NEWS/BLOG

New ID Rules for Border Crossings

The new border protection law takes effect Monday, June 1. Under a recommendation by the 9/11 Commission, the Western Hemisphere Travel Initiative will require secure travel documents when departing and entering the U.S. from Canada, Mexico, Bermuda and 17 nations of the Caribbean by sea or by land.

Travelers who do not comply with the new requirements will get a warning and be allowed to enter the U.S. after a background check. Officials say that drivers may be assured they will be able to re-enter the U.S. once their identity and citizenship is verified. (Requirements covering air travel went into effect in 2007.)

The documents for land and sea travel include:

U.S. or Canadian passport.
U.S. passport card.
Trusted Travelers Card (NEXUS, SENTRI or FAST/EXPRES).
State or provincial enhanced driver’s license

The passport card issued by the U.S. State Department to cross land borders is specifically for those not traveling by air. It costs $45 for first-time applicants in contrast to passports, which cost $100.

Identification documents available under the “Trusted Traveler” programs cost from $50 to more than $100. Developed by the U.S, Canadian and Mexican governments, these documents allow vetted travelers faster access to the border. In some cases, members in these programs have their own lanes at border crossings.

Enhanced driver’s licenses, which use a microchip to store a person’s information, also can be used to cross the northern and southern borders of the U.S.  Currently Vermont, Washington State, New York, and Michigan are the only states to offer them.

Exceptions from the new ID rules include children under 16 traveling with family, people under 19 traveling in youth groups, Native Americans and members of the military, who will be able to use different forms of identification. Also, travelers on cruise ships departing from a U.S. port, sailing only within the Western Hemisphere and returning to the same port do not have to comply.

For more information, go to www.travel.state.gov/passport.

Books Worth Looking Into

I’ve just discovered Tourmaline, a novel by Joanna Scott, published a few years back. The title refers to the gemstone found on the Italian island of Elba, where Napoleon was exiled and where an American family goes for a vacation that keeps getting extended. The story is told by various family members long after the fact. It’s the early fifties, post-war Europe. The Americans have borrowed money from their more affluent relatives for a vacation. Their misadventures begin when their luggage is stolen before they even get to the island. It’s not a comedy of errors, though errors are plentiful. Murray Murdoch, the father, is full of grand schemes, some of them quite absurd and his pursuit of them leaves his wife and four young sons unsettled. What’s interesting here is the juxtaposition between these American expats and their Italian neighbors who are ever polite and accommodating, but who become suspicious after the mysterious disappearance of a young woman from a prominent local family. The loose ends are tied up finally. This is recommended to anyone considering a move to a country where there’s apt to be culture shock.

Another not-so-new book that I enjoyed tremendously is The Mission Song by John Le Carré, whose work I’ve always loved. Here the main character, (dare I say hero?), Salvo, is half black, half white, a highly gifted interpreter, who happens to be married to an upper-class Englishwoman who is a journalist. There is another woman, though, African, sincere and compelling. Salvo is summoned to a meeting where the fate of an impoverished African country is being decided by a group of moneyed Europeans and some Africans tribal leaders they’ve hoped to dupe. The Africans are characters one rarely meets on the printed page, much less in real life. One in particular, Haj, is unforgettable. As Le Carré fans would expect, the plot has more than a few twists and turns. Le Carré is now well into his seventies and let’s hope he enjoys good health for some time to come.

I’ve been spending time with Living Abroad in Costa Rica, an excellent source for anyone considering a move there or who enjoys Costa Rican lore. See the review Updates from All Over.

Please note that the Living Abroad books aren’t related to Network for Living Abroad or liveabroad.com/ However, we do think they do a fine job.

Send us your suggestions as to books, resources and news items. We like hearing from you.

Greenback Falls from Grace

The following update is from the trusted currency exchange firm World First.

The dollar sharply reversed its strengthening trend last week, as worldwide optimism continues to grow, and questions were raised about the United States’ fiscal stability. The currency darling of early 2009 continued its dramatic fall from grace, as it managed to shed over 4% against both the pound and euro over the week.

