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.

In my travels around Asia the past couple of weeks, I’ve been meeting with various banks and investors to learn more about the FX market in connection with our big initiative there. Stopped in to see a decent sized U.S. hedge fund and was fascinated by the investment strategy.

Among other tings, these folks invest in convertible bonds issued in local currencies in home countries. They end up with three factors that can affect returns: credit exposure, changes in interest rates and changes in currency values. The manager relayed an interesting anecdote that explained the benefit of such a strategy: the bond and underlying stock hadn’t moved much in price but the currency had to the point it allowed him to convert the bonds into stock and then sell the stock, convert the currency to dollars and make a handsome return. In other words, currency fluctuations in transactions like this can help take an out-of-the-money convertible and all of a sudden bring it in the money.

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There is clearly a lot of positioning going on by AT&T to convince the public and U.S. regulators that its proposed acquisition of rival T Mobile from Deutsche Telecom shouldn’t be viewed as anti-competitive. One certainly might think that when two of  the top leaders in any industry join forces.

If you check out the AT&T website, already there is a video of CEO Randall Stephensen discussing, among other things, his respect for regulators. There is a brief presentation of the deal that shows how consolidation has not hurt pricing. to the contrary, prices have come down since consolidation has been underway.

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Retail investors are often looked on as the unsophisticated types who move slowly and late and rarely have a short-term affect on financial markets.  They broke from that mold in Japan, where retail FX traders  (known as Mrs. Watanabe) contributed to a surge in the Japanese yen this week when they began to unwind a popular strategy called the carry trade.  Many of these investors had shorted the yen and gone long currencies that offer higher yields (the so-called carry trade). Concerned about the effects of the horrible earthquake in Japan on its economy, these investors unwound these trades – meaning they bought the yen en masse and sold the other side of the trade, often the Australian dollar.

Is it possible that the retail investor could move the currency of the world’s third-largest economy this way? Sure thing, because Japanese retail trading of the yen can account for nearly 30% of all trading on any given day.

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Hewlett-Packard reported earnings today and while the numbers for the quarter ended January 31 were generally good, investors focused on the tepid outlook. Initial analysis of the results zeroed in on soft PC sales for the recent quarter and the question raised by the company of whether consumers were really opening their wallets. The stock fell 12% in after-hours trading.

There’s another longer-term trend investors should consider when looking at companies that have a lot of exposure to the printer business – will the introduction of tablets like the iPad make printing documents less necessary? Combine that with the green movement and it could spell troubles for companies that make printers.

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Here’s yet another sign that the economy is showing some strength: In it’s first quarter earnings report released a short while ago, Walt Disney Co. showed a couple of examples of being able to raise prices, something that has been nearly unheard of for the past couple of years in just about any business.

In its cable networks division, sales were higher in part on stronger advertising growth. The drivers? More ads but also, higher rates. Again, in the ad-challenged media business, the idea of raising rates over the past few years was certainly unheard of.

And in the parks and resorts division, sales were higher because attendance levels were up. But also because the company raised ticket prices.

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You normally wouldn’t think it’s good news that consumers are taking on more debt, especially when that debt comes in the form of credit cards, which can be very costly debt. But today’s report from the Federal Reserve that showed the first increase in credit-card debt since the month before Lehman Brothers failed is being viewed as just that – a positive sign about the economy.

In December,  credit-card debt rose $2.3 billion to $800.5 billion – the first monthly increase since August 2008. This, combined with a recent Fed survey that found banks were becoming more willing to make installment loans, has some wondering: Has the consumer stopped de-leveraging?

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Try these numbers on for size.

At Las Vegas Sands Corp., the company just reported that fourth quarter revenues were up nearly 57% year-over-year. Consolidated EBITDA was up 141.3%. You got to figure that a company with “Las Vegas” in its name knows how to make some money.

But that’s not where it is making its money. It’s in two tiny Islands – one about an hour south of Hong Kong in Macao and the other in a recently opened (last April) giant of a casino in Singapore.

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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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