Money world

Merrill Lynch & Co Inc’s (MER.N: Quote, Profile, Research, Stock Buzz) perennially optimistic chief executive has made something of a habit of promising not to issue common shares, only to raise capital weeks later.

So far, though, investors seem to be cutting him a fair amount of slack. In fact on Tuesday after John Thain’s latest about-face, Merrill’s shares rose 7.9 percent.

But patience for the former Goldman Sachs and NYSE executive’s flip flops may wear thin, critics said.

“This may be the last time, or you could see more writedowns. You just don’t know,” said Jim Huguet, co-chief executive at fund manager Great Companies.

Merrill Lynch said on Monday it was raising $8.5 billion capital after agreeing to sell toxic debt assets at a loss.

The share sale comes less than two weeks after Thain said on a conference call with investors, “Right now, we believe we are in a very comfortable spot in terms of our capital.”

Thain has been making positive statements about the bank’s capital for months. In an April interview with Japan’s Nihon Keizai Shimbun, Thain said, “The goal is to maintain our current ratings. No more capital raising; I’m sure we have enough capital.”

Weeks later, the company issued more than $2.5 billion of preferred shares. 

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Sony, Samsung and other consumer-electronics heavyweights are uniting to support a technology that could send high-definition video signals wirelessly from a single set-top box to screens around the home.

This consortium is an important development in the race to create a definitive way to replace tangles of video cables, but does not end it - both Sony and Samsung are also supporting a competing technology.

In the new consortium, Sony Corp. and Samsung Electronics Co., along with Motorola Inc., Sharp Corp. and Hitachi Ltd. (HIT), will develop an industry standard around technology from Amimon Ltd. of Israel called WHDI, for Wireless Home Digital Interface.

"If you have a TV in the home, that TV will be able to access any source in the home, whether it’s a set-top box in the living room, or the PlayStation in the bedroom, or a DVD player in another bedroom. That’s the message of WHDI," said Noam Geri, co-founder of Amimon.

Amimon is already selling chips that fulfill part of that promise, but the creation of a broad industry group makes it more likely that consumers will be able to buy WHDI-enabled devices from different manufacturers and have them all work together.

Geri expects TVs with Amimon’s chips to reach stores next year, costing about $100 more than equivalent, non-wireless TVs.

Wireless streaming of high-definition video is a relatively tricky engineering problem that many companies are trying to tackle. It can be done with the fastest versions of Wi-Fi, a technology already in many homes, but that requires "compression," or reduction of the data rate, with picture quality degrading as a result. There’s also a delay in transmission as chips on both ends of the link work to compress, then decompress the image.

Competing standards: This has prompted a great deal of research into radio technologies that are faster, and require less compression. A leading contender is WirelessHD, centered on technology from SiBEAM Inc. of Sunnyvale, Calif. It uses an open portion of the radio band, at 60 gigahertz, for ultrafast transmission of uncompressed video, but it could be years away from commercialization. Its range is limited, meaning that it would be used for in-room links rather than whole-house networking, like WHDI.

Sony is part of the WirelessHD group as well, and is supporting WHDI to have "wider options," the company said in a statement.

Samsung, on the other hand, looks at WHDI as a stopgap technology until the higher-picture-quality WirelessHD takes over. JaeMoon Jo, Samsung’s vice president of TV research, said the company believes WirelessHD will be the "ultimate solution in the long run."

Still another contending wireless technology is ultra-wideband, or UWB. It requires less compression than Wi-Fi, but its range is more limited, generally to in-room networking. Monster Cable Products Inc. plans to introduce a kit that produces a wireless video link using UWB.

WHDI is less exotic than either WirelessHD or UWB. It uses a radio band at 5 gigahertz that’s used by some Wi-Fi devices, which means it can take advantage of research in that field. To get around the limitations of the restricted bandwidth, Amimon uses a clever trick instead of compression.