The greenback has performed strongly throughout the credit crises, as investors flocked to the safe haven appeal of the dollar and US denominated securities. Enjoying the mantle of the world’s reserve currency, it benefited in part from the safety of the US government’s AAA credit rating. However, events last week brought into the limelight the validity of this position.

Ratings agency S&P downgrading the UK to ‘negative’ from ‘stable,’ concerned that debt levels may reach 100% of GDP by 2013. But it was a case of down the elevator and up the stairs for the GBP/USD cross, as the immediate selloff was followed by a gradual return of strength for the pound, as the initial shock of a possible sovereign debt downgrade for the UK spurred questions into the likelihood of a downgrade for the US itself. For the US, the combination of a current account deficit, high levels of debt and an ongoing quantitative easing program means makes the dollar look like a riskier prospect than previously, and has contributed to the selloff of late.

Further damaging the dollar’s prospects are signs that the financial system looks to be healing, as illustrated by two important measures of well-being of the financial system, the VIX index, and the 3 month LIBOR spread. Both this indicators returned to levels not seen since before the Lehman’s Brothers meltdown, a clear signal that times are improving.

The 3-month LIBOR spread is a classic barometer of how much banks trust lending to each other, and suggests that credit markets are thawing out in response to government interventions.  The VIX index, or the ‘fear gauge’ for investors measures volatility in equity movements, and shows that equity markets seem to have consolidated, or at least paused at their current levels, a prerequisite of a global recovery. 

With investors dipping their toes back into the market and chasing high yielding currencies, it wasn’t surprising to see the Australian and New Zealand dollar climb strongly over the week against the dollar, as did emerging markets currencies in general. The Indian rupee rose to five month highs amid optimism around possible economic reforms from the returning Prime Minister Manmohan Singh.

Data out this week with look to reaffirm the notion of green shoots sprouting, which are dollar negative. Most of the data is US centric this week, starting with a consumer confidence figure this afternoon. We look for further upside surprises to continue with new and existing home sales later in the week. The euro zone has an unemployment and CPI figure to contend with on Friday, while the UK also looks to the housing market with new home sales and nationwide housing prices

Trade of the Week

This week’s trade of the week is a Participating Forward Plus for a seller of GBP and a buyer of Euros.

This zero premium option gave the client a worst case rate (WCR) of 1.11 and the ability to participate in 75% of favorable movement upwards of the WCR

If, on expiry, GBP/EUR is below 1.11, and above 1.07, the client can buy at 1.11. If, on expiry, GBP/EUR is below 1.07, for every percent that the rate is below 1.07, the WCR (1.11) also falls by a percent. If, on expiry, GBP/EUR is above 1.11, the client is able to participate in 75% of the movement upwards. For full details of this structure please contact one of our options traders on 0207 801 9050.

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Please feel free to contact me () if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact World First Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

For more information see www.worldfirst.com. To view any past or present currency blogs, please click on the following link, www.worldfirst.com/blog.

Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as of the date of the briefing and are subject to change without notice.

There are a number of charges that we will levy if you enter into a hedging strategy.  The nature of these charges depends upon the specific strategy, but may include an up front premium.  We recommend that you read carefully the details of these charges which are set out alongside the description of each strategy.

For your protection, telephone calls are usually recorded

For more information see www.worldfirst.com. 

Technology to Speed Up Things at Airports

Travelers are accustomed to booking travel online. Now, though, a bar code on a cell phone or smart phone mobile browser can be read by a scanner at security and at the gate when a passenger boards, taking the place of a paper boarding pass. Major airlines in the U.S. are currently testing the technology at more than a dozen U.S. airports. Some foreign airlines already have it in operation. 

BRICS Are Back

Equity funds of the BRIC countries—Brazil, Russia, India and China— took in $686 million so far this year, most of it in the last 10 weeks. Asia ex-Japan equity funds saw the biggest inflow among the four major emerging-markets fund groups last week with a total of $1.9 billion. Diversified global emerging markets took in $1.18 billion and Latin America $350 million.Taiwan funds received a net $375 million, which amounts to 11% of assets, the highest since the fourth quarter of 2005.

