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.

MOST NOTEWORTHY: Goldman Sachs, Lehman and TD AmeriTrade were today's noteworthy downgrades:

• UBS downgraded Goldman Sachs (NYSE: GS) to Neutral from Buy. The firm believes liquidity problems and de-leveraging in the capital markets will get worst before they get better; UBS also downgraded Bank of New York (NYSE: BK), State Street (NYSE: STT) and Invesco (NYSE: IVZ) to Neutral from Buy.
  
• Following Bear Stearns' (NYSE: BSC) downfall, UBS also downgraded Lehman Brothers (NYSE: LEH) to Neutral from Buy and said the company could be the "next on the list" for the confidence/liquidity crisis by some investors.
  
• TD AmeriTrade (NASDAQ: AMTD) was downgraded to Neutral from buy at UBS and to Market Perform from Outperform at Friedman Billings. Friedman Billings downgraded TD Ameritrade citing slowing client activity as well as margin compression.

OTHER DOWNGRADES:

• JP Morgan cut Portugal Telecom (NYSE: PT) to Underweight from Neutral.
  
• Goldman downgraded Marathon Oil (NYSE: MRO) and Holly Corp (NYSE: HOC) to Neutral from Buy and removed Frontier Oil (NYSE: FTO) from its Conviction Buy List.

Short sellers trading stocks listed on Nasdaq made big bets against cable and financial shares, according to data from January 15. The numbers compare to short interest in the same companies on December 15, 2007.

The short interest in cable company Charter Communications (NASDAQ: CHTR) moved up 4 million to 99.3 million. Charter's stock has fallen close to $1. It carries $19 billion in debt and there is a growing concern that operating profits will not cover interest. Controlling shareholder Paul Allen may have to put more debt into the company.

Short interest in Comcast (NASDAQ: CMCSA) rose almost 600,000 shares to 45.1 million. After hitting a record high last year, shares of the nation's largest cable company have fallen one-third on concerns that large telephone companies will take its TV and broadband subscribers with their new fiber-to-the-home products.

Short interest in E*Trade (NASDAQ: ETFC) moved up 9.9 million shares to 91.2 million. The market is obviously willing to bet that there are more problems with the company's balance sheet. Short interest in healthier rival TD Ameritrade (NASDAQ: AMTD) fell 5.1 million to 8.6 million shares. The market is not shorting the discount brokerage industry, just the weakest company in the group.

Douglas A. McIntyre is an editor at 247wallst.com.

TD Ameritrade Corp. (NASDAQ: AMTD) saw a Q1 net income growth to the tune of 65% [subscription required] as more of its retail customers placed trades in the turbulent market during the final quarter of 2007. That's not all, though: the company said 2008 earnings would be better than its previous outlook.

In perfect market fashion, the company's shares rose slightly and then tanked over 4%. AMTD shares stand at $18.08 as of 12:27 p.m., down 4.79% from yesterday's close. This, after the company reported a 65% net income rise in its Q1's fiscal period, with $240.8 million in net income or $0.40 per share and shares indicated up over 4% in premarket trading.

For the trading company's Q1 period, it reported an average of 321,736 client trades per day -- up 35% from the year-ago quarterly period. Seeing as though the final three months of 2007 saw some wild swings in tech stocks (among other sectors), TD Ameritrade's customers were on an apparent trading frenzy of sorts.

However, the company reported that client assets fell 0.8% to $300.4 billion for the quarter ended December 31st. The total includes $47 billion in cash and money market funds within all consumer client accounts. All those consumer trades, all those assets, and a brighter 2008 outlook -- and AMTD shares go down as a result. You have to love the market's interpretation of good results.

A look at the Nasdaq short interest on December 14, compared to November 30, shows that bets against discount brokers rose sharply. Short interest in E*Trade (NASDAQ: ETFC): moved up 3.9 million shares to 53.7 million, according to data from the exchange. That might have been expected, given the financial company's problems with mortgage related securities.

But, shares short in TD Ameritrade (NASDAQ: AMTD) jumped 8.2 million shares to 17.8 million, and short interest in Schwab (NASDAQ: SCHW) moved up by 6.1 million shares to 28.7 million. Both figures are a fairly large percentage increase.

