Heating Oil and Diesel Supplies Rising to 27-Year High in Survey: Energy Markets. U.S. heating oil and diesel inventories probably climbed to a 27-year high as the slowing economic recovery curbed demand, a Bloomberg News survey showed. “We really have some risk that the normal, seasonal uptrend in heating oil prices will be disrupted because of high inventories and weak ongoing demand,” said Tim Evans, an analyst at Citi Futures Perspective in New York. “Refiners overestimated demand this summer so we are going into the fall turnaround season with fuel supplies at the highest level in a generation, especially for distillate,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “You have to go back to the Reagan years to see anything like this.” U.S. stockpiles of oil and fuel climbed 5.3 million barrels to 1.13 billion in the week ended Aug. 13, the highest level since at least 1990, when the Energy Department began to collect weekly data. On a monthly basis supplies are at the highest level since November 1983. “Demand for crude oil will dry up even more than usual this fall as refiners shut units,” Schork said.
Fed Loses Bid for Review of Bailout Disclosure. An appeals court refused to reconsider a decision compelling the Federal Reserve Board to release documents identifying banks that might have failed without the U.S. government bailout. The full U.S. Court of Appeals in New York, in a docket entry dated Aug. 20, denied a May 4 request by the Fed to review a three-judge panel’s unanimous March 19 decision requiring the agency to release records of the unprecedented $2 trillion U.S. loan program begun primarily after the 2008 collapse of Bear Stearns Cos.
Hedge Funds Bet Most on Higher Commodities Prices Since 2008, Led by Food. Speculators including hedge funds are more bullish on commodity prices than at any time since April 2008 after adding to wagers that wheat and corn will keep climbing, Commodity Futures Trading Commission data show. An index of speculative holdings in futures for 20 commodities rose 2.6 percent to almost 1.18 million contracts in the week ended Aug. 17, according to data released by the CFTC on Aug. 20. Commodity assets under management gained about $8 billion in July to more than $300 billion, driven mostly by new investments, according to Barclays Capital.
Oil Falls a Fifth Day on Concern Over U.S. Supply Gains, Slowing Recovery. Oil declined for a fifth day after analysts estimated that U.S. inventories of crude rose last week and as the dollar rose against the euro because of concern the global economy is slowing. Oil dropped to the lowest in almost seven weeks yesterday as investors sought the relative safety of the U.S. currency before economic reports that may show the recovery is faltering. Crude oil for October delivery dropped as much as 56 cents, or 0.8 percent, to $72.54 a barrel in electronic trading on the New York Mercantile Exchange. Deliveries of gasoline, a measure of demand, were little changed at an average 9.257 million barrels a day in July, compared with 9.26 million in July 2009, the industry-funded American Petroleum Institute reported Aug. 20. It was the second-lowest July demand number since 2003.
Florida Man to Plead Guilty to $880 Million Grocery-Business Ponzi Scheme. Nevin Shapiro, the former owner of Capitol Investments USA Inc. accused of leading an $880 million Ponzi scheme, is to plead guilty, court papers showed. Shapiro, 41, of Miami Beach, Florida, is charged with defrauding more than 60 investors in his bogus wholesale grocery distribution business. He is accused of using new investors’ money to pay earlier ones, as well as to fund his lavish lifestyle. Prosecutors said Shapiro stole $35 million to pay illegal gambling debts and make payments on a $5.3 million house, a $1.5 million yacht, a Mercedes-Benz and seats to Miami Heat basketball games. He also bought a pair of diamond-studded handcuffs to give to a prominent professional athlete and donated $150,000 to the University of Miami for an athletic lounge, prosecutors said.
U.S. Funding of Embryonic Stem Cell Research Halted. U.S. funding of embryonic stem cell research approved by President Barack Obama was halted by a federal judge who ruled that the work violates a law passed to bar the destruction of human embryos. U.S. District Judge Royce Lamberth in Washington today issued an order temporarily stopping the U.S. Health & Human Services Department and the National Institutes for Health from conducting the studies. The judge cited the still-in-force 1996 Dickey-Wicker Amendment. “The language of the statute reflects the unambiguous intent of Congress to enact a broad prohibition of funding research in which a human embryo is destroyed,” Lamberth said in a 15-page decision.
Mining Mergers Will End in Tears for Investors: Matthew Lynn. Almost every day brings news of another mega-deal in the mining and resources industry. BHP Billiton Ltd. makes a $40 billion bid for Potash Corp. of Saskatchewan Inc. Vedanta Resources Plc pays $8.4 billion for a controlling stake in the oil driller Cairn India Ltd., while Korea National Oil Corp. offers 1.87 billion pounds ($2.9 billion) for U.K. exploration company Dana Petroleum Plc. Mergers-and-acquisitions bankers who know anything about oil, iron ore or potash are no doubt looking forward to generous bonuses this Christmas. The City of London, where many of the resources companies are listed, is enjoying a frenzy of wheeler- dealing. Speculators and hedge funds can make a fortune taking positions in the shares. And yet, shareholder value is more likely to be destroyed in this flurry of bids.
Dell(DELL) Said to Prepare Sweetened 3Par Bid After HP's(HPQ) Counteroffer. Dell Inc. is readying a sweetened offer for data-storage provider 3Par Inc. after its earlier bid got scuttled by a $1.6 billion proposal by Hewlett-Packard Co., according to a person familiar with the matter. The offer may be sent in the coming days, said the person, who declined to be identified because the plans aren’t public.
