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WiMax set to make splash in summer

LAS VEGAS After years of promise, it looks like WiMax or Wi-Fi on steroids, as it has been described is finally ready to make a big splash this year.

Attendees walk next to a WiMax booth at the Consumer Electronics Show in Las Vegas on Tuesday.
(Paul Sakuma/Associated Press)

Microprocessor giant Intel Corp. announced at the Consumer Electronics Show in Las Vegas that it will ship computer chips embedded with WiMax receivers beginning this summer.

Some computer manufacturers also announced they would incorporate the chips into their products, with Taiwan-based Asustek Computer International promising that 15 per cent of its laptop shipments this year would have embedded WiMax.

WiMax has for years been promoted by its backers, primarily Intel, as superior wireless broadband that provides much better range and speed than Wi-Fi. It has also been hailed as the best solution for providing rural communities with broadband access.

Intel chief executive officer Paul Otellini more than two years ago promised that WiMax chips would be widely deployed in laptops by the end of 2006, but that never came to pass.

Gregory Ofili, director of marketing for Intel and vice-chair of the WiMax Forum, said the technology’s supporters have been waiting until WiMax was more widely deployed by internet service providers. With more than 300 commercial tests running around the world, the time is now right to launch the chips, he said.

But the service providers say it’s a chicken-or-the-egg matter.

David Robinson, vice-president of new business planning for Rogers Wireless a member of the WiMax Forum steering body said the company was waiting on consumer devices to be introduced before committing full investment in WiMax.

Rogers, in partnership with Bell Canada, is testing an early WiMax technology through its Inukshuk joint venture.

Robinson said the announcements by Intel and Asustek were encouraging votes of confidence for the technology.

“That’s a very favourable sign for WiMax,” he said. The deployment of WiMax-enabled consumer devices is “critical” to Rogers’ investment decisions, he added.

Intel, which called the new chips the biggest breakthrough in microprocessors in 40 years, displayed WiMax technology at its booth in the form of a remote-control car race. Attendees were invited to sit in mock race cars, which were fitted with laptops that connected and controlled the toy racers by WiMax.

According to the WiMax Forum, the technology is expected to be able to deliver internet speeds of about 15 megabits per second within three kilometres of a transmitter.

BOJ spurs carry trade

To no ones surprise, the Bank of Japan has announced that it would maintain Japanese interest rates at the current level of .25%. Carry traders seized upon the opportunity to continue borrowing Yen at near-record lows, and selling the Japanese currency in favor of higher-yielding alternatives. In fact, the news was met with such gusto that the Euro was almost immediately propelled to an all-time high against the Yen, which continues to plumb the depths of forex disfavor. At this point, analysts and economists are feeling fairly certain that Japanese interest rates will remain at current levels in the near-term, a sentiment which supports the viability of the carry trade. Forbes reports:

One analyst commented: with BoJ expectations stable, currency market volatility subsiding and risk aversion abating, carry trades are recovering, keeping the yen under pressure. He sees no immediate catalyst for a yen recovery.

Read More: http://www.forbes.com/markets/feeds/afx/2007/04/10/afx3597315.html

CIBC’s fourth-quarter profit tops last year

Fourth-quarter earnings at CIBC rose despite the bank taking a big charge related to fallout from the U.S. subprime mortgage market and the global credit crunch.

The bank said Thursday it made $884 million for the fourth quarter, or $2.53 a share. In the same quarter of last year, it made $819 million, or $2.32 a share.

CIBC took a $463-million pre-tax charge on write-downs on collateralized debt obligations and residential mortgage-backed securities related to the U.S. residential mortgage market. That charge trimmed 89 cents from the company’s bottom line.

However, a $456-million pre-tax gain from restructuring of Visa wound up adding $1.13 to CIBC’s per-share profit.

“CIBC delivered good overall financial results in 2007, underpinned by our progress against our priorities,” Gerry McCaughey, CIBC’s president and CEO, said in a release.

“However, the mark-to-market write-downs we recorded in our structured credit business were not in line with our strategic imperative of consistent and sustainable performance. Our focus in this area is on reducing existing risk,” he said.

The bank’s return on equity for the fourth quarter was 30.3 per cent, down from 32.5 per cent for the same period last year.

