More Bankruptcies, Swindles, and Backbiting

02/19/2009 12:07 pm EST

Focus: GLOBAL

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Just as Bernie Madoff’s 162-page list of victims was published amid news that lawyers in more than 21 countries have joined together to take legal action against the alleged Ponzi artist, America is greeted with another investment swindle!

This time, Sir Allan Stanford (an American knighted by Antigua) has seemingly disappeared as word of his $8-billion fraud became public. We don’t have many details yet, but once again it looks as if investors took the bait of promised and ridiculously inflated returns.

Unfortunately, before the dust from this economic storm settles, there will be plenty more where that came from.

Meanwhile, both General Motors (NYSE: GM) and Chrysler came back to the bargaining table with their government-mandated recovery plans. No surprise—they both want another handout—$16.6 billion for GM and $5 billion for Chrysler. As part of the plan, and in an effort to stave off bankruptcy, GM intends to reduce its workforce by 47,000 jobs, or 20% of the company.

And there’s a new name to add to the growing list of corporate bankruptcies: Trump Entertainment Resorts, Inc. (Nasdaq: TRMP). Oh wait, that’s not so new—the company has now filed for bankruptcy three times! But Donald Trump has rushed to announce that he opposed the filing, has resigned his seat on the board, and has no role in its management. At least he avoided having someone say to him: “You’re fired.”

Moving abroad, first, Jim Rogers ticked off Britain’s government with his unflattering comments on the British economy, as I wrote here.

Now, Starbucks (Nasdaq: SBUX) head Howard Schultz is taking his turn. In a CNBC interview, Schultz commented that the UK was in an economic “spiral” and consumer confidence was “very, very poor.”

In response, Business Secretary Peter Mandelson blasted Schultz for being “unnecessarily pessimistic about Britain's prospects and of was speaking out of turn.”

Come on, boys, let’s play nice. In case you haven’t heard, the entire globe is in somewhat of a meltdown, so we probably would benefit by working together, not angling for sound bites.

Just look how well the fellows at Royal Bank of Scotland (NYSE: RBS) are getting along. Despite its £20-billion taxpayer-funded bailout and talk of eliminating the bank’s big bonuses, an article in the Daily Mail claimed that some of the investment bankers at RBS are still planning to take home up to £600 million in bonuses, albeit delayed by three years or so. However, the government replied that bonuses are being cut to an “absolute minimum,” which may still turn out to be a whopping £175 million.

More bad banking news: giant Lloyds Banking Group (NYSE: LYG) reported that HBOS—the company it recently took over, with the help of the government—is looking at a 2008 loss of £10 billion.

That report sent the bank’s shares tumbling and—accompanied by the announcement that the UK’s prized AAA credit rating may be in jeopardy—also didn’t help the FTSE 100, which lost 27 points on Wednesday.

Global stock exchanges still haven’t come to terms with President Obama’s various stimulus efforts, and not liking his newest $75-billion effort to halt the foreclosure tide, the FTSEurofirst 300 index declined 0.3%.

Japan's Nikkei joined in sympathy, dropping 1.5%, falling to a four-month low. Further shocks to Japan’s system came in the report that the country’s gross domestic product (GDP) fell at an annualized rate of 12.7% in the fourth quarter of 2008, its third consecutive quarter of retrenchment.

But there is some good news—especially for fans of the yellow metal. Gold hit a series of price records this week, gaining against the euro, sterling and India’s rupee. In US dollars, it is now around $964, a seven-month high.

Our advisors continue to find the silver lining in this economic crisis. Heiko Böhmer, editor of the German Privatfinanz-Letter, spoke at the recent World Money Show in Orlando, and he joined me to discuss Germany’s investment market in our Q&A this week.

Roger Conrad, editor of Canadian Edge, recommended an income fund with high yields, while Paul Goodwin, editor of Cabot Emerging Markets Report, offered an easy way to invest in China.

Have a good and profitable week!

Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.

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