When an "Immigrant" is not an Immigrant
28 March 2009

We normally share our proprietary information only with our clients, but there is enough interest in the broader community in the topic of Americans relocating or investing in properties outside the US (where they may eventually relocate) that we felt we should at least share a broad overview in a brief public presentation.

I'll begin with by introducing and defining a new term in most vocabularies that we consider critical to the discussion. I'll follow with a brief overview of the results of our latest survey of American opinion on the subject of relocation overseas (and the eighth since 2005). I'll finish with a few comments on a very interesting suggestion regarding real estate sales in the US to people in other nations.

Ever since we began the first studies of American relocation outside the US, we have met with problems due to a fundamental misunderstanding.

Migration is a major issue in dozens of nations today. When I speak or write publically on the subject of Americans moving to other nations or purchasing property in other nations, I am always faced with folks who insist that I am talking about "migration". I am not.

Definitions are in order here. Without them, we are in trouble. For purposes of this commentary and in light of our research, we define migrants as people moving to other nations, seeking eventual citizenship. This is the traditional view of migration for the simple reason that selling your home and moving to another nation was difficult, expensive, and often dangerous (think of those sailing ships that never made it across the Atlantic).

If you were going to take this action, you were not planning on a short-term stay. There were probably many Irish, Italian, Polish, and other Europeans who thought the US was the land of milk and honey where they could make their fortune in a relatively short time, then return home. Today, most descendants of these immigrants are referred to as Irish-Americans, Italian-Americans, Polish-Americans and so forth. Indeed, at this late date, we normally think of them as simply Americans. Although many of their ancestors, especially in the early days before word got back otherwise, may have thought they were only going to temporarily live in the US, but were rapidly disabused of that expectation when they discovered that the "milk and honey" were not come by easily or quickly.

These are the migrants. They still exist, of course, and we expect they will be there generations from now. They are not the people we are interested in, important though they may be to others.

Another group that has been around for a very long time, although in far greater number in recent decades, can be called temporary residents. These are people whose employers assign them overseas, or are spending their Junior year in college in a non-US university, or are sent overseas by the US military and so forth. They are living outside the US for a limited time and they recognize that from the beginning. They are not the people we are interested in, important though they may be to others.

There is a third group that has been around for a very, very long time. They are refugees. They may end up being migrants or temporary residents, but they are different in one critical respect. They do what they do because they are forced to do so or suffer. Unlike migrants and temporary residents, they move from one nation to another involuntarily. They are not the people we are interested in, important though they may be to others.

Instead, we are interested in a fourth group, but we have found no generally recognized term for this group, so we have had to create our own. We are talking about American relocators. They do not intend to give up their American citizenship. They are not moving overseas as the result of an obligation to their firm, their education, or military service. They are not traditional refugees, although a few of the more emotional may use that word. They are relocating voluntarily for a whole range of reasons, but they are relocating, not migrating and so forth.

Why is understanding this critical? Because every single discussion we have noted that is clearly focused on relocation refers to it as migration. This is the old "comparing apples to oranges" problem. Commentators on the "apple" of relocation are forever calling it the "orange" of migration. If you want to properly compare apples to oranges, you first have to recognize that apples and oranges are different and define them properly. If you don't do that, you can't compare them and discussing an orange that is actually an apple is a waste of time at best. Much worse in this case, it can lead to serious errors in policies and practices in both the private and public sectors.

One of the great frustrations when discussing American relocators is that too many people insist on treating them negatively as migrants. "Why are they taking money away from us? These people are rejecting the nation that has done so much for them. This is 'unpatriotic' (or, worse yet, un-American). This is a new 'brain drain'. What can we do to stop this?"

I note how many Americans react when one of their number announces that he or she has accepted, for example, a job with a European firm in China. You are congratulated! What a wonderful opportunity! This is a great career move. And how exciting! You are going to learn a new language, live in a new culture, and "expand your horizons". This is a smart personal and professional move in a growing global market.

By the same token, I note how many Americans react when one of their number says he or she is moving to another nation to look for work, but without a contract, the reaction is often different. What's wrong with the US? What are your reasons? Why are you taking such a drastic action? What are you running away from?

What is going on here? Why is it great that someone is taking a job with Dell, 3M, or another American firm in Panama, but it isn't if he or she is moving to Panama to look for work?

