The FDIC has been busy afterall!

Over the last 2 weeks there was only 1 bank failure. Well below the average over the last several months. Knowing that there are over 482 troubled banks, I for one was wondering what they heck they have been up to. Well now we know... they were preparing for the 7 bank failures today!

Check out the following list of banks that are considered under capitalized by regulatory standards. Capital ratios are a great predictor of bank failure. Failed banks are highlighted in red, with the failure date in the last column.

Data from SNL financial via The Street. Here is another great Troubled Bank List.

Apple releases cool new stuff!

Apple released a whole bunch of cool new tech today. I am personally most excited about the new 27" iMac:

Check out what Gizmodo has to say about the Mighty Mouse and New MacBook ! And all the Deals you can now get on old Apple Stuff!

Commodities - Untouchable by Retail Investors

Last year in when Oil was trading over $150 per barrel I had a novel idea. Short Oil. More recently I had another "ah ha" moment. This time I was loving the lowest prices for natural gas since 2002 due to extremely slow demand and over supply.

I started researching how to invest in natural gas. The first thing I came up with was an ETF called the United States Natural Gas Fund (UNG). This seemed perfect for my investment thesis, so I jumped in.

Then I started researching (wrong order... I know)...

It turns out that the massive popularity of commodity ETFs has been their downfall. I turn to Neil Collins and his article Here’s why commodity trackers lose you money:

Standard & Poors reckons that $100 billion is invested in commodity tracker funds, and it is only now that the problems are becoming clear. Unlike shares, commodities need space and insurance for storage, so the funds buy the commodities forward, selling them before having to take physical delivery and buying forward again. Because they have strict rules about how and when they roll the contracts, the traders can see the forced sellers (and buyers) coming a mile off, and move their prices accordingly.

This is, effectively, a tax on the fund, and the bigger the fund gets in any one market, the greater the tax the traders can demand to roll its contracts. The result is to guarantee underperformance against the relevant index, and the longer the investment is held, the greater the underperformance will be.

So... basically since I have been invested in UNG I have been providing the infamous "free lunch" to commodity traders. Oops! This is just one of many examples of how Wall Street's finest set up products for retail investors that are designed to make THEM money. What more should we expect?

Caveat Emptor!

Links - CRE Timebomb, Housing Tax Credit, Leverage Ratios... Oh My!

U.S. Office Vacancies Reach Five-Year High of 16.5%, Reis Says (Bloomberg via CalculatedRisk)

Fed Frets About Commercial Real Estate (WSJ via CalculatedRisk & NakedCapitalism)

Starwood Group Strikes Deal for Corus Assets (DealBook)

Manhattan Office Vacancies Reach Five-Year High (Bloomberg)

Apartment Glut Expands: Vacancy Rate Rises to 7.8% as Unemployment Dents Demand; Monthly Rents Slip (WSJ via Naked Capitalism)

US apartment vacancy rate hits 23-year high-report (Bloomberg via CalculatedRisk)

The Housing Tax Credit and the Consumer Price Index (CalculatedRisk) - Interesting take on how the housing tax credit is actually contributing to apartment vacancy and falling rents, and how that in turn could cause deflation... very interesting how all the parts fit together.

The Elusive Leverage Ratio (Reuters)  - There has to be a way to make the leverage ratio requirements at least remotely useful. As is in this country, they aren't worth much...

This wont happen again... right?

An article in Business Week titled Financial Reform: Lessons from 1929 brings up some interesting parallels between the regulatory efforts during the great depression and those going on today.

Now:

"Establish a "commission" of politicians and lawyers to investigate the problem. Check!"The Financial Crisis Inquiry Commission, set up by Congress to tell us who killed the banks and what to do about it, has just held its first meeting. Established by law in May, the 10-member panel gathered on Sept. 17 to appoint its executive director: Thomas Greene, a longtime California prosecutor."

Then:

"After Black Monday and Tuesday in October 1929, several senators called for new laws to prevent another crisis."

Here's what happened:

 "But over the next six months, stocks recovered 90% of their losses from the Crash. (President Herbert Hoover called it "the little bull market.") Appetite for reform waned, and bankers assured Congress that heavy-handed regulation was unnecessary—even counterproductive. They would reform themselves. Sound familiar?"

(Riholtz, you don't really think this is going to work?)

Oh, and don't feel bad for the 10 poor saps stuck on this commission-

"Congress appropriated $8 million to examine the causes of the recent crisis"

Only time will tell what we learn from, but I can't help but think that it won't be much.

For our visual learners: (via The Big Picture via Salon)