Carter to Go to North Korea to Release Prisoner, Reports Say. Former U.S. President Jimmy Carter will soon travel to North Korea to negotiate the release of an American citizen who has been detained for seven months, Foreign Policy Journal and Yonhap News reported.
Wall Street Journal:
Fed Split on Move to Bolster Sluggish Economy. The Aug. 10 meeting of top Federal Reserve officials was among the most contentious in Ben Bernanke's four-and-a-half year tenure as central bank chairman. With the economic outlook unexpectedly darkening, the issue was a seemingly technical one: whether to alter the way the Fed manages its huge portfolio of securities. But it had big implications: Doing so would plunge the Fed back into the markets and might be a prelude to a future easing of monetary policy, moves that divided the men and women atop the central bank. At least seven of the 17 Fed officials gathered around the massive oval boardroom table, made of Honduran mahogany and granite, spoke against the proposal or expressed reservations. At the end of an extended debate, Mr. Bernanke settled the issue by pushing successfully to proceed with the move. The debate over the decision to keep the Fed's $2.05 trillion stock of mortgage debt and U.S. Treasury holdings from shrinking, described in interviews with several participants, set the stage for a more consequential discussion inside the Fed that remains very much alive: what to do next, if anything, about America's stubbornly weak recovery and troublingly low inflation.
Biden: U.S. May Keep GM Stake Beyond This Year. Vice President Joe Biden reiterated Monday that the U.S. government may maintain an ownership stake in General Motors Co. beyond this year, as the auto maker prepares to return to the stock markets as early as this fall.
Red-Ink Fears Prompt Mortgage Backer to Raise Fees. The country's most popular federal mortgage-insurance program is set to raise fees to borrowers in a bid to avoid burning through its dwindling reserves as home prices come under renewed pressure. The move reflects new threats facing the Federal Housing Administration, a New Deal-era agency that has taken a central role in the housing market since mortgage markets seized up three years ago. The FHA, which doesn't make loans but rather insures lenders against losses, guaranteed $857 billion in loans at the end of June, up 24% from a year ago.
New Fees Weighed for Mortgage Industry. The Obama administration may propose that any federal backing of mortgages be paid for through fees on the lending industry, according to people familiar with the internal discussions. While the administration hasn't settled on a plan to revamp failed mortgage giants Fannie Mae and Freddie Mac, which are now under federal supervision, a consensus appears to be emerging that some type of government guarantee will be needed to keep the ailing mortgage market functioning. Some conservatives don't believe the government should offer any type of guarantee, while others advocate limited, but explicit, backing. About nine in 10 new loans are currently backed by Fannie, Freddie or government agencies.
Suit Says Countrywide CEO Allowed Lax Loans. The Securities and Exchange Commission alleges that Countrywide Financial Corp.'s ex-chief executive Angelo Mozilo approved loans for favored borrowers that contradicted the company's lending policies. The SEC's statements came in federal-court filings filed last week in its pending civil fraud case against Mr. Mozilo and two other former top Countrywide officials. It appears to be the first time in the year-old case that the SEC has addressed Mr. Mozilo's role in the controversial VIP lending program, where borrowers sometimes received better loan terms and service than were generally available. Some of the borrowers included public officials.
IOU Part Two: California To Issue IOUs For Second Year In A Row. The insolvent state of California which, just like the country of the USA, is operating without a budget (and who needs a budget when the Fed-PD complex will buy the bulk of anything and everything needed to fund ongoing daily operations), has once again ended up on the verge of bankruptcy. As a result, it has just passed a measure which for the second time in as many years (going all the way back to the Great Depression), will allow it to use IOUs in lieu of payment on everything from supplies to contracted services and health-care costs, so it can actually preserve cash to make payments to its generous debtors.
Huffington Post:
Two Top Investigators Leave Financial Crisis Commission. Two senior staffers have quietly left the Financial Crisis Inquiry Commission, a panel working under a tight deadline that has been dogged by rumors of discord among key personnel.
Eric Cantor: Mosque Builders 'Not Interested in Healing'. Rep. Eric Cantor, one of the highest-ranking Jewish lawmakers, says Muslims building a community center in Lower Manhattan are “insensitive” and “not interested in healing or bringing people together.” Cantor told POLITICO in an interview here in his central Virginia district that he does not understand why organizers are pushing so hard to build a Islamic community center blocks from where radicals killed thousands of Americans.
Yomiuri:
Toshiba Corp. will this year put on the market a 3D television that doesn't require special glasses, citing the company.
South China Morning Post:
Some real estate developers in Shanghai have misreported property prices to the government, distorting national housing-market data.
Evening Recommendations Citigroup:
Reiterated Buy on (WINN), target $16.
Janney Montgomery:
Rated (BKE) Sell, target $21.
Rated (TLB) Buy, target $14.
Rated (ANN) Buy, target $19.
Rated (ZUMZ) Buy, target $19.
Rated (URBN) Buy, target $40.
Rated (JCG) Buy, target $41.
Rated (ANF) Buy, target $42.
Night Trading
Asian equity indices are -1.25% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 126.0 +3.0 basis points.
Asia Pacific Sovereign CDS Index 115.75 -1.0 basis point.
Existing Home Sales for July are estimated to fall to 4.65M versus 5.37M in June.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Evans speaking, $37 Billion 2-year Treasury Notes Auction, weekly retail sales reports, Richmond Fed Manufacturing Index, weekly ABC consumer confidence reading and the EnerCom Oil & Gas Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