INDIA
May 18 was a big day for India, following the end of the month-long election ushering the Congress Party into power. Unfortunately, India has complex restrictions on foreign investing. One stock worth watching is TTM, Tata Motors, which now owns Jaguar and at the same time is manufacturing the world’s cheapest auto.

Two relatively new—and very different --ETFs permit investing in the broad economy of India. The WisdomTree India Earnings Fund, EPI began trading on February 22. It is based on an earnings-weighted index of 150 companies listed on the Mumbai Stock Exchange. Each company has a minimum $200 million market cap, $5 million in earnings.

Soon to follow was the PowerShares India Portfolio, PIN. It is composed of 50 of the largest Indian stocks, weighted by “IndusCap,” a methodology that specifically addresses the foreign ownership limits. PowerShares believes it will deliver a more accurate representation of the capitalization in each company than market-cap or float-weight.

Older India ETFs include the iPath MSCI India Index, INP; Morgan Stanley India Investment Fund, Inc., IIF, and theBlackstone India Fund, IFN. All have made impressive gains recently.

BRAZIL
Brazil’s economy grew at a rate of 5.1% in 2008, down from 5.7% in 2007, according to Moody’s. Van Eck has introduced the first ETF to focus on small-cap Brazilian companies. Market Vectors Brazil Small-Cap, BRF started trading May 14.The fund holds 52 stocks that earn at least half of their revenue in Brazil and have market cap $250 million to $3.8 billion. Consumer discretionary stocks account for 32% of holdings, basic materials 16% and utilities 11%. Expenses are 0.73% of assets to cover expenses.

The only other Brazil focused ETF, iShares Brazil, EWZ, has soared 44% year-to-date yet is still 50% below its 12-month high.

Other New Emerging Markets ETFs
On May 6 WisdomTree initiated WisdomTree Dreyfus Emerging Currency Fund, CEW, which tracks a basket of 11 emerging-market currencies against the dollar. The currencies are: Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Israeli shekel, Turkish new lira, Chinese yuan, South Korean won, Taiwanese dollar, and Indian rupee.

Meanwhile, Back in the USA
The top story in Barron’s last weekend: Long-term Treasury prices have plunged by about 20%, with yield increases from 2.82% at the end of 2008 to about 4.10% currently. Investors took cover with treasuries last year as the recession spread worldwide. Now, though, some believe yields on 30-year- and 10-year notes could rise to more than 5% and 4%, respectively, within the coming year.

New Eco-Tour to Palau

A naturally eco-friendly destination for adventure travelers and a few expats, Palau has a special “Sense of Wonder ECO Tour,” an environmental and educational program supported by the Ebill Society in the Ngarchelong state. Activities include kayaking through the mangrove forests, nature games and a tour through Palau’s many historical remains.

Groups are no larger than six and are accompanied by a personal tour guide. Guests will experience close encounters with Palau’s endemic flora and fauna as well as becoming familiar with local cultural legends. They’ll also have tours of historical remains such as stone monolithcs—plus something billed as spiritual encounters. Included, too, is a sumptuous Palauan lunch.

All this costs just $150 for adults and $130 for children six to 12. The program schedule is as follows: pick up at hotel; departure to Ollei, Ngarchelong; kayaking through the mangroves; lunch; visits to historical sites, stone monoliths, Taro Garden; and a Taro painting experience. For more information about the tour, contact Dildoseb ecoTour at 680/488 6276. Visit the tour operator at www.dolphinspacific.com.

Located in the westernmost corner of Micronesia, Palau is an archipelago of more than 586 islands with only about 20,000 inhabitants. Consistently ranked as one of the world’s best dive destinations, Palau is known as a destination for the adventure traveler, offering some of the most spectacular water features and beaches. It has more than 1,400 species of fish and 500 species of coral.

For transportation, places to stay and travel planning, visit www.visit-palau.com. For still more about Palau, including wonderful photos and links to other sites, see www.visit-palau.blogspot.com.

Shaping Up for Recovery

The following update is from the currency exchange firm World First.