Before transmission, Amimon’s chips separate the important components of the video signal, the ones that really make a difference to the viewer, from the less important ones, like tiny variations in color over a small area. It then gives priority to the important parts, while putting less effort into getting the fine nuances to the receiver.

That means the transmission works over relatively long distances, albeit with lower image quality as the distance increases.

Motorola has looked at competing technologies, but WHDI is the only group it’s joined because of Amimon’s "extremely unique" approach, said Paul Moroney, a Motorola research fellow who works with WHDI.

Motorola (MOT, Fortune 500) plans to build the technology into its set-top boxes, which are used by many cable providers around the country. But the first product will likely be a pair of adapters that talk wirelessly to one another. One could be attached to a set-top box, the other to a TV set, Moroney said.

Belkin International Inc. already sells a pair of adapters based on Amimon’s chips for $1,000, and Sony (SNE) has announced a similar set for its TVs. Moroney said Motorola hopes to sell a kit for significantly less than Belkin’s price next year, as the technology matures.

Kurt Scherf, an analyst at Parks Associates, noted that wireless video technologies have been talked up for years, but haven’t lived up to their promises so far. Professional audio-video installers surveyed by his firm aren’t excited about wireless, because they’re afraid of reliability problems.

Still, he said, WHDI’s range should give it an edge, since it allows the technology to do more than just replace a cable in the entertainment center. 

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SemGroup LP declared bankruptcy on Tuesday after $3.2 billion in oil trading losses torpedoed the formerly 12th-largest private U.S. company.

The Tulsa-based company racked up the massive losses as oil prices ran up record gains, undercutting short crude futures positions SemGroup bought to hedge against its 500,000 barrel-per-day trading business.

To meet obligations, SemGroup plans to sell off oil and natural gas gathering, transportation, and storage assets worth an estimated $6.14 billion that were purchased in a whirlwind of acquisitions since it was founded in 2000.

“We have determined that the best way to maximize value for our creditors is to undertake a sales process that will transition our valuable businesses to well-established companies,” Terry Ronan, SemGroup’s acting chief executive, said in a statement.

SemGroup took a $2.4 billion loss on July 16 after it transferred its New York Mercantile Exchange oil futures trading account to Barclays Plc, converting what they called “loss contingencies” into an actual loss.

Included in the NYMEX loss was $290 million owed to SemGroup by a trading company owned by co-founder and former chief executive Thomas Kivisto, who was placed on administrative leave on July 17.

Securities legislation limits publicly traded company executives from extensive dealings with their firms, but experts said privately held companies have more flexibility.

“They can’t do anything illegal. But there is no particular disclosure to anyone apart from any contractual agreements that they may have with investors,” said Kenneth Froewiss, a professor of finance at New York University. 

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In 1973, when Bill Gross was 15 and cars were lined up at every gas station in Southern California, the aspiring engineer wanted to do something about spiking energy prices.

So he figured out how to build parabolic concentrators and Stirling engines to capture the sun’s energy, selling the plans for $4 apiece through ads in “Popular Science” magazine.

Gross, now 49, is again building solar power projects, albeit after a lengthy detour through the early days of the Internet.

His company, Idealab, created a slew of Web businesses in the 1990s, including pay-per-click advertising pioneer GoTo.com and online toy retailer eToys, which he said eventually “outspent its leash.”

“Everything we touched was turning to gold for a while, and then the crash came,” Gross said in an interview at his headquarters in Pasadena, California. He is not related to the Bill Gross who manages bond fund Pimco.

In its heyday, Idealab was planning an initial public offering, had 5,000 employees and locations in Boston, San Francisco, Pasadena and London. That is down to between 500 and 1,000 employees and one office now.

In that period, he also faced accusations — since dismissed or settled — by some of Idealab’s shareholders that he used company assets to finance a lavish lifestyle.

Two years ago, Gross was spared financial ruin again when Idealab shareholders agreed to pay off a $50 million personal loan he owed to a bank. 

