Despite a lower "trade deficit" number, investors have been taking profits. Seeing oil go over $126.00 hurt more than a horrible turnout in financials. Below are the unofficial closing levels:

• DJIA 12,745.88 -120.90 -0.94%
• S&P500 1,388.28 -9.40 -0.67%
• NASDAQ 2,445.52 -5.72 -0.23%
• 10YR-TBond 3.7670% -0.0380
• 52-WEEK LOW CLUB
• TOP 10 ANALYST CALLS

American International Group, Inc. (NYSE: AIG) fell over 8% to $40.26 after reporting huge losses and disclosing that would raise $12.5 Billion in capital.

MOST NOTEWORTHY: Pfizer, Dell, Quest Diagnostics, and Societe Generale were today's noteworthy upgrades:

• Lehman upgraded Pfizer (NYSE: PFE) to Equal Weight from Underweight on valuation.
  
• Friedman Billings raised Dell (NASDAQ: DELL) to Outperform from Market Perform, citing expectations for improved margins next quarter, and valuation.
  
• Quest Diagnostics (NYSE: DGX) was upgraded to Outperform from Neutral by Credit Suisse, which cited valuation.
  
• Lehman upgraded shares of Societe Generale (OTC: SCGLY) to Overweight from Underweight to reflect a potential takeover by BNP Paribas and limited downside.

OTHER UPGRADES:

• Bayer (OTC: BAYRY) was raised to Overweight from Equal Weight by Lehman.
• Deutsche Telekom (NYSE: DT) was upgraded to Hold from Sell by Citigroup.
• Public Storage (NYSE: PSA) was raised to Buy from Hold by Deutsche Bank.
• UBS raised Entergy (NYSE: ETR) to Buy from Neutral.

MOST NOTEWORTHY: Sierra Pacific (SRP), Intersil (ISIL), Fannie Mae (FNM) and Freddie Mac (FRE) were today's noteworthy downgrades:

• Deutsche Bank downgraded shares of Sierra Pacific (NYSE: SRP) to Hold from Buy on valuation and uncertainty over the company's Integrated Resource Plan investment program.
  
• Jefferies downgraded shares of Intersil (NASDAQ: ISIL) to Hold from Buy and lowered their target to $30 from $38 after their Asia channel checks indicated the first wave of cancellations for PWM ICs from the leading Taiwan Motherboard manufacturers.
  
• Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were lowered to Neutral from Buy at UBS, citing credit pressures that will likely require increased reserves.

OTHER DOWNGRADES:

• First Marblehead (NYSE: FMD) was downgraded to Underperform from Market Perform at Friedman Billings.
  
• The firm also downgraded Casey's General Stores (NASDAQ: CASY) to Market Perform from Outperform.
  
• Public Storage (NYSE: PSA) was lowered to Market Perform from Outperform at Wachovia.

Most mergers are driven by the notion, sometimes wildly mistaken, that the combination will bring both a competitive advantage. Some pairs of companies, however, seem so intuitively right for one another, no bottom-line considerations should be allowed to interfere with their matrimony. Like a slot machine and a blue hair with a pocket full of quarters, these two were meant for one another.

George Carlin has a famous rap (NSFW) about Americans and our love of stuff, which drives our need to build more places to put our stuff. That's always struck me as an integrated business plan. Two seemingly perfect partners for such a business are Dollar General (NYSE: DG) and Public Storage (NYSE: PSA).

Dollar General is a leader in recreational shopping for the denominationally challenged. If you have a hankering for neon-colored plastic, something covered in polyester fur, food with the half-life of uranium-235 or clothing with the style of Piltdown Man, DG is your go-to source.There you'll find shelf after shelf of non-essentials, the kind that end up in storage sheds. Currently, the 8,260-store company is in the process of merging with Buck Holdings LP.

If this deal falters, though, how about a merger with Public Storage? PSA (I'm a little uneasy with a company whose stock ticker is the name of a prostate cancer screening test, by the way) is a REIT with direct and indirect interest in over 2,000 self-storage developments in the U.S., containing, I'm sure, a great deal of material from Dollar General. The merger would be an excellent opportunity to double-down on America's seemingly inexhaustible need for more stuff.

MOST NOTEWORTHY: REITs, Business Objects, Allstate Corp and P&C Insurance were today's noteworthy downgrades:

• Deutsche Bank downgraded REITs AvalonBay (NYSE: AVB), Boston Properties (NYSE: BXP), Health Care REIT (NYSE: HCN), Kimco (NYSE: KIM) and Public Storage (NYSE: PSA) to Hold from Buy on valuation following the recent share appreciation.
  
• Business Objects (NASDAQ: BOBJ) was downgraded to Neutral from Outperform at Baird following its acquisition by SAP AG (NYSE: SAP).
  
• Wachovia downgraded Allstate Corporation (NYSE: ALL) to Market Perform from Outperform and P&C Insurance (NYSE: PGR) citing deteriorating fundamentals in personal lines.

OTHER DOWNGRADES:

• UBS downgraded BEA Systems (NASDAQ: BEAS) to Neutral from Buy.
  
• JP Morgan downgraded Merrill Lynch (NYSE: MER) to Neutral from Outperform.
  
• Sealy Corporation (NYSE: ZZ) was downgraded to Neutral from Buy at Banc of America.
  
• Friedman Billings downgraded technology stocks, lowering ASE Test Limited (NASDAQ: ASTSF), ASML Holding (NASDAQ: ASML), KLA-Tencor (NASDAQ: KLAC) and Rudolph Technologies (NASDAQ: RTEC) to Market Perform from Outperform.

The past six months have been brutal for Public Storage Inc. (NYSE: PSA), which has seen its stock price lose about 35%; it's now trading below where it was 12 months ago. The company's net income in 2006 was well below what it was in 2005, after a few years of steady growth, and the first two quarters of 2007 haven't been much better. Net income in the second quarter was down nearly 25% from the second quarter of 2006, and for the first six months it is down nearly 50% from the first half of 2006. No wonder investors have been worried.

But PSA argues its results are due in large part to the amortization and depreciation costs associated with its
acquisition of Shurgard, the third-largest self-storage company in the U.S., and the largest one in Europe. While this acquisition may have hurt PSA in the short term, I think it's going to help the company a great deal in the long run. PSA has always benefited from strong management, and I think it's going to make the increased revenues from Shurgard turn into increased profits before too long. PSA is the leading self-storage company in the country, with modest if steady growth in same-store revenues, and the new acquisition will only make it stronger.

It may take some time for this growth to come. With a slowing housing market and an uncertain economy, people may be moving less and acquiring fewer goods that need storage. It's possible a slowing economy could force homeowners to move to smaller houses and require storage space, but generally it works the other way. Goldman Sachs recently released a report that lowered its earnings estimates for the next few years, and lowered its 12-month price target to $78 from $86.

But the Goldman report also claimed that PSA has strong growth potential, and it expects further acquisitions and higher rents to drive this growth. I think this is the right way to see this company -- but it may take a year or two. You may want to wait, but you could also buy now and enjoy the modest dividend (2.7%) while you wait for the company to return to where it should be. Public storage will always be in demand, and this company will be there to service that demand.

Type of Stock: The largest self-storage company in America, facing an uncertain economy.

Price Target: PSA has regained some ground (about 15%) after dropping from $117 to $68, and it's currently trading in the low $70s. I think it's a solid buy for the long term below $80 -- but you'll need to be patient.

Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.