Supreme Court to rule on securities regulator

Supreme Court to rule on securities regulator
The chase by Marty Cej:

Our top story today is the Supreme Court of Canada's decision on whether the government can proceed with plans to create a single securities regulator for the country. The plan, which has scandalized regional regulators in Alberta and Quebec (a single regulator? Next thing you know people will be allowed to marry their pets!!), would establish the Canadian Securities Regulatory Authority (CSRA), targeted to begin operations by the end of 2013. The push for a national regulator gained significant momentum with the financial crisis but the debate began decades ago. The Feds argue that a single regulator will provide more consistent protection for investors across Canada, improve regulator and criminal enforcement, create new tools to support the stability of the Canadian financial system, faster policy response, simpler and cheaper processes for businesses and investors and more effective international representation and influence for Canada. Canada remains the only country in the G7 without a single regulator. The provincial holdouts' argument goes something like this: That's what you say.
Today's decision will affect companies, institutions, investors, traders and analysts at home and abroad. A decision that allows the government to proceed will put into motion a process that will bring Canada into line with global standards but will also cause great consternation and worry for many people working at regional regulators now. Will regional expertise be sacrificed in the transition? Is regional expertise of any value in the first place? What will the next steps be for the holdouts in the event of a ruling in the government's favour? And what would the government's next steps be if the court rules against? The decision comes down at 9:45 a.m. ET. Our analysis begins with the Street.
Among our guests on this key Canadian story today are Tom Hockin, Executive Director for the IMF representing Canada; Ermanno Pascutto, Executive Director of FAIR Canada and Ian Russell, Executive Director of the Investment Industry Association of Canada. We are also expecting to hear from Finance Minister Jim Flaherty after the decision.
Today also sees the unveiling of BNN's Newsmaker of the Year. Beginning at 11:00 a.m. ET, we'll count down the stories that mattered most to Canadian investors to No. 1. What were the biggest deals? The biggest blunders? The boldest coups? The toughest calls and flimsiest strategies?
Speaking of strategy, Thomson Reuters said a few moments ago that it has suspended its attempt to sell its healthcare business. The company put the unit up for sale back in June, but says the "global economic conditions have become more challenging and the company believes they are not conducive to concluding a transaction that reflects the fair value of the Healthcare business at this time." This is a big important company that is in turmoil and struggling to find its feet again after a period of remarkable internal upheaval.
Yahoo will be a stock to watch amid speculation the company is poised to sell a big chunk of its holding in Alibaba Group.

ECB rolls out cheap money

The chase by Marty Cej:

European stocks are mostly higher and U.S. stock index futures are pointing to early gains after the European Central Bank said it will lend the region's banks a record 489 billion euros for three years, almost double expectations. The loans, at a sporty 1 percent (at these prices, you'd be crazy not to borrow!), provide Europe's cash-strapped banks with plenty of liquidity for the foreseeable future and should bolster confidence in the European financial industry, economy and the ECB's commitment to stability. In the simplest terms, European banks can borrow from the ECB at 1 percent and lend to companies, consumers and governments at much higher rates, pocketing the difference. Yes, Virginia, the ECB is a central bank. The true test of the efficacy of the ECB's plan, however, is not the demand from the banks but the demand from the banks' customers.

With just a few trading days left before the New Year, time has all but run out for a Santa rally. So far this month, the S&P/TSX Composite is down 4 percent, the S&P 500 down 0.45 percent and the Dow Jones Industrial Average up a measly 0.48 percent. Volume is low, tax-loss selling is picking up and many of the headwinds that buffeted financial markets through 2011 continue to blow.

There is still plenty of time left this year for us to label and list the challenges and opportunities investors will face in 2012. Yesterday's conversation with economist Joel Naroff was an excellent example. One of the most accurate forecasters for the U.S. economy in recent years, he surprised us when he argued that the world's largest economy will grow much more briskly next year than most economists and investors expect. Outliers… I love 'em.
Speaking of outliers, Edward Zarbitsky at ACI Research is the only analyst

anywhere who has a 'sell' recommendation on Apple stock. He joins us at 10:00 a.m. ET.
The market is talking about Research In Motion today after Reuters reported late yesterday the company rebuffed talks with Amazon that could have led to an offer. Citing unnamed sources, Reuters reported that Amazon hired an investment bank to kick the tires but RIM executives decided to fix its own problems rather than court outsiders. The Wall Street Journal followed with a story of its own -- again citing unnamed sources -- that Microsoft and Nokia considered a joint bid for the BlackBerry maker.

No matter how flimsy the speculation -- who hasn't spit-balled a bid for RIM this year over their third dirty martini at a wood-paneled pub with the word "Olde" in its name?? -- the stock rallied as much as 10 percent overseas and is higher in the pre-market. We've contacted all the principals, none of whom comment on market speculation, and will continue to test the logic of the potential tie-ups that have been proposed.

The tech sector will be a busy on today after Oracle reported after the close of trading last night. The world's second-biggest software maker missed both revenue and profit expectations and said that customers are taking longer to assess and close deals. That level of caution among companies can tell us plenty about the software and hardware industries, as well as the broader economy. The Oracle story today is bigger than Oracle.

The TMX Group said a few minutes ago that it has purchased a 16 percent stake in the Bermuda Stock Exchange, scoring a seat for TMX CEO Tom Kloet on the BSX board and some choice tee times. The TMX says the deal "represents TMX Group's commitment to looking beyond Canada for opportunities."