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Diversified U.S. manufacturer United Technologies Corp (UTX.N: Quote, Profile, Research, Stock Buzz) reported better-than-expected quarterly profit Thursday on solid demand for Otis elevators and fire and security equipment from the commercial construction sector, sending its shares up almost 5 percent.

The world’s largest maker of elevators and air conditioners also raised its full-year profit forecast, saying it was managing its way through a slowing economy and moderating demand for its aircraft components.

“You’ve got a very diversified company in a variety of different businesses that’s extremely well managed,” said Jim Huguet, chief executive of Great Companies, a Tampa, Florida-based money manager with about $300 million in assets, including United Tech shares. “I’m not surprised they did well.”

United Tech said second-quarter earnings rose 11 percent to $1.28 billion, or $1.32 per share, from $1.15 billion, or $1.16 per share, a year earlier.

Analysts, on average, had expected a profit of $1.30 per share, according to Reuters Estimates.

Profit growth was sharpest at its Otis elevator and Sikorsky helicopter units; earnings at its Carrier air conditioner operations, which are influenced by rising metals prices, were marginally lower.

Revenue rose 12.7 percent to $15.67 billion.

The company said it now expects full-year profit of $4.80 to $4.95 per share, up from a prior forecast of $4.65 to $4.85. Wall Street expects $4.88. 

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Democratic presidential candidate Barack Obama could take longer to implement environmental policies than Republican rival John McCain, but he will be greener in the long run, a renewable fund manager said.

Portfolio manager Gunter Greiner, who manages a 5 million euro ($7.86 million) fund, said a change of governing party in the United States could mean policymaking decisions slow down, but that investors in the renewables sector should be patient.

“The funny thing is that although Obama will be a better bet for green energy, it could be the other way around at the beginning,” Greiner, who runs the VCH New Energy Fund, told Reuters on Wednesday.

“If Obama comes to office, every green energy and carbon strategy will be looked through very carefully and it will take time until decisions are made. If it’s McCain, the transition will be smoother and there will be less stalling,” he said.

Both candidates have endorsed emissions trading to fight global warming. McCain, with independent Senator Joe Lieberman, introduced one of the first U.S. climate bills in 2003.

Either candidate would be a vast improvement on President George W. Bush in terms of renewable energy, Greiner added.

It is Germany which has led the boom in the sector, offering state subsidies to help curb carbon dioxide emissions.

However Germany will scale back subsidies from next year. Greiner’s fund therefore favors solar companies which specialize in rooftop installations and is less keen on solar park installers. “People will still build solar parks but maybe not with the same returns that we are seeing now,” he said. 

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Profit warnings, breaches of key index levels, record oil prices, stressed consumers and investors seeking safety provide the background for markets this week, and many people are wondering how long this will all last.

There has been no classic “capitulation” — a market concept which states that heavy, sometimes panic, selling of stocks heralds the bottom and a beginning of an upturn. But there is enough gloom around to make a contrarian bullish.

“You are beginning to get into capitulation territory now,” said David Bowers, joint managing director of Absolute Strategy Research and consultant to Merrill Lynch for its monthly global fund manager sentiment survey.

“Are we going to go from a narrow bear market to a broad bear market?” he said, meaning that investors may start selling not only poorly performing stocks such as financials but also those which have not done too badly this year.

This week may offer some sort of answer if only because of the depths that have been reached recently.

MSCI’s main gauge of world stocks .MIWD00000PUS, for example, fell last week to a five-month trough. This was below the key March low it reached during the height of the Bear Stearns crisis when the U.S. Federal Reserve stepped in.

The U.S. S&P 500 index .SPX has joined its European and Japanese .N225 counterparts in formal bear market territory — that is, at least 20 percent below a cycle’s peak.

