Randomly Noted

J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees number came from equity and debt underwriting, with the big piece coming from debt – a quarterly record of $971 million for the bank.

Grouped under the investment bank is also trading – and fixed income once again ruled the day. Of the $6.6 billion of revenues from “fixed income/equities,” $5.23 billion came from fixed-income. The bank didn’t offer a break down i.e. how much was from FX trading, for example.

Finally, the investment bank (trading and traditional IB) contributed about 43% of the firms net income ($2.37 billion of a total $5.5 billion).

A quarter where the investment bank didn’t carry the whole day, er quarter, but carried a lot of it.

The Federal Reserve has a committee studying how to improve communications with the public. But change was not in evidence in the latest statement issued today following the rate-setting meeting of the central bank.

In a bid to be more open with investors and the general public, the Fed should adopt a less stilted post-meeting announcement of its rate decision. Sure, each word the Fed utters must be carefully chosen because each word will be subject to over-the-top analysis by market types and analysts. But still, the Fed should indicate it doesn’t live in a cave.

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This may be a case of  over-the-top tea-leaf reading.

So, by definition, it will be convoluted. But here goes. My interpretation of some comments made today byFederal Reserve Vice Chair Janet L. Yellen indicates the central bank will feel no rush to remove the famous “extended period” language from its post-meeting statements.

The reason for that, essentially, is that Yellen thinks the Fed’s conditionality around that phrase has been sufficient to allow market participants to change their views about when the central bank may finally come off its long-standing emergency easy policy, which features zero short-term interest rates. Said another way, the phrase “extended period” is flexible.

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In the fast-paced financial market world, history gets started more quickly all the time.

Feb. 10. Twelve days ago. History.

So while enthusiasts for the growth of the U.S. economy surely want to take heart from the data on U.S. consumer confidence delivered earlier today by the Conference Board, the chilling reality is that date – Feb. 10. The Conference Board tells us in a press release: “The cutoff date for February’s preliminary results was Feb. 10, 2011.”

That means that the Conference Board’s Consumer Confidence Index, reported today at 70.4 for February, up from 64.8 in January, can’t take into account a particular lack of confidence expressed today through the price action in certain U.S. financial markets.

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Sen. Charles Schumer, D-NY, is concerned about a name. So is a Congressman from Florida. But they’ve got it wrong. Whether a name is kept or not, the world it represented already is gone.

Schumer and Rep. Ted Deutch, D-Fla., and no doubt other U.S. politicians yet to be heard from are hell-bent that if a merger between Deutsche Borse and NYSE Euronext takes place, as expected, the New York Stock Exchange name be preserved.

Schumer even went so far Sunday as to say the New York Stock Exchange name has to come first in the combined and so far undeclared title of the new entity, which would be the planet’s largest exchange. This despite the fact that Deutsche Borse shareholders would have 60% of the new entity.

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Some good quotes from Robert Khuzami, head of the Securities and Exchange Commission’s enforcement division, as he laid out how people associated with an “expert networking” or “matchmaking” firm allegedly shared inside information about some of the big companies that employed them with hedge fund employees.

Said Khuzami in a statement issued today: “Today we pull back the curtain and reveal that the only matching that was going on here was to match theft with greed.”

And lest anyone not understand what’s allegedly involved, Khuzami employed analogy to good use. He said: “These trusted employees chose to steal information that belonged not to them, but to the company and its shareholders. They lined their pockets with tens of thousands of dollars by trafficking in that stolen information in a manner that is not unlike an employee who drives to the loading dock late at night and fills the trunk of his car with valuable office equipment and sells it to his neighbor.”

In the Financial Crisis Inquiry Report issued today, there is a fair amount of criticism lobbed at Wall Street and the complicated securities it created that fueled the explosion of toxic mortgages. It also notes that there were quite a few hedge funds that figured this out and entered trades that would make them profitable if “the entire market crashed.”

The FICC report says it surveyed more than 170 hedge funds and a found a common strategy to be one where they went long the equity (extremely risky) portion of a collateralized debt obligation but used credit default swaps to take offsetting positions in different ranches of the same CDO.

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Here’s a great quote from the Financial Crisis Inquiry Commission report that  was released earlier today:

“It didn’t take Sherlock Holmes to figure out this was bogus.” That’s from Prentiss Cox, then an assistant attorney general with the state of Minnesota. He was talking about loan applications he reviewed from a mortgage lender who later went bust,

Cox received 10 boxes of applications from the mortgage lender and began to pull out random files. Here a pretty healthy mortgage was given to a disabled borrower in his 80s who used a walker and was described in the loan application as being employed in light construction.

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Kinder Morgan, the largest refined petroleum products operator in North America, filed new documents with regulators today giving a little more color on its upcoming initial public stock offering. It set the size of the deal at 80 million shares and is telling us there will be 707 million shares outstanding after the offering. It didn’t give us a range yet for the size of the offering but this will clearly be a deal that places a market cap on the company at more than $10 billion. This blogger surmises that because one number the company did give was its expected dividend payout: $1.16 a year or a total of $820 million in dividend payouts.

If the market cap was $10 billion, that would be an 8.2% dividend payout – and we shouldn’t expect a dividend yield that high.

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One of the interesting little tidbits in the Goldman Sachs earnings report today – the company took a $305 million impairment write-down against its “Designated Market Maker” rights at the New York Stock Exchange.  What that’s referring to is the old specialist business that Goldman owned through Spear, Leads & Kellogg.

Once upon a time, before technology became such a big part of our lives, traders called specialists made markets in a stock. He/she matched buyers and sellers from orders over the phone. If someone wanted to buy but no sellers were available, the specialist became the seller. Or vice versa. But as technology became more prevalent, it became apparent you didn’t that brokers to so the matching of orders.

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