E*Trade (NASDAQ: ETFC) is a well-known brand in the broker space. It competes vigorously with the other giants, TD Ameritrade (NASDAQ: AMTD) and Charles Schwab (NASDAQ: SCHW). To be honest, if I were looking for investment ideas in this sector, I would probably begin my search with the latter two. It's difficult to put E*Trade on the list. The company got in trouble during the financial crisis because it was exposed to the mortgage industry. It has now become, in my opinion, a speculative play on a return to glory.

The latest earnings report shows what I'm talking about. For the third quarter, E*Trade lost, on a GAAP basis, 66 cents per share from continuing operations, wider than the year-ago loss of 60 cents per share from continuing operations. After adjusting for an item related to debt extinguishment, the current red ink is equal to 5 cents per share.

If you've worked as a broker you know the game. The house sets quotas. You must meet the quotas or its good-bye.

As a broker, your first and foremost obligation is to the client. You can make recommendations, but in the last analysis, the decision to buy or sell a security rests with the client. Brokers, however, are often under the gun by management to tout certain securities to their clients that may not be in their best interests.

The brokerage reported a Q1 loss that was wider than the year-ago number. E*Trade lost 41 cents per share versus a loss of 20 cents per share in 2008. According to this source, that was a penny worse than what Wall Street was bracing itself for.

When putting together a big merger, it's not easy keeping employees on board. Often, the strategy is to extend retention bonuses. If not, there could be a significant revenue drain.

Take a look at Morgan Stanley's (NYSE: MS) joint venture with Citigroup (NYSE: C) to form a massive brokerage organization. To keep key brokers on board, Morgan is willing to pay as much as $3 billion in retention bonuses.

Yes, in today's harsh environment – where Wall Street is considered a pariah (if not worse) – this seems out-of-whack. After all, Morgan Stanley was the recipient of lush federal bailout funds, although the bonuses will not come out of TARP funds, the company says.

E Trade Financial Corporation (NASDAQ: ETFC), which competes with TD Ameritrade Holding Corporation (NASDAQ: AMTD) and Charles Schwab (NASDAQ: SCHW), is doing splendidly today. As I write this, the stock is up well over 15%. But I would not touch this one with a ten-foot pole, as they say.

According to this article, E*Trade reported a quarterly loss on Tuesday of $0.50 per share. While that was a lot better than the $3.98 per-share loss reported in last year's Q4, it wasn't enough to beat expectations. Wall Street was hoping for a loss of $0.24 per share. E*Trade said in its press release that daily average revenue trades increased 18% and that 97,000 new accounts were captured. While both of those stats are impressive to a certain degree, an investor must keep in mind that E*Trade is a complicated story. The company really screwed itself by exposing its shareholders to so much financial risk; sure, that might be hindsight now, but it nevertheless is true. And with all the loan provisions and all the issues with the company's involvement with applying for the government's TARP initiative, etc., I can tell you that I absolutely would not want to play around with this stock.

After the stock market meltdown of 2008, Wall Street brokerages aren't anyone's favorites in 2009.

But some customers said they're still happy with their online broker.

A December ChangeWave survey of 3,051 consumers found that despite the extremely difficult financial market, two online brokerages still capture high customer satisfaction ratings -- Charles Schwab (NASDAQ: SCHW) and archrival, Scottrade.

If there is a silver lining in the disaster that has been investing in the markets in 2008, it's that increases in volatility made it possible to generate huge returns moving in and out of stocks in a very short period of time.

Day trading had all but disappeared after the dot-com crash. And while the strategy is making a comeback in a major way this year, investors have yet to catch on.

Think about it for a moment. What businesses were at the forefront of this investment strategy?

Discount online brokers, led by E*Trade Financial Corp. (NASDAQ: ETFC), were some of the biggest winners during the boom in day trading.

With everyone and their mother trading stock tips in the 1990s, brokers made increases in customer accounts and trading commissions that led to big profits.

Now, with fertile ground for day trading back in play, are the discount brokers worth owning in this environment?

Well, one would think that now would be an excellent time to be owning the discount broker stocks, but that hasn't borne itself out as of yet. What gives?

If there is definitely one stock to avoid these days, it's E*Trade (NASDAQ: ETFC). I went back and forth on it over the summer, wondering if it was worthy of a trade at certain points, but after the broker's Q3 earnings report, I just don't have any good feelings about it right now.

Total net revenue declined over 21% to $377.7 million. The net loss per share from continuing operations on a diluted basis plummeted over 300% to $0.60. E*Trade, as we all know, has been a victim of the whole financial debacle. It's provision for loan losses was $517.8 million in the third quarter. This compares to a provision of $186.5 million in the previous year's similar quarter.

E*Trade states in its release that it is trying to further reduce its exposure to risk and it's keen on shoring up the balance sheet. Good attitude, I suppose. Also, daily average revenue trades for Q3 were up 7%. But it doesn't mean anything. This was a terrible quarter. The data is both horrible and telling.