Over time, we have discovered that the fundamental problem is too many people see relocators as migrants. It is often just that simple. They are seen as leaving America for good. These days, it can even lead to the charge that they are "deserting the nation in its hour of need" or some such nonsense.

Let me emphasize, relocators are not migrants. They are American citizens living outside the US. They are not giving up their citizenship. They may not know how long they will live in their new home, but this is not necessarily a permanent shift. If so, they will become migrants, but that is rare.

In a global economy, no matter how disrupted it may be at the moment, these folks are very valuable to the US for at least two reasons. We could write a book on this topic, but we will keep it very brief here.

We learn and grow so much more when we move to a new environment. You hear that all the time from relocators. They pick up new ideas, they start new businesses, they learn new approaches, the list is long. Because they are American citizens, the odds are very high that they will return to the US and bring with them the experience they have gained elsewhere. In a global economy, that is gold.

In addition, but sometimes forgotten, American relocators are better communicators of what is good about America, in deeds and not just words, than any government-sponsored publicity campaign. They are the true "Voice of America" and their voices are heard more clearly and more effectively than any publicity campaign or foreign policy announcement. In a day and age when Americans can no longer expect people in other nations to immediately respect them simply because they are Americans, this too is gold.

Enough. I have spent more time on this than perhaps I should, but we have found this confusion between migration and relocation so profound, even among our clients, that the time has come to lay it out. Now on to the second portion of this letter.

Until earlier this month, the last of our seven surveys conducted by Zogby International of statistically-valid samples of the American adult population was conducted in June of 2007. How fortunate, so to speak, as we captured this snapshot of American relocators just weeks before the term "sub-prime" became a standard term in the American lexicon.

It has been a year and a half now that the global financial world has been on an especially frightening roller coaster. You know; the part of the ride where you go over the top and head down at a dizzying speed that scares the heck out of you.

We believe we have waited long enough for the enormity of the financial crisis to register on the consciousness of nearly all adult Americans. We decided it was time to check the results. Our survey of 3436 adults (three to four times the normal survey number) was conducted between March 2 and March 5 of 2009.

As with all such surveys, we began with a fundamental "gateway" question asked of all respondents. Here is the question and the responses offered:

I won't go into details here. That is proprietary information available only to clients, but I do want to share a quick and basic overview of the response to this question in comparison to the seventh survey of June 2007.

As in the past, we phrase the question to try and remove the "temporary residents" described earlier so as to focus on the relocators.

As you can see above, we divide the population into seven groups, one of them not being interested in either relocation or purchasing a vacation or investment property outside the US.

The remaining six are divided into two categories that we informally refer to as Relocators and Investors. In addition to some of our clients' interest in people purchasing property outside the US, our experience has clearly demonstrated that Investors often become Relocators at a later date.

Each category is divided into three sub-categories, depending on the "level of seriousness" of their interest.

In our discussions with clients and others, there is a widespread assumption that the number of both overseas Relocators and Investors has taken a dramatic and negative hit as a result of the financial turmoil and loss of household financial resources in the US. Indeed, two of the six have substantially declined.

Those who are in the "Yes, I plan to relocate outside the U.S." sub-category are sharply down, some 40%, although still representing roughly a million US households. We informally refer to these folks as the Committed.

In addition, an even greater drop, nearly 50%, is found in "No, I do not plan to relocate, but I am somewhat seriously considering purchasing property outside the U.S." sub-category who, if they will forgive us, we call the Dreamers. If the Committed are at one end of the spectrum of "seriousness", the Dreamers are at the other end.

The other four? There are changes, but overall, their number has increased.

Let's look at it from a slightly different perspective. Because the Dreamers are quite a distance from making any decision and are not even considering relocation at this time, we subtract them from the total to focus more tightly on Relocators and the more serious Investors.

So what has been the effect of the last year and a half on this grouping? Their percentage has fallen from 12.2% in June of 2007 to 12.0% in March of 2009. Remember, that includes the sharp decrease in the Committed. The overall decrease in all six groups is a minus 4.1%. However, 3.9% of that decrease comes from the Dreamer sub-category alone.

Despite everything that has happened in the US over the last year and a half, the situation is surprisingly stable. Yes, the number relocating now is down, but those who may take their place in the future are increasing.

