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.

Interesting article from the Associated Press this morning, taking a look at how fast banks expanded during the past five years. The article states that banks added more than 10,000 full-service branches in the past five years, with nary a bank in the inner city (actually, one of every 10 was in a minority neighborhood).

The banks were "racing" to plant themselves in various parts of the country deemed exclusive or growing. The problem that the article looks at is the dearth of banks located in inner-city locations, which could lead to more charges for customers. This is a very real problem, and warrants the discussion; however, I want to take a look at the problem of overexpansion for the banking industry.

Late yesterday, MetLife (NYSE: MET) announced a second-quarter net loss of $1.74 per share, compared to earnings of $1.26 per share a year ago. The company blamed the loss on derivative losses of $1.8 billion, $1 billion of which was related to an increase in the company's own debt in the second quarter. Excluding charges, MET earned 88 cents per share for the quarter, topping the consensus estimate by 20 cents. The insurer's premiums, fees, and other revenue increased 4% to $8.38 billion thanks to a record amount of money spent in variable annuity products.

Variable annuities can be described as a contract between the purchaser and the insurance company. The insurer agrees to make payments to the purchaser either immediately or at a future date. Investment options for variable annuities are usually a mutual fund that invests in stocks, bonds, money market instruments, or a combination of the three.

I know, I know. You look at the recent performace of E*Trade's (NASDAQ: ETFC) shares and you say to yourself, man, I've got to play this stock and make some return! Sure, E*Trade shares have doubled since the first of the year. But then the earnings hit the fan, my trading friends, and that double suddenly disappeared.

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.

Minyanville Professor Quint Tatro dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

There are a few things I am watching for today to give me better clues as to the internal character of the market.

Wal-Mart (NYSE: WMT): It's off on retail numbers after the stock broke out of a four-month consolidation pattern on good volume. If the stock catches a bid, it is an indication that institutional investors are back stalking retail plays and would be bullish for the general market.

Energy ETF (AMEX: XLE): Energy has recently broken a longer term trend going back to mid-2006. It is bouncing off recent lows on very light volume. If money continues to rotate out of this sector, finding a home in the likes of retail, housing and financials, again a bullish sign. I initiated a short position in XLE this morning.

Financial ETF (AMEX: XLF): Financials have been and will continue to be the key to the market's future. After recapturing the 50-day moving average, this ETF is being brought down by AIG (AIG) and needs to regain its footing. Some consolidation is fine, but anything back below $20 would have me heading back towards the bunker.

Homebuilders ETF (AMEX: XHB): The homebuilders continue to perk up and also remain a key to the future of the tape. They are probing green today above their 50-day moving average on decent early volume. A break here above yesterday's high going on to attack the $19.00 level is also a bullish sign.

These are things I am watching for which will give me my clues to start wading back into the market with real capital.

(Prof. Tatro has positions in WMT, XLE, XLF, XHB).

When it comes to the banking industry, the good news just keeps coming. The head of the FDIC says that only about 13% of the banks on its watch list of troubled institutions actually fail. Except for the banks that go out of business, how could it get any better?

"We work with the primary regulator to give them extra care and attention, to nurse them back to health or to sell them off to another institution," said FDIC Chairman Sheila Bair, according to Reuters.

The comments side-step the issue that the credit crisis is getting worse. The IMF recently said that it could not see a bottom for the housing market and that financial companies would end up with $1 trillion in write-offs before the troubles pass. Bill Gross, the head of huge bond house Pimco, has essentially said the same thing.

The comment from the FDIC chief may be accurate based on a snapshot of the market today. It fails to acknowledge that the current watch list is only the tip of the iceberg.

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

American Express (NYSE: AXP) saw a big sell-off in its shares during the after-hours session on Monday following the release of its second-quarter earnings numbers. The shares already closed down over 11%.

It isn't difficult to comprehend this one. According to Earnings.com, Wall Street was hoping for the credit company to make 83 cents per share. American Express only delivered 57 cents per share from continuing operations. Not only did the company disappoint the Street by a very wide margin, but it disappointed itself, since that 57 cents per share represents a 35% drop compared to the bottom-line results achieved a year ago.

Yep, the financial crisis is still with us. American Express needed to significantly add to its credit reserves. Management stated that the economy is having a negative effect on its cardmembers, and that previous guidance can no longer be relied on. Translation: don't buy this stock! At least, that's my opinion.

I simply can't see allocating investment funds to American Express at this point. If investors wanted to get some exposure to plastic, all they would need to do is consider Visa (NYSE: V) or MasterCard (NYSE: MA). Both of these businesses are based primarily on transactions, not on credit risk. Whenever a card is used, these businesses get a little cut. And that adds up, my friends. Granted, both of these companies sold off on Monday and have been weak lately, and they have litigation risk, but I'd at least look at them for the long-term. Over time they should do well.

American Express, however, is way off my list of potential investment ideas. Not even going near this one. Name a timeframe (e.g. year-to-date, one-year, five-year, etc.), and you'll find that the stock is down. The economy is going to have to turn sharply before I even remotely consider it.