The simple explanation for the rise may be that both stocks have done better than financial shares as a whole and are ready for a pull-back. Schwab's stock is up over 30% this year. Ameritrade is up just under 25%.

But there are two other possible explanations, both a bit more unsettling. One is that a bear market would likely hurt earnings at discount brokers. A recession early next year could cause individual investors to pull in their horns. The other theory is that the two firms could have balance sheet problems of their own. This is less likely, since neither company has made any disclosures to that effect.

Whatever the reason, a fairly large amount of money is being gambled that the discount brokerage stocks have peaked.

Douglas A. McIntyre is an editor at 247wallst.com.

CNBC is reporting that Schwab (NASDAQ: SCHW) and TD Ameritrade (NASDAQ: AMTD) may be in talks to buy troubled discount broker E*Trade (NASDAQ: ETFC). The news has pushed up E*Trade shares as much as 23% to $5.25.

The problem is that if the broker's mortgage securities investments are as severe a problem as some analysts think, the company may not be worth more than the $3.46 where the stock traded a few days ago. Those buying into the rally could be burned if an offer is well below the current price.

Any deal would probably be based on selling the customers of the discount brokerage unit and keeping the damaged securities on the balance sheet within the remaining public company. There is no guarantee that the cash paid for the customer base would not be eaten up if the market for these distressed securities drops further.

E*Trade may be worth over $5, but it could also be worth a lot less.

Douglas A. McIntyre is an editor at 247wallst.com.

TD AmeriTrade Holding Corp. (NASDAQ: AMTD) recently up $1.09 to $19.01 on the hopes E Trade Financial Corp. (NASDAQ: ETFC) customers uncomfortable with ETFC asset backed security losses will move assets to AMTD:

AMTD overall option implied volatility of 58 was above its 26-week average of 45 according to Track Data, suggesting larger risk.

Charles Schwab (NASDAQ: SCHW) recently up $1.22 to $23.45:

SCHW overall option implied volatility of 46 was above its 26-week average of 35 according to Track Data, suggesting larger price movement.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Crocs (NASDAQ: CROX) is recently (8:44 a.m.) down $20.55 (27.5%0 to $54.20 in pre-open trading.

• Think Equities: "Q3 results beat consensus, but raised FY07 guidance disappoints."
  
• CROX introduced FY08 revenues and EPS growth targets of 35% to 40%.
  
• CROX November option implied volatility of 96 was above its 26-week average of 60 according to Track Data, suggesting larger price risks.

TD AmeriTrade (NASDAQ: AMTD) --

• TD Ameritrade CEO Joseph Moglia was an executive at Merrill Lynch (NYSE: MER) in the 1980s and 90s. Moglia has been mentioned as a potential candidate to lead MER.
  
• AMTD over all option implied volatility of 42 is near its 26-week average of 43 according to Track Data, suggesting non-directional risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

E*Trade (NASDAQ: ETFC) closed at $14.21.

• ETFC lowered its EPS guidance, increased its provision for loan losses. ETFC will take additional security impairments and exit and restructure some non-core business.
  
• Goldman Sachs (NYSE-GS) lowered its 12-month price target to $16 and removed ETFC from its Americas Buy list. Smith Barney says: "If its bank regulators took a more holistic view of ETFC's regulatory capital, it could result in a forced deleveraging."
  
• The Wall Street Journal reported on 8/22 that TD AmeriTrade (NASDAQ: AMTD) is in merger talks with ETFC. Jana Partners & SAC Capital Advisors LLC in late May encouraged ETFC and AmeriTrade or Schwab (NASDAQ: SCHW) to consider a combination.
  
• ETFC overall option implied volatility of 60 was above its 26-week average of 44, according to Track Data, suggesting larger price fluctuations.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

There is no holiday break for the rumor mill as word of many a company's activity is bantered about.



BUILD-A-BEAR WORKSHOP INC (NYSE: BBW)

As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.


COUNTRYWIDE FINANCIAL CORPORATION (NYSE: CFC)

It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.


THE STEAK N SHAKE COMPANY (NYSE: SNS)

Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.