The recent bull run finally paused for breath last week, as equities worldwide were down, and safe haven currencies the dollar and yen advanced. Meanwhile, the pound marched on to four month highs against the dollar on the back of better than expected retail and manufacturing sales figures. However, as the general rally in risky assets begins to stumble, investors have begun to question how sustainable the recovery is, and what pattern does the future hold?

Alistair Darling and the Treasury stirred sentiment in the recent budget, forecasting a contraction of 3.5% for 2009, with growth rising to 1.25% in 2010, implying that growth would rebound sharply in a ‘V shaped’ pattern.

Victor Zarnowitz, a leading scholar in the field of business cycles was made famous in part for the ‘Zarnowitz rule,’ which states that deep recessions are almost always followed by rapid rebounds. This view is strengthened by empirical evidence which shows that since the 1930’s there hasn’t been a recession in the UK that wasn’t followed by a sharp rebound. Recent economic fortunes would also vindicate this perspective for the moment, as equities and risky currencies have rebounded strongly since March lows.

But we are not out of the woods yet, as while the Zarnowitz rule may be true is most cases, according to the International Monetary Fund (IMF) “recessions that are either associated with financial crises, or that are highly synchronized worldwide have historically been longer and deeper”.

If this plays out, the UK may be in for a growth pattern closer to an elongated ‘U shape’, as growth takes a while to recover and filter through the wider economy. This is in large part due to the stress that banks have been placed under; as the normally effective stimulatory action from central bankers, (lowering interest rates, quantitative easing) is less effective than recessions with healthy banking systems. Banks look to more selfish measures of mending their own books before passing on any benefits, in the form of credit, to the wider economy. The Bank of England realizes this may be the case, and in last week’s inflation report noted that the UK was likely to face a “slow and protracted recovery”.

It is also conceivable that this is simply a bear market rally and we will see a ‘W’ shaped recovery, with large swings up and down, and (hopefully) with an underlying trend towards recovery.

The shape of this recovery is important for sterling’s prospects, as the faster the rate of improvement (or slower the rate of decline) sets a rosier outlook for the pound. The worry is that we are all wrong and the market economy takes another permanent turn downward, although this looks unlikely. As Alistair Darling commented “It means there’s no plan B should the economy not do a U or V shaped recovery.”

Euro zone GDP results last Friday knocked the euro down a peg, as figures revealed a larger than consensus contraction. Most worrying was German GDP slumping to the worst result in 40 years. Conversely, the yen was a big gainer last week, as figures showed that investment flows were favorable for Japan during the month of February, meaning that the flow of money into foreign securities had abated.

This week sees further room for sterling appreciation with plenty of data due. Tomorrow sees the release of CPI and RPI figures, Wednesday shows industrial trends as well as BoE minutes, while Thursday shows a release of retail sales figures. Data from the US will be centered around FOMC minutes on Wednesday and the Euro zone has construction and PMI readings to contend with.

Trade of the week
The Target Accumulator Redemption Note (TARN) is an attractive option for a seller of GBP and a buyer of EUR over a 5 month period.

The client is given a strike rate of 1.15 with 7 big figures (on GBP/EUR) to use over the 5 months. The strike rate a TARN provides is significantly better than the current spot and forward rate of 1.13 The client is obligated to buy €100,000 at expiry per month for 5 months at the strike rate of 1.15 until either the benefit of the 7 big figures has been used, or until the end of the 5 months. E.g. if spot at expiry is 1.13 for the first month they will sell at 1.15, and have used 2 cents of the total benefit of the 7 cents (leaving 5 cents of benefit to be used over the remaining 4 months). However, if spot at expiry is above the strike rate, the client is obligated to buy at the strike rate. Once the 7 cents are exhausted, the TARN ceases to exist.

Please note that this cannot be considered a hedge as it doesn’t carry a worst case rate. This product is suitable for clients currently un-hedged due to the low value of sterling. Like all of our option structures, this is also available in other major currency pairings. For full details of this structure please contact one of our options traders on 0207 801 9050.

For more information see www.worldfirst.com. To view any past or present currency blogs or to see daily updates, click on the following link www.worldfirstfirst.com/blog.

