An interesting couple of days in the news. Yesterday, the lead story in the Financial Times (FT) was “Fears over US banks’ mortgage dominance,” which discussed how the banks are making too much money off the refinancing wave. I have to say, it is interesting to note the change that has occurred when we see this kind of article, as opposed to the ones that focus on failing banks. This follows earlier articles about higher-than-expected profit gains at J.P. Morgan and Wells Fargo and suggests that the U.S. financial system is actually getting to be in pretty good shape.

Now, for the aspera. The big news today is the surprise resignation of the CEO of Citicorp and his immediate replacement by another executive. The story made the front page of the major papers, as it should, because it’s a little strange. Supposedly, the board has been discontented for a while, and the CEO just decided to resign. Certainly possible, but it does not usually play out that way. This sort of suggests that there is something else going on, and if so, it should emerge shortly. Perhaps the U.S. financial system, at least as far as the large banks go, isn’t out of the woods yet.

The U.S. consumer represents approximately two-thirds of the total economy, so what he or she does matters to everyone. The paradox of thrift is particularly relevant here, in that the less consumers spend and the more they save, the slower the economy grows. We need to delever—and that is happening, but not too fast.

In that light, the recent September retail sales report indicated an increase of 1.1 percent, which was higher than expected. The overall figure had to be revised down a bit for one-time factors, such as the release of the iPhone 5, but it still was a very strong result.

Two pieces of economic data came out in the past couple of days that I think are worth a look. I want to start with inflation; my other post deals with the recent retail sales numbers.

Two major banks, J.P. Morgan and Wells Fargo, reported substantially stronger profits over the weekend, largely due to mortgage lending. The weekend Wall Street Journal (WSJ) had “JP Morgan and Wells Fargo: Housing on Mend” on page B1, and the weekend Financial Times had “Dimon bullish on US housing market” on the front page. The weekend New York Times (NYT) had two housing stories on B1: “Mortgage Lending Helps JPMorgan Profit Rise 34%” and “Which House Is Worth More?”

The first point I want to make is that as housing recovers, it helps across the board. Rising home values generate more transactions, which generate multiple business spin-off benefits: realtor fees, mortgage fees, furniture sales, and everything that goes with the transaction and the new property. For existing owners, rising prices make them wealthier. For underwater owners, the power of leverage that made them broke on the downside is now making them whole just as fast. Fewer underwater owners means fewer foreclosures going forward. The fact that the improving housing market is showing up in the financials of the largest banks is a sign of how large and widespread the recovery is becoming. The publicity around it can help build confidence even further.

The Nobel Peace Prize was awarded this weekend to the European Union (EU) for the stabilizing role it has played in a continent that was wracked by war for most of the last century. The prize was also explicitly awarded as a warning for what could happen if the EU were to abandon the unifying process amid the current turmoil.

I have been doing some detailed review work on the economy, both historically and going forward, for my presentation at Commonwealth’s upcoming National Conference. As part of that, I put together a chart that I thought was worth sharing as we move closer to the election. The blue line is business uncertainty, and the red line is the U-6 unemployment series. Note how changes in the blue line lead changes in the red line.

I have been getting some feedback that, although people like the blog, there is a sense that it is pessimistic. To which I can only say, pessimistic? Me?

Looking at today’s news, there really isn’t a lot that’s new. Election. China/Japan. Europe, Europe, Europe. Nothing we have not already talked about—a lot. So I am going to go back to yesterday to look at what I think may be a big story going forward.

When a major financial paper has not one, not two, but three stories on a particular topic, you have to assume it’s probably a big deal. The Financial Times had three stories on Walmart and American Express’s launch of a new product intended to take on the banks. The product is a separately branded, prepaid card that can be used as a debit card wherever AmEx is accepted. According to the stories, the card is aimed at lower-income households that are tired of or unwilling to pay the fees charged by most banks. Walmart wants to replace the bank for its customers.

I am very proud to announce that five members of the Commonwealth Investment Research team have once again been named All-Star analysts by Financial Advisor and Private Wealth magazines. This is an honor for the whole team, as well as for Commonwealth. Eight firms had analysts named: six firms each had one analyst honored, one had three analysts, and one firm—that’s us—had five individual All-Stars! We are very fortunate to have such a wide and deeply talented team.

Read the full story.

The reason the posts are late today is that I was sitting on a panel at a conference, discussing the role of gatekeepers in the industry. For those who don’t know, a research department at a broker/dealer typically reviews myriad products and provides opinions on them for the broker/dealer’s advisors. Investment products that are considered “very good,” based on the research department’s analysis, may end up being recommended. As such, we analysts are considered the gatekeepers that product sponsors would like to have on their side. At the very least, they’d like to avoid getting a negative review.

Much of the discussion at the conference centered on the opportunities that exist for product sponsors to create new products to better serve advisors and clients, which is all to the good. We love to see new and innovative products. Other discussion was less edifying, though; it had to do with how companies can essentially get in with products that are, at best, about the same as every other product out there.