STILL FLYING AROUND


WENDY'S INTERNATIONAL INC (NYSE: WEN)

They say they may want to sell the company, and the latest firm to gobble up shares is Tudor Investment, purchasing a 6.1% stake.


TD AMERITRADE HOLDING CORPORATION (NASDAQ: AMTD)

Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.



BUZZ


DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.

MOST NOTEWORTHY: Gap Inc (GPS), World Wrestling Entertainment, Inc (WWE), AstraZeneca plc (AZN), and Nike, Inc (NKE) top today's list of noteworthy upgrades:

• Wachovia upgraded shares of Gap Inc (NYSE: GPS) to Outperform from Market Perform citing increased visibility on the turnaround and execution given modest merchandising improvements at Old Navy and GapKids, potential cost-cutting by late Spring and Summer and potential improved products at Gap adult by the holiday season into Spring 2008.

• Susquehanna upgraded shares of World Wrestling Entertainment inc (NYSE: WWE) to Positive from Neutral.

• Bernstein upgraded AstraZeneca plc (NYSE: AZN) to Market Perform from Underperform citing valuation and more realistic expectations.

• Off The Record Research changed their view to Positive on Nike Inc (NYSE: NKE) shares given the company's lack of discounting, share gains at Foot Locker (FL) and momentum in Europe.

OTHER UPGRADES:

• Lehman Brothers upgraded LG Phillips LCD Co, Ltd (NYSE: LPL) to Overweight from Equal Weight citing a fundamentals turnaround in display and structural changes occurring now rather than in the second-half of 2007.

• Friedman Billings believes TD AmeriTrade Holding Corp (NASDAQ: AMTD) has compelling risk/reward and upgraded shares to Outperform from Market Perform given significant free cash flow and an attractive valuation that increases the likelihood that the company could become a takeover target.

• Goldman Sachs upgraded The Mosaic Co (NYSE: MOS) to Buy from Neutral on valuation.

• Matrix USA upgraded Avocent Corp (NASDAQ: AVCT) to Buy from Hold on valuation.

• AG Edwards upgraded American Home Mortgage nvestment Corp (NYSE: AHM) to Buy from Hold and believes the market has over-reacted, pulling shares down with it.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

For the past two years I have been given 50 free (online) stock trades associated with my Wells Fargo & Co. (NYSE:WFC) Portfolio Management Account (PMA). I do not make anywhere near this many trades and do not expect to -- even in the next five years. So for me it makes all trading free. The PMA account has been convenient in many ways because it ties together my equity line, cash management, checking, credit cards, and stock accounts.

Recently, Bank of America Corp. (NYSE: BAC) has done the same thing and offered me 100 free trades. This seems to be the new direction in banking and relationship management. Telecommunications and cable networks are bundling services as well to increase revenue and make the relationship "stickier."

But as the banking services become similar, it's likely I will drop one bank for another and consolidate accounts further. This will likely happen a lot.

So who loses out? For me, in the short run it is likely to be Charles Schwab Corp. (NASDAQ:SCHW) because it still charges me for trading. Without the same network of branches as its competitors, it loses out on face-to-face contact as well. To mitigate this, I think Schwab will have to continue migrating its services toward asset management and banking and be forced to mimic the services of its competitors.

Mellon Bank / Mellon Financial Corp. (NYSE:MEL) (recently acquired by The Bank of New York Co., Inc. (NYSE:BK)) is also at a disadvantage (although it is not a retail bank and holds our business accounts only.) Mellon has been trying for years to increase the depth of our relationship, but for whatever reason has not elected to tie its services together and cannot compete with the full breadth of services offered by Wells and B of A. To its credit, however, Mellon has offered a high level of service for our many enterprises, and I doff my hat to Fred, Roger, Lynn, Janet, Tamara, Josh, German and Caesar in the Century City office. Without that valuable face-to-face relationship with them, we'd probably be gone.

All of the institutions we do business with offer what is referred to generally as "premier" banking. Each requires some level of account size or banking relationship to achieve a particular level of service. As competition heats up, this threshold will probably drop.

The price competition in stock trading and the consolidation of the industry has been, and will continue to be, forefront in the business news for years to come. E*Trade, Scott Trade, Fidelity and TD Ameritrade are all beating each other up with free trading offers, discounts to new clients, banking opportunities and more. You can find these amazing offers spread throughout the AOL Money and Finance pages and every other financial web outlet.