While that is true, I'm curious just how big an opportunity the BSX provides. It's not exactly the Hong Kong Stock Exchange. We expect to have a conversation with the CEO of the BSX later this morning.

All eyes on North Korea

The chase by Marty Cej:

2011 was not a banner year for dictators, despots and political strongmen. Kim Jong Il, the second-generation North Korean dictator has died, shoving the region into a period of uncertainty of unknown depth and time. The heir apparent is the 28-year-old son, Kim Jong Un, who has been educated in Switzerland and elsewhere and has been named a four-star general though he has no military experience. South Korean stocks slumped overnight and the country's military has gone on high alert. Japanese Prime Minister Yoshihiko Noda's cabinet held a security meeting after the announcement. China sent its sincerest condolences. The dictator leaves behind an economy that is less than 3 percent the size of South Korea's and has relied on economic handouts since the 1990s when some 2 million people died from famine. Both are important measures of a despot's regime: economic catastrophe and body count. We're pursuing insight and analysis into what this new measure of instability could mean to a crucial economic region.

Eldorado Gold has agreed to buy European Goldfields in stock and cash in a deal valued at about $2.5 billion, giving Eldorado a foothold in the Aegean. Calls are out to the principals and we're looking at how the European Goldfields properties mesh with Eldorado's existing projects in China and South America.

Sino-Forest has defaulted on two sets of bond payments and will create a restructuring committee in the hopes of receiving waivers on additional payments to bondholders as it struggles to make it through another week. Our challenge today is to better understand the process of what Sino-Forest is trying to do and to talk about what recourse bondholders might have. We have contacted the company and are pursuing bond owners. We are also digging for analysts and lawyers who can tell us what the next steps are for investors.

U.S. Republicans in the House of Representatives have rejected a two-month extension of tax breaks for 160 million workers that was overwhelmingly approved by the Senate over the weekend. House Speaker John Boehner has demanded a new round of bargaining with the Democratic-controlled Senate to extend the tax break through 2012. Democrats are accusing him of reneging on a deal brokered by Senate Republican leader Mitch McConnell and his Democratic counterpart Harry Reid.

The two arrived at the modest two-month extension on Friday after failing to break a deadlock over how to pay for the tax break for a full year. The debate will be difficult to settle with less than two weeks left before the tax break expires. And so it goes.

Sense of calm hits markets

The chase by Marty Cej:

Financial markets appear to have found a modicum of composure this morning after a day that saw declines in global stocks, the euro, the Canadian dollar, precious metals and industrial commodities. Most commentators put today's modest gains in European stocks, gold, silver and the euro down to the fact they fell yesterday. Obviously, our viewers expect a little more analysis than that. A read on the euro-zone's manufacturing economy rose in December, countering expectations for a decline, but still sits in contraction territory. A sale of Spanish debt raised almost double its target. What do these data points tell us about the outlook for the European economy or confidence in Spain's fiscal authorities?

Are today's gains in European stocks and the common currency a brief reprieve or something more?
A crowded slate of U.S. economic data this morning is likely to determine the direction of markets, regardless of the European data. Inflation at the wholesale level is due out at 8:30 a.m. ET along with the current account balance, Empire State manufacturing report and initial jobless claims. Industrial production and capacity utilization are out at 9:15 and the most potentially market-moving data point, the Philly Fed index -- a read on the manufacturing economy in the Philadelphia region -- is out at 10:00. The market is anticipating an improvement in both the Empire Manufacturing data and the Philly Fed.

Many Canadian investors will zero-in on Research In Motion today as it reports third-quarter earnings after the close of trading tonight. Already this morning, agitated and agitating shareholder Jaguar Financial has called out two of RIM's directors, Barbara Stymiest and Roger Martin to stand up and insist that the company separate the chairman and CEO roles.

Some analysts and investors are saying the stock is dead money until the issue of leadership and governance is settled. Others argue that RIM could represent one of the best -- if riskiest -- bets for 2012. Should the company split into two? Should it put itself up for sale? Should it soldier on and prove the skeptics wrong? Will it beat, meet or miss? Will it warn or raise forecasts? The company reports after the close but our coverage begins now.

For the record, RIM is expected to report a 34-percent decline in third-quarter earnings per share of $1.15, the average forecast of analysts surveyed by Thomson Reuters. Revenue is seen declining 4 percent to $5.26 billion. Yes, that's right, one of the worst performing stocks on the TSX still generates sales of more than $5 billion on a quarterly basis.
Also in earnings, we're watching Fedex, which topped second-quarter expectations and ordered up 27 brand-spanking new 767 jet freighters. One of the best economic barometers in the U.S. equity markets, we'll need to pick apart the numbers.

In Canadian earnings, tourism and airline Transat reported a stronger fourth quarter on the revenue line but swung to a net loss on the bottom line. The company also cautioned the market that so far this winter, "a significant portion of seats remains to be sold and the trend towards last-minute bookings and the volatility of margins make it difficult to make forecasts."
Also today, we'll be watching for numbers from Adobe, Empire Co., Pier 1 (wicker, anyone?) and Rite Aid.

John Corzine has been invited to testify before the House Financial Services Committee.
We are also waiting for the release of the National Energy Board's Arctic Review at 12:30 p.m. ET. Any energy company with ambitions for the North will be following the release as well.