering the event until morning.


 
 
 
 
 


UPDATE: 9:30 pm: First results of Monaco election. Annette Anderson announces Others: 19.1%; Donald Trump 23.3% and Hillary Clinton 57.5% – Monaco has just elected first female President of the United States.
Weekend conversations across the Principality, and indeed elsewhere, were dominated by the neck-and-red-neck race to the White House, which will finally come to an end Tuesday, November 8.
MonacoUSA will show election coverage as it happens with voting results from the 50 states on a giant TV screen at Stars’n’Bars’ StarDeck from 7 pm and finish with breakfast at 6:30 am Wednesday.
All nationalities are invited to come by, entrance is free, to take a selfie with Hillary and Donald, take part in Kandidate Karaoke, and vote for their favourite candidate (disclaimer: voting in Monaco unfortunately will not be binding but voters can win a prize in a free tombola). Guests who come in their pyjamas (not obligatory) can also win a prize.
After midnight, there’ll be a live stream from Atlanta, Georgia, with MonacoUSA member Marco Orsini, founder of Monaco-based IEFTA, and fellow filmmaker Bilal Mekkaoui. The duo will present “Election Night Viewing Party” as they reunite guests after five years since filming “Dinner at the No-Go’s” for an exchange of ideas, opinions and arguments. (Facebook: Dinner at the No-Go’s.)
According to the US State Department, nearly 9 million American citizens currently live in foreign countries, so if “Abroad” was a state, it would be the 11th most populated. And the state of Abroad has one key voting concern this election, that’s FATCA, the Foreign Accounts Tax Compliance Act, which came into effect in 2010.
While Monaco Life reached out to both the Republican and Democratic parties for a comment on how this election could impact American expats abroad, we had only a reply from Amy L. Bondurant, a retired US Ambassador working as a volunteer on the Clinton campaign.
The former ambassador shared Hillary Clinton’s stand on FATCA, the implementation of which has caused “hardship” for many people, according to the Democratic Party nominee who has spoken to Americans living abroad.
“FATCA’s intent was to catch wealthy tax cheats hiding money abroad,” said Mrs Clinton. “But in practice, banks are refusing to provide average law-abiding Americans abroad the basic financial services they need because of the compliance requirements of FATCA.
“I support working out an effective same country safe harbour proposal and finding a solution that works to give relief to law-abiding citizens, without weakening our rules against tax cheats.
“I’ll work hard to fix this critical problem for you and for your friends and family working abroad, proudly representing our country around the world.”
What is FATCA?
American-born Jonathan Weiss has lived outside the US for 25 years. Residing in Switzerland for the last ten years, “out of the blue” he got a letter from his bank saying that “since I am an American citizen I had to file some extra paperwork. Two weeks later my bank account was frozen,” Weiss told the local press last year.
It took him three weeks to file the paper work and provide the bank with a letter of certification to have his account unfrozen. “It was scary,” he said. “People should be aware of FATCA and deal with it proactively so they don’t have to go through what I did.”

American Tax Consultant in France and American Club of the Riviera member, George Donnelly, explained FACTA as “a step towards clamping down on those who evade US taxation by investing overseas” that was enacted in the US on March 18th, 2010, with an effective date of July 1st, 2014.
There are two parts to FATCA, Mr Donnelly clarified: US taxpayers reporting of foreign assets and income on Form 8938 and the reporting of accounts by a non-US financial institution, otherwise known as a Foreign Financial Institution or FFI.
If you don’t otherwise need to file a tax return, then you are not required to file a Form 8938. But it is the second part of the form involving bank reporting that is resulting in a letter being sent to suspected US account holders requesting US taxpayer identification from FFIs.
Having been around since the 2011 tax year, the new Form 8938, Statement of Specified Foreign Financial Assets, requires disclosure of certain foreign assets and financial accounts. This is filed with the federal tax return. Although Form 8938 resembles the dreaded FBAR – the Foreign Bank Account Reporting, which looks only at bank account information – certain other non-account assets, such as business arrangements, are disclosed on the FACTA form.
The Treasury Department has negotiated a series of intergovernmental agreements with the tax authorities of other countries, such as France, Germany, Spain, Italy, Switzerland, Austria, Sweden, Denmark, and Norway, allowing them to act as intermediaries before the information is forwarded to the US government agency responsible for the collection and enforcement of taxes.
FATCA has become a model for other countries. The Organisation for Economic Co-operation and Development (OECD) is establishing the Common Reporting Standard (CRS) for international account disclosure. Some 44 OECD member states began CRS implementation on January 1st, 2016, with reporting commencing in 2017.
Last year, the US Treasury reported a record number of Americans giving up their citizenship – a figure of 4,279 – an increase of 20 percent over 2014, which was in itself a record-breaking year (in 2010 the number was just over 1000). The renouncement statistic may not be officially linked to FATCA, but for many ordinary Americans living abroad who’ve been denied access to basic banking facilities because “banks would rather refuse US citizens’ custom than run the risk of hefty penalties”, the law is grounds for a nationality divorce.
Whether the 45th President of the United States is willing to find a solution to this problem remains to be seen but one poll indicated that 28 percent of US citizens intend to move to another country if Donald Trump is elected president.
A note to Americans living in or visiting Nice, Democrats Abroad is hosting an Election Watch breakfast at the Negresco Hotel from 6 am to 11 am on Wednesday (reservations: €15/person).
For more information on FATCA, contact George Donnelly: george@donnelly-cpa.com
Article first published November 6, 2016.