A Farewell to America
Swiss Private Bank Advises Clients to Sell All US-Assets
Dr. Konrad Hummler, Chairman of the Swiss Private Banker Association, CEO and owner of Switzerland’s oldest private bank, Wegelin, is not a man who minces his words. The title of his most recent investment report is “A Farewell to America”. Hummler recommends all his clients to sell all securities issued in the US. Quite a radical step. The three main reasons, according to Wegelin’s Hummler, are:
The IRS is trying to tax non-US citizens, who own US securities through a more aggressive application of the US estate tax. In fact, every person, wherever he or she may live, can fall under the US estate tax with a tax rate of up to 45%. In case of death the IRS may confiscate up to 45% of all US assets of this person and this person’s bank is required to report all assets to the US government.
The Obama government in a new document, called Greenbook (“General Explanation of the Administration’s Fiscal Year 2010 Revenue Proposals”) describe how the IRS can extract much more income from so-called US persons abroad. And it is much easier to become a “US person”. If you have spend in 3 years more than 183 days and this year a minimum of 31 days in the US you have become a US person. Once you are a US person you fall under strict US tax regulation.
Last but not least, so Hummler argues, the US has amassed so much debt that it should strike fear in investors. According to Wegelin’s report, the total US government debt stands at 600% of the gross national product if calculated correctly. That is the reason why, according to Wegelin’s report, US government bonds and treasury bills are wildly overvalued. The same argument is also true for the US currency in general and therefore for all other bonds denominated in US-Dollar.
Mr. Hummler may only be a lone voice of one medium-sized bank in Switzerland. But it seems that even wealthy US citizens are increasingly heading towards the exit. According to a recent Wealth Bulletin report the number of rich US citizens who wish to expatriate has increased sharply last year. One may also recall the outflow of a very significant amount of assets from private Middle Eastern investors after the Bush administration has turned openly hostile towards the Arab world because of September 11. Another capital flight of this dimension could have some critical and profound implications for the US economy.
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(by Francis Groves, Senior Analyst)