It's a simple proposition for me: stay far away from E*Trade. Sure, there will come a time when the stock might make for a good investment, but that's a long way off. Technically, the stock is weak. And the broker will be unwinding its exposure to the financial markets for a while.

Talk about an interesting day for E*Trade (NASDAQ: ETFC). The broker, a competitor of TD Ameritrade (NASDAQ: AMTD) and Charles Schwab (NASDAQ: SCHW), reported Q2 earnings on Tuesday after the market closed. E*Trade saw its stock close up on the day by almost 11% on better-than-average volume ahead of the press release. Then, after hours, the stock was down over 15% as investors digested the data. It was a wild ride indeed, and I'm glad I wasn't on it.

E*Trade saw its total net revenue decrease by 20% to around $532 million. The loss per share came in at 19 cents. According to this Reuters article, Wall Street was hoping the loss would only be 14 cents per share.

E*Trade isn't out of the woods yet, and I think it'll be a while before it fully turns itself around and recovers from the financial crisis it's been suffering. In fact, the release mentioned how the broker lost value on investments in preferred equities of Federal National Mortgage Association (NYSE: FNM) and Federal Home Loan Mortgage (NYSE: FRE) in July and that the liquidation of the investments will impact the third quarter. Yeah, I'm sure shareholders of E*Trade love to hear the names Fannie Mae and Freddie Mac thrown around in the earnings report. They're sure to warm the heart.

At one time, I thought E*Trade was worth entering, and it obviously might have been worth trading ahead of the earnings (if you were quick to get out before the after-hours, that is). Now, however, I'm reticent to put any new money to work in the financial sector. It's going to be a while before the financial malaise finally lifts. Since E*Trade is still losing a lot of money and missing estimates, I see no reason to allocate any investment funds here. The stock has become too speculative, and if you want to speculate, I'm sure you can find safer sectors to place some bets.

Disclosure: I don't own any company mentioned; positions can change at any time.

TD Ameritrade Holding Corporation (NASDAQ: AMTD) reported earnings for its second fiscal quarter yesterday, and they were pretty decent for the most part -- some might have thought that investors were completely shunning the market because of all the volatility going on, but TD Ameritrade's results show that a broker can still make money in such a challenging climate.

Even so, overall revenues declined 3% to $623 million. While transaction-based revenues also declined, it should be noted that average client trades per day did increase 23% to 312,000. That's an important measure when talking about brokers such as TD Ameritrade, or competitors such as E TRADE Financial Corporation (NASDAQ: ETFC) and The Charles Schwab Corporation (NASDAQ: SCHW). Earnings per share really shined, rising 35% to $0.31 per diluted share.

TD Ameritrade is sticking to its earnings guidance of a "midpoint forecast of $1.32." Of course, I'd like to see raised guidance, but a reaffirmation is certainly better than a reduction in guidance. Besides, I have to go back to the challenging climate concern -- if TD is happy to keep the forecast right now, then this is definitely positive. Investors would probably do well to at least investigate the brokers. When the economy snaps back, they should rally higher from these levels. TD Ameritrade, while not right up against a 52-week high, actually isn't that far from it, interestingly enough.

Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.

Perhaps some good will come out of the softening of the real estate market. A year ago, homes were selling with little or no effort at all in some of the hottest markets. Some agents were reaping six-figure paydays just for breathing and, in many cases, they added little value.

But times have changed. The Wall Street Journal recently featured a list of 5 Things You Should Expect from Your Agent, and brokers are scrambling to find ways to add value to their listings. According to The Journal, "With the housing market in a dive and homes lingering unsold for months, the relationship between real-estate agents and their clients is beginning to change. Both buyers and sellers are demanding more from their brokers, and getting it."

This is exactly what they need to be doing -- and not just for this rough market. With the growth in online services making "for sale by owner" easier than ever, real estate agents must find ways to make themselves indispensable if they are to survive as a profession.

If the softening of the market forces them to do that, it could be worth it -- a few years of lower paydays is a small price to pay for the revitalization of an industry.

In a move to make it one of the largest retail brokerage operations in the country, banking giant Wachovia (NYSE: WB) has bought AG Edwards (NYSE: AGE). The combined operations will become second only to Merrill Lynch (NYSE:MER), and ahead of Citigroup's Smith Barney. The new operation should have about 15,000 brokers.

It is easy to say that the move is simply a cost consolidation play. Wachovia says that it can take out [subscription required] about $400 million in duplicate costs, which should add to the profitability of the acquired assets.

Wachovia, however, is cleverer than simply making the purchase as a simple earnings play. Retail brokers are huge collectors of assets. The new, combined operation will manage $1.1 trillion.

Rival banks, including Bank of America (NYSE: BAC) and JP Morgan (NYSE: JPM) do not have networks of brokers anywhere near this scale. That gives Wachovia an edge in wealth and asset management that Citigroup already has. While Wachovia's stock is flat over the last year, Citi is up about 12% and JP Morgan has climbed well over 20%.

Perhaps Wachovia needs a little edge.

Douglas A. McIntyre is a partner at 24/7 Wall St.