USD to be driven by economic data

Most analysts reckon that the USD has resumed its downward path against the worlds major currencies, after a two month hiatus. The fear is that the mess in the real estate market (via subprime mortgages) will spread to the rest of the economy, with loan defaults and a decline in consumption. In such a case, the Federal Reserve Bank would be forced to cut interest rates dramatically in order to prevent the US from sinking into a full-fledged recession, which would decrease the relative attractiveness of US assets. Traders will be eying a couple pieces of economic data this week for any indication as to the direction of the economy.

The Wall Street Journal reports: This weeks data parade is bracketed by two key releases: Mondays national report on U.S. manufacturing activity in March from the Institute for Supply Management and Friday’s payrolls report.

Read More: http://www.wsj.com

Funds Exit European Financial Stocks

International funds have been dropping their exposure to European financial companies as the combination of spreading credit woes and losses at major banks make managers wary of the sector.

The average exposure to the financial sector was 27.39% as of Dec. 31, 2006, according to Morningstar data. A year later it was 23.25% and it stood at 22% at the end of January.

The cap-weighted average global financial services stock has fallen 8.55% over the past year through Feb. 20. But one-month returns are 3.29%, while exposure kept on falling. This suggests the shrinkage in positions came more from managers’ active selling than depreciation of holdings.

The financials’ problems first appeared as the credit markets seized up over the summer. More bad news has surfaced since then.

Societe Generale, one of the top financial firms in France, reported a $7.1 billion loss as a result of a trader’s fraud. UBS () President Peter Wuffli stepped down as that firm posted record quarterly losses after it was forced to write off $14 billion in subprime-backed securities.

Societe Generale’s losses have fueled speculation that the bank might be carved up and sold. Swiss banking regulators have stated they won’t bail out UBS.

Both stocks have fallen sharply. Societe Generale’s ADRs peaked on May 4 at 43.20 after rising steadily for several months. It’s now at about 21. UBS peaked in April at 65.36 and has since fallen to 33.

“The key risk for these stocks is erosion in the capital base,” says Lewis Kaufman, co-manager of the $4 billion International ADR portfolio at Thornburg Investments. The Thornburg portfolio is underweighted in financials relative to the MCSI EAFE Index, which is about 26%.

Big losses at any financial institution raise questions about the way the business is run, he says.

Mortgage Woes

For UBS, the wealth management business has won praise for its sustained profits, Kaufman says. The problem is the firm’s mortgage-backed debt business.

Some European real estate markets are facing problems of their own. Similar to the U.S., a housing bubble formed in Spain, as property prices rose amid low interest rates.

“Unlike the U.S., the Spanish banks have a cushion,” said Dean Tenerelli, who manages $1.02 billion T. Rowe Price European Stock Fund. Spanish banks are required to have more capital on hand to cover unexpected losses than in some other countries.

Still, Tenerelli says European financials will likely get worse before they get better. Rather than simply cutting losses on depreciating assets, many are parceling out bad news over time. That hurts their credibility with investors, he says.

Tenerelli likes SocGen despite its problems. The fraud was an unpredictable event, and the company’s business is still profitable.

Another that he bought recently is Allied Irish Banks, () which he says is profitable and has a balance sheet relatively free of complicated debt securities.

The stock has declined 35% below its 52-week high, but Tenerelli says that has more to do with the perception of the sector than the quality of the stock.

Amid the carnage, some investors have found value in the insurance industry.

Warren Buffett’s Berkshire Hathaway () bought an $800 million stake in reinsurer Swiss Re. The ADR topped out in April at 96. It has fallen to about 70 as it wrote down losses from insuring mortgage-backed bonds.

Some funds have avoided banks entirely.

The $20 billion First Eagle Global, managed by Jean-Marie Eveillard, is one. He says the problem with SocGen and other big firms is that they are no longer in the core business of straight lending.

“Today they have all these off-balance sheet liabilities. That makes them glorified hedge funds,” he said.

Worst Not Over?

Eveillard also isn’t convinced that the worst is over. “We are not at the point where we are interested in sifting through the rubble.”

He says institutions’ revenues could keep slipping because the structured finance products brought in so much of it.

With the structured products not selling, that revenue disappears.

Oberweis International Opportunity Fund portfolio manager Ralf Scherschmidt says he has increased the exposure to financial stocks, but not banks or brokerages. He has taken stakes in exchanges, which do well even in bad markets.

“Trading isn’t going to go away,” he asserted.

The fund has a 10% weighting in financials, still below the S&P Citigroup Small Cap Growth Index, which is 18%. That’s up from the 3% it was the previous quarter.