Investor sentiment indicators have also been hitting significant levels. Reuters global asset allocation poll last week, for example, showed equity holdings among leading investors to be at the lowest level in the more than four years it has been compiled.  

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H&R Block Inc., the nation’s largest tax preparer, said Monday it swung to a fourth-quarter profit, helped by a record-setting tax season and the sale of its troubled mortgage arm.

The Kansas City-based company earned $543.6 million, or $1.66 per share, in the three months ended April 30 compared with a loss of $85.6 million, or 26 cents per share, during the same period a year ago.

Excluding discontinued operations, including its Option One Mortgage Corp. subsidiary, the company said it earned $691.1 million, or $2.11 per share, compared with $591.2 million, or $1.81 per share, from continuing operations a year ago.

Discontinued operations contributed a loss of $147.6 million, or 45 cents per share, compared to a loss of $676.8 million, or $2.07 per share, during the fourth quarter of 2007.

The losses included the company adding about $203 million to its reserves for repurchasing defaulted mortgage loans, writing down the value of residual interests and the costs incurred from the April 30 sale of Option One to an affiliate of billionaire investor Wilbur Ross.

H&R Block (HRB) said revenue during the quarter rose 11% to $2.6 billion from $2.3 billion a year ago. It had a 1.9% increase in core customers using the company’s offices to file their income tax returns in the latest quarter.

Analysts surveyed by Thomson Financial expected adjusted earnings of $2.03 per share on $2.5 billion in revenue.

The company said it expects to earn between $1.60 and $1.70 per share for continuing operations in fiscal year 2009, which is above analysts’ predictions of $1.58 per share.

"While we are not providing earnings guidance beyond fiscal 2009, we are confident that for the three-year horizon through fiscal 2011, we can realize significant gains in earnings per share through unit growth, greater efficiency in our tax and other operations, and capital deployment, rather than relying solely on annual price increases for growth," Interim Chief Executive Officer Alan Bennett said in a release.

Bennett was named CEO last fall after former Chairman and Chief Executive Mark Ernst stepped down, ousted by the election of dissident shareholder Richard Breeden and two others to the board.

For the full year, the company said it lost $308.6 million, or 94 cents per share, compared with a loss of $433.7 million, or $1.33 per share, in 2007.

Annual revenues rose 10% to $4.4 billion from $4.0 billion a year earlier.

Analysts were expecting annual earnings of $1.35 per share on $4.3 billion in revenue. 

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MBIA Inc (MBI.N: Quote, Profile, Research, Stock Buzz) said on Monday that after selling $4 billion of assets in the second quarter, it now has enough cash and collateral to meet the extra requirements triggered by its recent downgrades.

The announcement followed a Wall Street Journal report that said the bond insurer was raising cash through municipal bond sales last week to make billions of dollars in payments triggered by its rating downgrade by Moody’s Investors Service.

Because of the sales, MBIA said will record pre-tax net realized losses on its second-quarter income statement of approximately $300 million. But this should not have a material impact because the losses “did not differ substantially” from unrealized losses already taken, MBIA said in a press release.

MBIA shares had fallen as much as 13 percent on Monday, but pared those losses after the company announcement to trade down almost 9 percent at $3.81.

“Contrary to recent statements in the media, MBIA is not in a ‘tenuous situation,’” said C. Edward Chaplin, chief financial officer, in a statement.

“The holders of our insurance policies, GICs (guaranteed investment contracts), medium-term notes and other debt instruments can rest assured that MBIA will meet its obligations to them as it always has — on time and in full,” the company said in a statement describing its latest actions.

MBIA and Ambac, both bond insurance industry giants, have lost their top ratings, mainly because of ill-timed and costly expansions into subprime mortgage securities.

The U.S. municipal market last week was pressured in part by MBIA’s sales of $400 million to $500 million of tax-free debt, and traders said on Monday they feared similar selling by Ambac Financial Group (ABK.N: Quote, Profile, Research, Stock Buzz). 

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