Another Piece of the Puzzle in Falling Unemployment Rates

Today Wells Fargo posted a record quarterly profit, due mostly to its mortgage arm. This increase in housing is part of the reason that unemployment numbers are down. However, Wall Street analysts were "disappointed":

Third-quarter net income rose 22 percent from a year ago to a record $4.9 billion, or 88 cents per share, the bank reported on Friday, topping the analysts' consensus estimate of 87 cents, as compiled by Thomson Reuters I/B/E/S.

But total revenue of $21.2 billion missed the $21.47 billion analysts expected.

The bank makes record profits but is excoriated for missing analyst's spitballing by 1%. JPMorgan also had a banner quarter, but both Wells and JPMorgan stocks are down so far today.

Analysts are unhappy with these companies because, while low interest rates encourage more home buying, it also means that the banks have to charge customers lower interest rates, which means less potential profit for them. In short, Wall Street analysts don't think the banks are screwing their customers enough.

The significant increase in the mortgage market provides more context about the "mysterious" fall in the unemployment rate. Housing is a prime mover in the economy. More housing sales mean more demand for products and services in the industry that tanked the economy five years ago, when the big banks brought the house down with their crazy financial "instruments" backed by adjustable rate mortgages they knew customers could never pay off.

The source of analyst's disappointment?

But where the bank stumbled was in the net interest margin, or the difference between what the bank earns on loans and pays out on deposits. That metric is crucial in the industry, and Wells Fargo's margin fell 25 basis points to 3.66 percent in the third quarter. That was a sharper drop than expected. [A basis point is a mere 0.01 percent.]

Wall Street analysts register displeasure at the fact that Wells Fargo can no longer saddle the American people with ARMs that were the downfall of so many new home buyers and those who refinanced. They seem to want the housing sector—and the entire economy—to remain in the doldrums.

And who are these analysts, anyway? Their entire purpose in life seems to be to set up artificial expectations in the stock market so that computer trading programs can kick in and make billions of dollars by capitalizing on minute fluctuations in stock prices when worried investors churn stock based on fears raised by—you guessed it—analyst's expectations.

Wall Street just doesn't seem to understand that their wealth comes from all of us people out here. They don't create wealth out of thin air: they're doing it with our money. And when they screw up, everyone else suffers.