Iowa aftermath

The chase by Marty Cej:

Iowans have spoken and said that Republican voters across the U.S. should now choose between the three candidates who have said the following:
1. "I do take the position that we should just end the Fed."
2. "Isn't that the ultimate homeland security, standing up and defending marriage?"
3. "I've always been a rodent and rabbit hunter. Small varmints, if you will."
Tough call, tough call.

Sometimes, when you air your dirty laundry in public, it can smell like a hockey locker room after a weekend-long Old Timers' tournament. The Chairman of Canadian Pacific yesterday sent a public letter to Bill Ackman of Pershing Square Capital, CP's biggest shareholder, scolding Ackman for leaking misleading information to the media, including the assertion that CP had invited the former head of CP competitor CN Rail to talks. Ackman responded late yesterday with a public missive of his own, stating that CP's Chairman had in fact called him personally to arrange a meeting with CN Rail's former boss.

The thing of it is, both letters can be true since arranging a meeting with someone is not necessarily the same thing as inviting someone to a meeting. Both sides have agreed that talks to improve CP's operating performance have been constructive so it seems the conflict lies in determining exactly how to do it. Ackman wants the CEO of CP out while the board of CP, at least for now, is confident in the current management. So what we are seeing with these letters is not really a tiff over the facts but a fencing match between PR staffs.

I might have given Ackman a point for transparency, but then he used the word "effectuating." In terms of angles, we need to look again at the performance of CP under CEO Fred Green, operationally, financially and as a stock. We need to compare it to competitors not just in Canada but in the U.S. as well. We need to take a look at the issues of corporate leadership, governance and activist investing, and I'm also interesting in hearing more about the strategy of conducting a debate like this through the media. A great story with compelling characters and thousands of jobs and billions of dollars at stake.

As we approach the North American open, European stocks are declining and U.S. stock index futures are pointing to an early decline. Oil is down just a touch and copper has slipped a bit, too. Traders are pointing to Italian bank UniCredit SpA's decision to sell 7.5 billion euros worth of new shares at 43 percent less than yesterday's closing price in a bid to shore up its capital. The size of the discount has rattled markets by raising concern that demand for new bank equity has plunged at a time when many European financial services companies are preparing to go to the same well. We should also add that overnight deposits at the ECB have surged to a record high, again.

We'll zero-in on the Iowa caucuses on Headline this afternoon and ask whether Canadians – or Americans, for than matter – should care. Among our guests is Bill Galston, former policy advisor to Bill Clinton and now Senior Fellow, Governance Studies, at the Brookings Institution. We'll also talk about the economic impact of the U.S. election cycle with John Lonski of Moody's.

Ahead of that, though, Business Day AM will sit down with David Darst, Chief Investment Strategist at Morgan Stanley Smith Barney where he oversees more than a trillion dollars in assets. I'll ask him whether he is fretting over the race for the White House and how he is putting those dollars to work in 2012. He sits down with us at 11:00 am Eastern.

Commodities continue to be a compelling story with expectations continuing to rise for a rebound in many prices this year. Oil, for example, has already vaulted back over $100 a barrel. The question is whether recent and expected gains are justified by the outlook for economic growth. Does oil belong at $100 a barrel with Europe poised on the edge of what could be a severe recession?

Natural gas remains a conundrum for investors and the companies involved in the sector.

Welcome to 2012

By Marty Cej
The Chase

The week ahead provides a glimpse at the themes that may dominate the new year. Investors will wade through a flood of economic data including Asian export numbers, global manufacturing reports and U.S. unemployment data at the end of the week, all of which will help determine the spillover from the European debt crisis. The heavy political calendar for this year kicks off with the Iowa caucus, which will help thousands of American reporters narrow their focus onto two or three frontrunners in the race to name a Republican challenger to President Obama. Europe and the race for the White House will likely dominate broad price action in 2012.
Today, we'll narrow our own focus on how political, economic and corporate events are likely to drive price action in the stock, bond, currency and commodity markets this year. As we near the open of North American stock markets, U.S. index futures are pointing to modest gains and most European stock markets are trading higher on the back of higher-than-expected manufacturing data out of China, India and Australia. A surprising improvement in German unemployment also helped boost demand for risk assets this morning. A report on U.S. manufacturing due out at 10:00 am Eastern is also expected to show expansion. In fact, a reading of 53.4 on the ISM index – the average expectation among economists surveyed by Bloomberg, would be the fastest expansion in six months. At 2:00 pm, we'll peruse the minutes of the last FOMC meeting along with Republican candidate Ron Paul who is looking for an excuse to abolish the Fed. We'll look for insight, Paul will be looking to incite.
Commodities are kicking off the year on stronger footing after the manufacturing data as well. Crude oil, natural gas, copper, gold and silver are all higher in the early going. Natural gas could be the one to watch this week after tumbling below $3 last week. The CFTC reports that last week's downward slide may have flushed a lot of traders out of their bearish positions. Natural gas plunged more than 30 percent last year, which could lead some producers to rein in their output. Plus, the weather has turned wintery in North America, at least in my office where the atmosphere is particularly Dickensian. Also, keep an eye on gold, which appears poised for a technical breakout after showing considerable stability amid thin trading last week.
In corporate news, we're following Canadian Pacific Railway after the company's Chairman, John Cleghorn, wrote a polite, if firm, letter to hedge fund manager and CP shareholder Bill Ackman, explaining that leaks to the media are counterproductive in his efforts to force change at CP. The letter is in response to reports last week that Pershing Square Capital was agitating for Hunter Harrison to take over as the new CEO of CP. Cleghorn says no invitation has been extended to Harrison and that perhaps Ackman might want to talk face to face about what he wants changed at CP rather than going to the press. The gloves haven't been dropped but the players are jawing.
The National Post reports this morning that Research In Motion is preparing to unveil a boardroom shakeup that would see Mike Lazaridis and Jim Balsillie give up their co-chairmen roles in favour of board member Barb Stymiest. Citing unnamed sources for the story, the Post did not give a timeline. Calls are out to the company.