Money world

The catastrophe looming in the documentary "I.O.U.S.A." isn’t romantic like the doomed young love in "Titanic," but billionaires Warren Buffett and Pete Peterson warn it could break many more hearts.

The disaster they warn of could be bigger than any we’ve ever seen - bigger than an iceberg, bigger even than the current mortgage crisis.

If the U.S. doesn’t do something, and fast, to tame the federal government’s debts - now more than $50 trillion - the two Nebraska natives warn we will saddle coming generations with economic problems that will make this year’s financial turbulence look like a trip to the debt counselor’s office.

Premiering Thursday at 358 theaters nationwide, "I.O.U.S.A." is part of Peterson’s campaign to give the ballooning debt a central role in the presidential campaign.

A live panel discussion after the first showings - tape delayed for moviegoers in the West - will include Buffett, Peterson and other experts. Despite ticket prices much higher than for a feature, at $11.50 to $20, Thursday’s showings had sold out at some theaters by Wednesday, organizers said.

The two prominent investors don’t share a political philosophy: Peterson endorses Republican John McCain for president while Buffett favors Democrat Barack Obama. But they say the nation’s budget and trade deficits aren’t really partisan issues.

"Our situation is a lot worse than advertised, and we need to start making some tough choices if we want our future to be better than our past," former U.S. Comptroller David Walker, one of the movie’s stars, said Wednesday.

Peterson - who co-founded the Blackstone Group LP (BX) private equity firm and served as commerce secretary under President Nixon - is financing the movie and the discussion in Omaha to advance the goals of his foundation, created in February, which Walker runs.

Peterson pledged $1 billion to help raise the alarm about the nation’s budget deficit, the projected shortfalls in Medicare and Social Security funding, the trade deficit and the meager savings rate for most Americans.

Peterson and Walker both talk about the substantial debt burden that could be left for future generations if changes aren’t made.

"We’re mortgaging the future of people who can’t vote and might not even be born yet," Walker said.

The "I.O.U.S.A." filmmakers followed Walker as he toured the country speaking to college groups, newspaper editorial boards and community groups about the nation’s financial problems.

Most of the talks in the movie took place while Walker still ran the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Walker and the movie cite GAO figures that show the U.S bad credit payday loans. government owed roughly $53 trillion more than it had at the end of the 2007 fiscal year, which is the most recent figure available.

About $11 trillion of that covers the publicly traded government debt, the amount the federal government owes to employee pensions and the cost of environmental cleanup of federal land. The rest of the $53 trillion figure accounts for projected shortfalls in Medicare and Social Security.

The cost of covering those obligations is expected to spiral as more and more baby boomers become eligible for the two programs.

The film also features interviews with prominent businessmen and officials from both major political parties, such as former Federal Reserve chairman Alan Greenspan and Paul Volcker and former U.S. Treasury secretaries Paul O’Neill and Robert Rubin.

Buffett did not respond to a request for an interview for this story, but he has said the United States is essentially selling off chunks of the country to foreign investors to finance the nation’s overconsumption.

"We’ve got a super-subprime crisis brewing - namely, the federal government’s finances," Walker said. "The factors that caused the mortgage-based subprime (crisis) to explode exist for the government’s finances. The difference is it’s 25 times - at least - bigger."

Buffett also has warned for years that the nation’s trade deficit - the difference between how much the country imports and exports - was going to devalue the dollar and create other problems.

"Our trade equation guarantees massive foreign investment in the U.S. When we force-feed $2 billion daily to the rest of the world, they must invest in something here," Buffett said in his annual letter to shareholders earlier this year.

Thursday’s panel discussion will also feature Bill Novelli, AARP’s chief executive, and William Niskanen, chairman of the libertarian-leaning CATO Institute.

With showings in 358 theaters, the movie’s premiere likely will be bigger than its planned 12-city theatrical run, which begins Friday.

The main reason the movie is being distributed in theaters is that its makers think it could contend for an Academy Award, Walker said. More people will likely see the movie after it leaves theaters because the foundation hopes to air it on television early next year, he said.

Clips from the movie and panel discussion will be available online. 