Indispensable Advice on Moving to Costa Rica

Book covers can be telling. Erin Van Rheenen’s first book about living in Costa Rica featured a rocking chair on the cover. Her new Living Abroad in Costa Rica shows a bicycle. Though still a retirement haven, Costa Rica is attracting younger people who come here to work for one of the multinationals or to start businesses of their own.

Young or old, they come here to start a new life. Van Rheenen notes. “Costa Rica has an immensely appealing combination of the exotic and the familiar...a far-off land less than three hours by air from Miami...a sophisticated place where life is still fueled by basic human warmth.” They may be escaping the rat race or may have been cast out of the rat race, but probe deeper and you’ll find they’re drawn by the values Costa Rica embodies. She writes that people come to Costa Rica to save the world or to save themselves.

This all-new edition from Avalon Travel Publishing explores what Ticos, as they’re called, are really like in a section titled “People and Culture.” A smiling face might mean that someone really likes you but it might also mean that this person is bearing up after having just been insulted. Ticos are too polite to tell you when you’ve just violated some rule of etiquette that you don’t know.

For the prospective expat, there are useful tips on planning your fact-finding trip, whether its for 10 days, two weeks or a month. If you want to avoid excessive rain, you’re best off visiting from December through April, which is considered the summer here. Some things you might not have thought to bring are listed, such as a clothes line, a wash cloth hotels don’t always supply them) and even duck tape (to mend a torn screen, for example). Also listed are reasonably priced places to stay as well as restaurants and bookstores where you may find other expats. The author recognizes that talking with other expats is important in reaching a decision about making the move.

Travelers from the U.S. only need a passport, which lets you stay for 90 days. The various types of residency are spelled out here as well as duties charged on goods you bring into the country. Make sure you’re up to date on these before moving here. And yes, you may bring your dogs and cats without putting them in quarantine if you bring the right paperwork from a vet.

Residency for retirees with Pensionada status requires proving that you have minimum $600 per month which will be deposited in a Costa Rican Bank. Persons who haven’t reached retirement age may qualify for Rentista status with $1,000 per month. After three years, Pensionaas and Rentistas may qualify for permanent residency. The book has more details on this.

How much you’ll really need depends on your lifestyle. The author emphasizes not bringing your old life and spending habits with you. One of the many benefits of coming here is creating a new life that is simpler than what you leave behind. Don’t count on working here unless engaged in a business that you bring with you. Getting a job requires a work permit, which is very hard to get. If you’re lucky, you may be able to land a position with a multinational company or NGO before leaving home. You could also look starting one of the businesses the Costa Rican government welcomes.

Healthcare options are detailed here. San Jose, the centrally located capital city, has good hospitals. People come to Costa Rica from all over the world as medical tourists. Alternative medicine is respected here. The country has had a government run health insurance plan, Caja, for about half a century. Some expats prefer to use it as back-up or in addition to an international health plan or a private plan purchased locally. The author describes her own experiences with the government plan in a section titled “Kafka would love Caja.”

Included, too, is an overview of areas where expats may want to live, including various parts of the country as well as neighborhoods and suburbs of San Jose. The capital city offers more cultural advantages, but there are other areas with breathtaking natural beauty. It all depends on what you’re looking for.

The book is well organized with a table of contents that includes chapter sub-topics. It is also well indexed and has 40 pages of resources at the end. Not only is the book extremely useful for anyone considering Costa Rica as a place to live, it makes for interesting reading, especially with the many stories and anecdotes set off in boxes throughout the book.

World First Update

The following update is from the trusted foreign exchange firm, World First International.

BoE Reveals Further Quantitive Easing
Last week was a week that the Bank of England (BoE) decided to take action.  In recent months the climate of fear with the British economy has been such that the central bank has gone to great lengths to make markets as aware as possible of their next move in before they announce it.  As such, their decision on Thursday to unveil a further purchase of £50bn of long dated gilts without so much as hint before hand was to economic policy what blitzkrieg was to military doctrine.

The week began with GBP in its strongest position of 2009 as it appeared that sterling had made the most of the Bank Holiday.  As the pound has been reclassified in recent times as within the ‘risky’ currency basket, it was no surprise that Monday’s positive fundamental releases encouraged movement towards risk.  Macroeconomic data continued to provide glimmers of optimism throughout the week, with sterling benefiting from better than expected US Jobless claims and Non Farm payrolls on Friday, revealing a 539K decline against the 600K loss expected.