Why is this movement of Americans so unnoticed? Well, for one thing, they are not seen as problems in most nations as they bring sufficient resources in money, skills or both to make them welcome additions to the local population. In the exceedingly negative atmosphere in today's world, if something isn't a "problem" or a "threat", it just goes ignored.

A second very important factor that we frequently emphasize is that American relocation is not an organized "movement." It has no "guru" and it is certainly not a result of government fiat. American relocation is the result of millions of individual household decisions made independently and without reference to each other. As such, it can go unnoticed for a very long time.

In addition, millions of non-Americans have immigrated or relocated to the US. The US is still seen as the best single nation for immigration, a credit to our legitimate claim to be a "nation of immigrants". Although I have gone to great lengths to separate migration from relocation when talking about Americans, the "flip side" of this coin is primarily migration. The two, combined, refer to the voluntary movement of people to and from the US.

When combined, we can see clearly that this voluntary movement is a two-way street. That is often forgotten, if it is considered at all.

One newsletter that is always read carefully at New Global is John Mauldin's Thoughts from the Frontline. Always intelligent and always thought-provoking, John has done more to educate the rest of us in important financial and investment matters, drawing on opinions and research from several different perspectives, than anyone else we know, and he does it all for free. A new reader soon learns that it is no mystery why John Mauldin has well over a million subscribers and has his newsletters translated into Chinese to meet the needs of that audience.

We consider ourselves faithful Wall Street Journal readers, but if it wasn't for John's newsletter, we would have missed the recent op-ed essay, Immigrants Can Help Fix the Housing Bubble by Gary Shilling and Richard LeFrak. As they put it,

As consumers retrench, production is cut, payrolls are slashed, and consumer confidence, incomes and spending are savaged in a self-feeding downward economic spiral. But if the government buys surplus houses and sells them at low market-clearing prices, other house prices will drop, destroying more home equity and driving many more mortgages under water. Bulldozing excess houses would be an inefficient end for perfectly habitable structures.

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. -- if they buy houses of minimal values (not shacks). They wouldn't need to live in those houses, but in order to remove the unit from the total housing market, they couldn't rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% -- but where many foreigners like to live.

This sounds very radical to most Americans, we suspect, and is probably going to be extremely controversial, in good part because of the migration/relocation misunderstanding. Some people are going to confuse illegal immigration to the US with legal relocation to the US. Mr. Shilling and Mr. LeFrac didn't help their cause by referring to these people as "immigrants", but they did provide us with yet another example of the confusion that can result from inaccurate terminology. It is critical that people who promote the benefits of relocation first sort out their apples and oranges, if they expect others to understand their proposal and act accordingly.

Similar programs to the one they suggest are found in other nations offering residency to Americans, among others, as in Panama where it has been very successful. We know from observation and experience that these programs can be very positive for all parties concerned and we salute these two gentlemen for bringing the subject to the attention of the American people (and to John Mauldin for bringing it to ours!), despite the error in terminology.

They may not know it, but Shllling and LeFrak are introducing relocation, not migration, into the American consciousness at a time when it can be most useful. That is one of the most constructive suggestions we have heard amidst the wailing, gnashing of teeth, and rending of garments that mark so much financial and economic commentary today.

On that note, I will bring this to an end. This has been an exceptionally long letter and I thank you for your patience.

Bob Adams
President and CEO
New Global Initiatives, Inc.

Mr. Adams is available for private consultations, speaking engagements, and interviews on the topic of American relocation. If interested, please call Liz Purcell at (301) 941-1877 or write us.

Mr. Adams has written on this topic elsewhere in the past. As you will see, he too fell into the trap of unclear terminology (although he insists that his editors were a big part of the problem!). They include his article at Barron's (A paid subscription is required. For those lacking a subscription, Barron's granted Mr. Adams the right to republish the article at his personal website, Retirement Wave), his op-ed at Boston's Christian Science Monitor, and his interview with Erin Burnett at CNBC's Street Signs, among others. And following considerable pestering from younger associates, Mr. Adams finally broke down and set up a personal page at MySpace. He can also be found at LinkedIn and FaceBook. Finally, Mr. Adams not only "talks the talk", but "walks the walk" as an American citizen residing in Panama City, Panama where is also President and CEO of Panama Wave S.A..