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Chip maker Vishay Intertechnology says it offered to buy power management chip maker International Rectifier Corp. for $1.6 billion in cash.

Malvern, Pa.-based Vishay Intertechnology Inc (VSH). says the offer would be for $21.22 per share, which is about a 13% premium over International Rectifier’s (IRF) Thursday closing price of $18.82 check cash advance.

International Rectifier is based El Segundo, Calif. 

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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 online payday advance. 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 cash advance. 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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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 payday loans. 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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LONDON–Belgian brewer InBev, the world's second-biggest by volume, is working on a $46 billion bid for Anheuser Busch, a Financial Times report said, boosting the U.S. brewer's stock price.

In the report on its Alphaville blog on the newspaper's website, the FT cited sources as saying the approach was expected to be pitched at $65 a share but while extensive work was being carried out InBev was "not about to push the button."

The report also said a financing package of $50 billion had been provisionally arranged through JPMorgan and Santander and that the bid had been discussed at an InBev board meeting on April 28 and at a meeting on Thursday.

InBev said it would not comment on the report. Anheuser-Busch was not immediately available but has a policy of not declining market rumours.

A JPMorgan spokeswoman declined to comment.

There have been recurrent rumours over a possible bid from InBev for its U.S. rival.

"Anheuser-Busch shares and options have been active throughout the week due to rumours of a takeover," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

Jan Meijer, a beverage sector analyst with Theodoor Gilissen in Amsterdam said the deal made sense.

"There is a clear takeover rationale and we've been waiting for this to happen," he said.

"InBev has had some problems in the United States and if there was a takeover they would be able to rely on the network of Anheuser-Busch guaranteed payday loans. It would fit in nicely with their exposure to emerging markets too."

InBev has a distribution deal wiyth Anheuser-Bush for its beers in the United States.

InBev was overtaken as the world's largest brewer by SAB Miller last year. Rivals Heineken and Carlsberg have also increased their size with their joint purchase of Scottish and Newcastle.

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Frank Stronach’s saddle sores intensified at Magna Entertainment Corp. yesterday with another big loss, but he showed no sign of giving up on the debt-heavy horse-racing and gambling company.

Stronach, MEC’s hard-riding chair, chief executive officer, founder and controlling shareholder, told other shareholders that despite past mistakes, the company is on the right track with a focus on a debt reduction plan, and should pull away from its troubles in about two years.

"MEC is not a dead horse, I can assure you," Stronach said at the company’s annual meeting.

His confidence follows an earlier prediction that Aurora-based MEC would be debt-free by the end of 2006. He made the same promise for 2007 and 2008.

Instead, Magna Entertainment is still buckling under the weight of more than $500 million (U.S.) in debt and $60 million in annual interest payments despite major asset sales.

It got worse yesterday when the company reported a huge loss of $46.4 million in the first quarter, down from a profit of $2.4 million in the same period last year. The deep red ink in the first quarter is on top of a $306.5 million loss in the last three years.

In the latest quarter, MEC revenues tumbled 9 per cent to $230.9 million. The company attributed the loss and lower revenues to fewer racing days because of heavy rains, lower attendance and poor performance at the flagship Gulfstream operation in Florida.

The racing company repeated a familiar note from recent quarters that its "ability to continue as a going concern is in substantial doubt."

The first-quarter loss pulled down the firm’s sagging A shares on the Toronto Stock Exchange. The shares, which slipped into penny stock status a few months ago, dropped 8.5 cents (Canadian) to close at 39.5 cents.

Stronach told the meeting Magna Entertainment’s stock price is so low because some financial institutions believe the company won’t survive.

Although he shied away from predicting when the firm would post an annual profit, Stronach remained bullish about its prospects payday advance.

He noted his family invested $20 million in MEC last fall and could pump more into the company.

"Would I invest monies in a company which I think would fail?" Stronach asked later. "That wouldn’t make sense."

He also reminded investors that he has some experience in dealing with a company in serious trouble by recalling auto-parts giant Magna International’s brush with bankruptcy 18 years ago.

