American Express Company (NYSE: AXP), a company that competes with Visa Inc. (NYSE: V), MasterCard Incorporated (NYSE: MA), and Discover Financial Services (NYSE: DFS), issued Q2 results earlier in the week. Earnings from continuing operations dropped very steeply to 9 cents per share. How steeply? Well, the per-share profit lost 84% of its value this time around. However, it might make you feel a little better to know that 18 cents can be added back, since that was the net worth of repurchase activity relating to preferred shares from the U.S. Treasury department. Therefore, American Express took in 27 cents per share from continuing activities. According to this Reuters piece, that number met expectations.

The Reuters article also points out that revenues fell by 18% and that net charge-offs increased. Not a great picture. Reading through the press release, an investor might come away with a feeling of dread. Management mentions the not-so-strong spending by its cardmembers and the fact that loan losses are at historic levels.

"Annaly Capital (NYSE: NLY) is in the sweet spot," says Steve Sjuggerud in Daily Wealth. He says, "It borrows money at a low interest rate and invests it at a higher rate -- and earns the 'spread'."

"The cost of money is historically low, and it's headed lower. Meanwhile, relative to the cost of money, the return on money is higher than it's ever been.

"The ultimate way trade on this historic discrepancy, for high-returns with very low risk, is through shares of companies like Annaly, which is now s now paying a 16% dividend.

"In the latest-reported quarter, the company borrowed money at 3.5%. (The credit markets have calmed down a bit, so its cost of borrowing should be even lower next quarter.)

"It invests the money in government-guaranteed bonds. You remember how the Treasury bailed out Fannie Mae and Freddie Mac? It wiped out shareholders. But it explicitly guaranteed the bonds.

"In the latest-reported quarter, Annaly earned 5.6% interest on these risk-free bonds. Therefore, it earned a 2.1% spread. If the company uses seven times leverage, a 2.1% spread means a 14.7% return on its money.

"Analysts estimate the company will earn $2.50 per share next year. It pays out essentially all of its earnings in dividends. So that'll be a dividend yield of about 19%. This is ridiculous. An opportunity like this only appears during market turmoil like we're experiencing now.

"This is a historic moment. The difference between the cost of money and the return on money relative to that cost is at the most extreme levels I've seen in my career. Take advantage, and buy stocks like Annaly today."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

"The financial sector got a boost after our Wells Fargo (NYSE: WFC), a buy recommendation in our model income portfolio, reported better-than-expected earnings," notes Jack Adamo.

The editor of Insiders Plus, explains, " While Wells, like virtually every other bank, is dragging its heels a bit on recognizing losses on bad mortgages, there were elements of the report that were unquestionably great.

"In its latest quarterly report, Wells Fargo reported:

• Revenues were up 16% year-over-year.
• Average loans were up 18% year-over-year.
• Net interest margin was 4.92%, up 23 basis points from Q1
• Net interest income increased 21% year-over-year.

"The fact that Wells is one of the few banks that is still well-capitalized enough to write loans was a large contributor to its increase in revenues.

"Longer term, history suggests that Citigroup (NYSE: C) will be one of the best turnaround plays out there -- if we have the intestinal fortitude to stick it out," says Keith Fitz-Gerald in The Money Map Reporter.

"Based on Travelers alone, Citi's breakup value is roughly 30% higher than where it is trading today. Other business lines suggest even more money on the table.

"That is why we want to be net buyers at these levels just like some of the smartest money on the planet, including companies like PIMCO and even investors such as Wilber Ross who are legendary for buying on the cheap.

"That doesn't mean there won't be more down days to come or that we won't hate every day we own Citi, but the financial sector is essential to the economy and being able to buy in for 25 cents on the dollar makes sense for any savvy investor looking to the longer term.

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

Financial stocks is a wide net to throw over many industries: credit cards, insurance, mutual funds, banks, savings and loans, stock brokers, mortgage bankers. They all do something a little different but are tied together by one element: money. They use yours to make a profit. There's one other common trait at the moment: sub-prime mortgages. They've hit everyone of these industries, creating havoc and opportunity for investors.

It may be a good time to start buying a few of these downtrodden stocks. The reason: the sub-prime mortgage mess will be over at some point. However, no one knows that point. Merrill Lynch took a write down of more than $8 billion when two weeks before management said it would be closer to $5 billion. Other brokerage firms had similar problems. Banks and insurance companies around the world are getting out of mortgage investments because of their sub-prime losses. There will definitely be more fall out.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Sydney, Australia's Macquarie Infrastructure Company Trust (NYSE: MIC) is the top conservative idea for 2007 from Neil George, editor of Personal Finance, while Macquarie Infrastructure Group (OTC: MCQRF), is his top speculative play.

The advisor explains, "Infrastructure is the foundation of our economy. And whether owned by privateers or the public, we need more and better roads, bigger airports, better power and water systems. And there are companies getting the bids over and over again to make it all happen.

"Sydney, Australia might not come to the forefront of your mind when it comes to our nation's infrastructure, but that's where most of the capital is being pooled together to quietly gobble up deal after deal.

"Parent company, Macquarie Bank, first cut its teeth on financing and investing in several projects in its own back yard for years before taking its deal-making skills on the road.