The very word "Bank" has become more and more obsolete, while "Financial Institution" becomes ever more relevant. For the consumer, the opportunities are expanding as the services and price competition keep increasing. Who do you "bank" with? Who do you "trade" with? Is there a better term than financial institution?

Check out my other posts for BloggingStocks here. and be sure and read You don't have to be 007 to find the best picks for 2007!

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.

As a contributor to GuruWatch.org, I noticed that celebrity guru, Suze Orman, is at it again. At what you might ask? Writing a new book, for one. And marketing herself, for another. Notice that she clearly gave thought to the colors to be used on her latest book cover. In short, she definitely knows how to make money .... for herself at least!

Suze Orman has partnered with TD Ameritrade (NASDAQ:AMTD) to offer brokerage account bonuses to women who read and follow the advice from her latest self-help book "Women & Money: Owning the Power to Control Your Destiny." In the book, Orman outlines a simple five-step, the "Save Yourself Plan," intended to help women find long-term financial security. TD Ameritrade is helping to promote Orman's book by offering a $100 bonus to clients who follow the Save Yourself Plan, open a new brokerage account during the month of March, and make monthly direct deposits of $50 or more for one year.

Forgive my eternal cynicism, but the "Save Yourself Plan"? I'm undecided whether that name is meant to motivate women by instilling fear or by uplifting their spirit. Orman explains it this way, "What's at stake is far bigger than money itself; it's about every woman's sense of who she is and what she deserves, and why it all begins with the decision to save yourself."

Would TD Ameritrade really care if women followed Orman's advice? The key is to build up the necessary illusion that they're after your best interest, and not your fees/commissions. The brand marketing strategy to reach out to women investors is a smart one.

As for Suze, increasing book sales would not be a bad thing at all for her bank account. I wonder if she uses TD for that? Hmm ...

Online brokerage TD Ameritrade Holding Corp. (NASDAQ:AMTD) reported its quarterly earnings before the open. Earnings rose 69% just as revenue nearly doubled. Main reasons for this surge is higher trading commissions, interest revenue and fees. AMTD shares are up around 6% in midday trading.

Net income rose to a record $146 million, or 24 cents per diluted share, in the first quarter ended on Dec. 31 from $86 million, or 21 cents a share, a year earlier. Analysts were expecting 22 cents per share. Net revenue were $535 million in the quarter, compared to $277 million the year before. Analysts were expecting $517 million.

Analysts were also expecting the stock to settle down after its rally in early morning trade, but so far, AMTD doesn't show signs of "settling down." Also, there is indication Ameritrade might be shopping itself around as the CEO said he thinks the company would be a "good candidate to pretty much anybody interested in going after [the] mass affluent [market] in the United States."

CEO Joe Moglia also said he expects the shift in the company's focus from total reliance on transactions to generating revenue from assets under management to be noticeable by the end of the year. This could contribute to growth and more stable earnings.

MOST NOTEWORTHY: Several online brokerage firms and RealNetworks (RNWK) topped today's list of initiations.

• Morgan Stanley initiated E*Trade Financial Corp. (NYSE:ET) and TD Ameritrade Holding Corp. (NASDAQ:AMTD) with Overweight ratings while starting Charles Schwab Corp. (NASDAQ:SCHW) with an Equal Weight on valuation. The firm prefers E*Trade and TD Ameritrade based on their smaller size and earlier stages of capitalization.
• RealNetworks Inc. (NASDAQ:RNWK) was assumed with an Underperform rating and $8.50 target at Jefferies; The firm considers RealNetworks' valuation expensive given the risks in the mobile and music services business.

OTHER INITIATIONS:

• Crocs Inc. (NASDAQ:CROX) was initiated with a Buy rating and $51 target at Nollenberger, as they believe the Crocs' product has created a category in footwear and outgrown its fad stage.
• The Western Union Co. (NYSE:WU) was started at Wachovia with a Market Perform rating; The firm expects near-term pressure on shares given the immigration reform concerns, brand repair costs and additional pricing pressure.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).