"A number of financial institutions thought we wouldn’t make it," said Stronach, who is still Magna’s chair. "Today, Magna is one of the premier companies in the global automobile industry with approximately $2 billion in cash on hand, no debt. So I know it can be done."

Stronach acknowledged the company’s drive to eliminate its onerous debt is slower than earlier predicted because of the downturn in the U.S. real estate market and a global credit crunch that’s lowering values and making borrowing more difficult.

"We’ve had offers (for racetracks and surrounding lands) but again there won’t be any fire sales," he insisted. The company is also considering joint ventures on developing racetrack projects, and chief financial officer Blake Tohana said it may have "announcements in the near future" about such arrangements or the sale of racetracks.

MEC is currently the largest owner of racetracks in North America, with 10 operations and accompanying gambling and broadcasting facilities. It wants to pare down the number of racetracks to five, Stronach says.

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LONDON – Oil hit a new record near $120 (U.S.) a barrel on Monday, boosted by a string of bullish factors that include a UK refinery strike and disruptions to Nigeria’s output that highlight the market’s anxieties over threats to supply.

Oil held firm despite a rally in the U.S. dollar versus the euro, which reflected growing expectations that the U.S. Federal Reserve may not cut interest rates this week.

U.S. light crude for June delivery was up 57 cents at $119.09 (all figures U.S.) a barrel, after an earlier lifetime high of $119.93. Prices are up almost 25 per cent since the start of the year.

London Brent crude was up 38 cents to $116.72.

"The Federal Reserve will have a chance to bolster the dollar if it decides to hold the line on further rate increases," Edward Meir, analyst with broker MF Global, said in a research note. "Both these developments could possibly induce a correction in energy prices later in the week, but for now the trend appears higher still."

Crude prices have surged more than fivefold since 2002 as global supplies struggle to keep pace with rising demand in emerging economies, such as China.

The Organization of the Petroleum Exporting Countries (OPEC), that produces more than a third of the world’s oil, has refused to pump more, saying the market is adequately supplied.

OPEC President Chakib Khelil blamed the fall in the U.S. dollar for high prices and did not rule out prices rising to $200 a barrel.

"Without geopolitical problems and the fall in the dollar, the prices of oil would not be at this level," he was quoted saying in Algerian government newspaper El Moudhajid.

A fall in the U.S overnight payday loans. dollar has played a big part in oil’s surge, boosting the value of commodities priced in the U.S. currency.

Gold, for example, hit a record high of more than $1,000 an ounce on March 17. But gold is now more than 13 per cent below its peak as investors wait to see the direction of U.S. interest rates.

The 700,000-barrel-per-day (bpd) Forties North Sea crude oil pipeline remained closed on Monday due to a strike at the neighbouring 210,000 bpd Grangemouth refinery after the collapse of talks over pensions.

Ineos, the owner of the Grangemouth refinery, expects striking employees to return to work on Tuesday. BP has said the Forties pipeline could then be back in operation within 24 hours but might take a few more days to get back to full flow.

In Nigeria, unidentified gunmen killed five policemen and seized several weapons in a raid on a police station in the oil-rich southern Nigerian state of Rivers on Sunday..

Last week a strike and attacks by rebels forced Nigeria’s two largest oil firms, Exxon Mobil and Royal Dutch Shell, to shut some 369,000 bpd of production.

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Citing soaring fuel prices, Air Canada has decided to follow a move by several U.S. carriers and begin charging some passengers $25 to check a second piece of luggage on certain flights.

The country’s largest airline, which already charges fees for a number of formerly complimentary services, said that passengers flying within Canada or to the United States on its cheaper "Tango" or "Tango Plus" fares will now be permitted only one piece of checked luggage for free.

Air Canada said the decision to move away from the previous industry standard of two pieces of checked luggage won’t be applied to passengers who purchase more expensive fare classes, fly on international routes or hold certain frequent flier status.

"The Americans led on this one and we are just aligning ourselves," said Isabelle Arthur, an Air Canada spokesperson. "It’s very important that Air Canada find ways of responding to the pressures of dramatically rising fuel costs.

"With this specific change customers can choose to control their own costs because they can choose to pack lighter."