The main action of the week was centered on Thursday’s BoE announcement, which revealed a further release of £50bn into the market, in addition to the existing £75bn quantitative easing (QE) program already in place. It added that the QE program in place would run for a further three months until the end of August, as it was due to end this month.

Initial reaction was sterling negative, as investors were nervous that this signaled further economic weakness and that further downgrades in growth forecasts would be due. However, market appetite for risk remained strong, as banking stocks were driven higher in anticipation of the results of the banking stress tests. The results of the tests revealed that over $75bn of capital is required to be injected into 10 of the 19 banks. This was digested as a largely positive result; however some have questioned the validity of the underlying economic assumptions.

The Euro zone experienced an almost reciprocal week to sterling, beginning it on the ropes in part due to Axel Weber (an ECB member) commenting that German GDP wouldn’t pick up until the second half of 2010. The ECB meeting saw the eurozone join the QE club, as it unveiled plans to purchase €60bn of covered bonds in eurozone companies.  This was in addition to the 0.25% cut in interest rates. The single currency strengthened as a result of this proactive stance, sending it soaring against the dollar

Commodity currencies had a positive week, with AUD, ZAR, CAD and NZD particularly strong.  The RBA held rates at 3%, and despite the RBA also downgrading growth prospects for the year, AUD managed to gain over 4% against the dollar, and breakthrough the psychological $2 mark against the pound.

To the week ahead and tomorrow sees a raft of data from UK with Industrial and Manufacturing production and DCLG house price indices out. The showpiece event of the week for sterling is the BoE quarterly inflation report.  Initial whispers indicate that Mr King will dispel concerns of deflation and may even revise up UK Growth figures.  However, if last week taught us anything it was to make sure the chickens hatch before we count them.  We expect risk environment and news from other regions to drive sterling towards the back end of the week.

The Euro zone anticipates German Consumer Price Index (CPI) data on Tuesday before Industrial production data on Wednesday, but it will be the ECB Monthly report on Thursday that will attract most attention this week. The week is rounded off with EU CPI and GDP data.

The Greenback is this week’s busiest currency with Bernanke speaking at 23.30 BST tonight followed by Lockhart speaking tomorrow at 12.20 BST, before the release of trade balance, budget statement and ABC consumer confidence. Wednesday’s retail sales figures will be hotly anticipated, and the week is rounded off by Thursday’s PPI data and Friday’s CPI data respectively.

Paradoxically, it appears that the surprise move by the BoE to release unexpected data of such magnitude may actually provide sterling with the proof of resilience it needed.  If it can continue to consolidate current levels it looks as though the sterling bulls may have the jump on the bears, for the moment at least. 

Trade of the Week
The trade of the week is relevant to a seller of sterling and a buyer of euros. This zero premium structure enabled the client to hedge their exposure for a six month period through a ‘window convertible forward extra.’

The client has a worst case rate (WCR) of 1.07 and can benefit 100% of any and all upside up to a rate of 1.20 during the relevant window period. Should GBP/EUR hit 1.20 at any point in the window period, the structure reverts to a forward contract at 1.07. This structure also provides an extra ‘boosted rate’ whereby if the rate doesn’t fall below 1.05 for the window period, the client will receive a WCR of 1.11. For full details of this structure please contact one of our options traders on 0207 801 9050.
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Please feel free to e-mail if you have any questions or thoughts regarding World First updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

For more information see www.worldfirst.com. To view any past or present currency blogs or to see daily updates, click on the following link www.worldfirstfirst.com/blog.

Disclaimer: The above comments are only the views of World First and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as of the date of the briefing and are subject to change without notice.

There are a number of charges that we will levy if you enter into a hedging strategy.  The nature of these charges depends upon the specific strategy, but may include an up front premium.  We recommend that you read carefully the details of these charges which are set out alongside the description of each strategy. For your protection, telephone calls are usually recorded.

For more information see www.worldfirst.com.