International Forecaster Weekly

Corruption Spirals As You Would Expect

The number of bribery cases in the courts spiral upward, creditworthiness and confidence is declining, Food stocks are low, apparently, Pressure on Bush over his role in the exposure of Valerie Plame, US national debt continues to grow at a million per minute.

Bob Chapman | December 8, 2007

This year our government collected more than $100 million in penalties from oil, chemical and telecommunication’s companies and secured five guilty pleas from corporate executives. The number of foreign bribery cases filed by criminal and civil investigators in the US has more than doubled since 2004 and they are spiraling upward.

Corporate America has joined businessmen internationally in bribing officials. Nearly a dozen energy companies are under investigation for alleged payoffs to Nigerian customs officials, and the giant insurance broker AON about its far-flung operations in an industry-wide probe. Authorities in the US and Germany are negotiating with Daimler to resolve allegations that the automaker paid foreign officials to win business in Africa, Asia and Eastern Europe.

Sixty more cases are in the pipeline and the list grows. As of now Britain has not brought forward any cases and dismissed the case against BAE System and Prince Bandar. The US Attorney has taken up the case. Germany is really doing their job investigating more than $1 billion in alleged improper payments by Siemens. Those who come forward in the US receive leniency. Last year Tyco agreed to pay $50 million to settle a civil case over cash and gifts to Brazilian and South Korean employees to win construction and water business. As you can see, corporate crime continues to flourish.

Fannie Mae will cut its dividend 30%, from $0.50 to $0.35 and issue $7 billion in preferred stocks. Fannie has only $2.3 billion in cash and even with $7 billion more that won’t be enough for operating capital and to cover losses on the way.

The Senate Banking Committee Chair Chris Dodd says Treasury Secretary Paulson needs to clear up questions about his former employees role in originating securities relating to subprime mortgages.

Retailers’ sales rose 2.5% last month, starting off what may be the slowest-growing holiday shopping season in five years. After the thanksgiving 50% discounts, buying slowed considerably. Sales at stores opened more than a year fell 2% last week from the week before and gained 3.1% yoy.

Interestingly debt market investors’ confidence in retailers’ creditworthiness is declining. Credit-default swaps tied to the debt of Target and Sears, used to speculate on the ability of the companies to repay their debt or hedge against the risk they present have been trading at or near the highest since March 2003. Dillard’s Department Store contracts at the highest since May 2002; these increases suggest deterioration in the perception of credit quality - the final 3-months of the year account for 30% of retailer’s annual profits.

Factory orders rose 0.5% in October, the biggest gain since July following a rise of 0.3% in September. The big rise was from 1.8% in petroleum shipments. Irrespective demand is cooling. The increase in factory orders was led by a 1.3% rise in shipments on non-durable goods.

Demand for food worldwide is more than the world is capable of producing and the problem is exacerbated by US ethanol production. Food stock inventories are the lowest in almost 30 years. Unless weather conditions are at an optimum and ethanol production is curtailed in the next 2 to 3 years, there could be famine in some parts of the world as food prices again skyrocket.

Bristol Myers will eliminate 4,800 jobs out of its 43,000 workforce. The industry has laid off 35,000 workers over the past year. Since 2000, 100,000 jobs have been lost.

Our president is doing everything possible to delay, obfuscate and obstruct a congressional investigation of his possible role in exposing an undercover CIA agent, says Rep. Henry Waxman, Chairman of the House Oversight Committee. Waxman has now challenged new A. G. Michael Mukasey to demonstrate his independence from the White House.

Waxman is seeking Mukasey’s help in obtaining records of Special Prosecutor Patrick Fitzgerald and his interviews with Bush, Cheney and other top administration officials regarding the unmasking of former CIA operative Valerie Plame Wilson.

NATO has sent 90 US soldiers to Kosovo to bring the NATO US compliment there to 2,800. Germany previously said it would send 500 troops to join the 17,000 NATO “peacekeepers” already deployed in Kosovo as part of KFOR.

Kosovo’s Albanian Muslim population intends to declare a unilateral declaration of independence on December 10, 2007, and that could restart the war. Belgrade is prepared to grant wide autonomy, but that isn’t good enough for the Albanians. They want to annex the state from Serbia, which is an act of war.

The money market fund of Pay Pal, eBay’s online pay service, invests cash parked by Internet shoppers in a portfolio that holds $1.63 billion in illiquid assets, or 5.5% of total holdings. It has $1 billion with Barclay’s Global Fund Advisors. If you have money there, get it out ASAP.

Our national debt grows at $1 million a minute or $1.4 billion a day. That is $30,000 for every American citizen. This debt is expanding as interest payments keep compounding, and that could in time squeeze out most other government spending. Since Bush took office, the total accumulation of annual budget deficits, is up from $5.7 trillion to $10 trillion by the time he leaves office. Our total debt commitment is more $75 trillion. In addition, we are looking at a $24 trillion bill for Iraq and Afghanistan.

The National Debt as a percentage of GDP has grown from 35% in 1975 to 65% today.

Since 2001, the dollar has lost 35% of its value against a basket of major currencies, during a period of strong dollar policy.

Foreign governments and investors now hold $2.23 trillion, or about 44% of all publicly held US debt. That is up 9.5% yoy.