While the two affected fare classes are the airline’s most popular, Arthur said Air Canada research shows that only about 20 per cent of those passengers check more than one bag.

In February, UAL Corp.’s United Airlines became the first U.S faxless payday advance. carrier to deviate from the standard policy of two free checked bags by charging some passengers $25 for a second piece of luggage.

Since then most of the other major U.S. carriers have followed suit. The list includes Continental Airlines, Delta Air Lines, Northwest Airlines and US Airways.

Even some low-cost carriers are implementing the extra charge. JetBlue Airways recently said it would begin charging $20 while AirTran Airways said it would charge $10.

Air Canada, though, has gone further than most when it comes to asking passengers to pay for extras that used to be given away free.

Since exiting its restructuring in 2004, the airline has started charging fees for everything from pillows and blankets to enhanced customer service when flights are cancelled because of airport delays or bad weather.

Richard Bartrem, a spokesperson for WestJet Airlines Ltd., said the Calgary-based carrier had not yet decided whether it would match Air Canada’s luggage fees.

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Energy stocks still haven’t factored in the value of $100 (U.S.) per barrel for oil, and that may be a hidden opportunity for investors, the chief economist for CIBC World Markets said in his latest research report.

That’s among the reasons Canadian investors don’t need to run for cover from the U.S. economic slowdown, economist and chief strategist Jeff Rubin wrote.

"Although even a modest U.S. recession would ordinarily be a sign for investors north of the border to hunker down, we do not believe that a shift to a completely defensive posture is as warranted today as it might once have been," according to Rubin’s monthly “Canadian Portfolio Strategy Outlook” report, released yesterday.

Rubin has a year-end target of 14,500 points for the S&P/TSX composite index and he thinks it will hit 16,200 by the end of 2009.

That means the TSX would continue to beat the U.S. S&P 500 index with a return of 7.7 per cent this year and 14.1 per cent in 2009.

The stock market strength will come from mostly the energy and materials sector, which has been driving most of the gains for the past five or six years, Rubin said.

"I think we’re going to see new all-time highs in the energy and materials sector, particularly the energy sector."

That’s despite the recession in the United States, Rubin added.

While some economists say the slowdown south of the border will dampen demand for oil and commodities, Rubin pointed out prices are already at record highs, despite the current economic turmoil, largely because of massive demand from Asia.

"The U.S. isn’t as decisive to those markets as it once was," Rubin said.

These higher commodity prices aren’t being fully reflected in energy stock valuations, he said.

"In oil stocks, for example, they’re pretty well pricing in $75 oil and oil is over $100."

Look for stock prices to rise as the remaining increase is factored in, he added guaranteed cash advance.

Rubin’s model portfolio is "overweight" in energy and material stocks, he said in his report. He said he expects firm prices for a range of commodities as supplies remain stretched for many minerals and industrial metals.

He said he remains "overweight" in bonds as well, expecting a 1 percentage point cut in interest rates by the U.S. Federal Reserve this year and a reduction of three-quarters of a percentage point by the Bank of Canada.

Rubin is "underweight" in financials, and he is expecting more asset writedowns resulting from the U.S. subprime mortgage market. U.S. commercial banks start to report their earnings in the third week of April, "raising the spectre of a further deluge of writedowns, which could affect valuations on both sides of the border," Rubin stated.

"Some Canadian banks now have significant stakes in U.S. banking."

He said he also believes gold’s recent retreat to below $900 an ounce will be temporary, given the weak U.S. dollar, worries about inflation and more interest rate cuts by the U.S. Fed.

"I think gold is going to recover," Rubin said. "I think the Fed still has quite a bit more interest rate cuts to do, and in an environment of rising U.S. inflation, I think that’s probably going to see gold top $1,000 an ounce."

Rubin and his team of economists see a "modest" downturn in the U.S. economy, with signs of recovery starting to show in the second half.

Still, Rubin believes Canada will be able to avoid a recession.

"Parts of the Canadian economy, like southern Ontario, are going to be affected, but I don’t think the Canadian economy as a whole is going to see a recession," he said.

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