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

The bulls got to lead the first day of the quarter, although we would note that if today was the norm that trading volatility isn't slowing down regardless of the direction. Oil rose again toward session highs on tensions and the usual myriad of reasons we cite for oil rising (yes, it's that routine). Here are today's unofficial closing levels:

• DJIA 11,381.77 (+31.51)
• S&P500 1284.89 (+4.89)
• NASDAQ 2304.97 (+11.99)
• 10YR T-Note 3.992% (+0.013%)
• 52-WEEK LOWS

We actually saw many financial sector upgrades from research firms today, which sent many of the corresponding shares higher in what feels like a "for once" statement. We would caution that later in the day an analyst report did note other banks would need more capital (again).

Bloomberg News reports a blizzard of bad news about Citigroup (NYSE: C). Its management team does not know what's going on with its Collateralized Debt Obligation (CDO) portfolio, and loan losses on the consumer side of its business are climbing fast.

I am most concerned about Citi's inability to quantify the CDO damage. According to DealBreaker, the conference call did not go well, with Citi's CFO "having to admit many times that he either wouldn't comment or didn't know the answer to detailed questions about credit market exposure. Merrill's Gary Moskowitz asked about what the original par value of the CDO portfolio. Crittenden said he didn't know. How about specifics on modeling versus market tests? Nope, just more hand-waving!"

Another analyst, Jon Fisher, who helps manage $22 billion at Minneapolis-based Fifth Third Asset Management said, "There are probably issues on their balance sheet that the management team, who's only really been running the company for about a month, doesn't even know about."

As investors throughout the world get ready to usher in 2008, here is a stock pick that looks like it will be a big winner.

TD Ameritrade (NASDAQ: AMTD), the online broker, looks like it will be the big winner in the E*Trade (NASDAQ: ETFC) fiasco. TD Ameritrade looks to pick up a whole bunch of accounts from the shamed online broker. In addition, after some clarity is shined on just how bad E*Trade's financial situation is, I would expect TD Ameritrade to swoop in and gobble up the retail brokerage business of E*Trade. They are sure to acquire it on the cheap, which makes TD Ameritrade all the more attractive.

With a PE under 19, and the stock trading just off the 52-week high, the stock has been hanging in during a period when the rest of the financials have gotten clobbered. Look for TD Ameritrade stock to be a strong performer in '08.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no position in any stock mentioned as of 12/30/07.

It's no secret that financial and consumer stocks have been slammed this year. Since January, the S&P financial sector has shed 21.3% while the S&P consumer discretionary sector has lost 14.2%. That compares to a 2.2% gain in the S&P 500 index.

While it is likely far too early to call for a bottom in either group, a quick read of the technical relationship between the two sectors going back several years suggests it might nonetheless be time to bet on banks, brokers, and other financials while wagering on further weakness in the shares of companies that are most exposed to a slowdown in personal spending.

Arguably, this particular pairs-trade probably jibes with how traders are positioned and the near-term fundamental outlook. Right now, many people are afraid of what bombshell might hit the financial sector next. Yet as far as the economy goes, the majority of central bankers, analysts, and various Polyannas still seem to be expecting -- hoping -- that any slowdown we see will be mild, at worst.

In sentiment terms, at least, that suggests the former group has a decent amount of bad news priced in. In contrast, shares in the latter group could be vulnerable to downside surprises, especially given that we are now in the midst of the crucial holiday selling season.

One way to play it (depending on risk): buy the Financial Select Sector SPDR Fund (AMEX: XLF) and sell (sell-short) the Consumer Discretionary Select Sector SPDR Fund ETF (AMEX: XLY).

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

This year has been quite a ride for America's financial stocks. Countrywide Financial is digging out from a mountain of defaults on high-risk loans. The CEOs of Citigroup and Merrill Lynch have been ousted, and the companies' recoveries will evolve over a matter of years. Other financial giants are holding billions in distressed paper. Two Bear Stearns hedge funds have collapsed. The financials have been slaughtered throughout 2007, and the fourth quarter may be even uglier.

But from an investor's point of view, this is precisely the time to go in: you buy properties when they're down and nobody wants them. Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), US Bank (NYSE: USB), and on the regional side, Marshall & Ilsley (NYSE: MI), will emerge from this as huge winners.

So why am I recommending these financial companies, in the midst of deep turmoil throughout the sector? A friend of mine, Sara Maddox from Washington, D.C., really crystallized the issue for me when she emailed, "Georges, why exactly are you recommending some of these financial stocks, and how did we get into this mess anyways? Please explain, as the information out there is so confusing."

I decided Sara was right: the information is really confusing and needs to be explained in layman's terms. So here we go... I hope this helps you!

Shares in internet search behemoth Google (NASDAQ: GOOG) recently rose to their highest level ever, giving the company a market capitalization figure (briefly) of over $200 billion. For a company that does not exist except in the virtual sense, that's impressive. The company makes no physical products (save for corporate search appliances) and rose to that level in just over three years on the public market. Is this for real?

Well, Google's recent quarterly earnings have shown that, so far, it is. The company just continues to make money hand over fist in the internet search arena, and have worked many acquisitions into itself to prepare for the day when -- gasp -- it can't grow by leaps and bounds on search results-based text advertising prowess alone. This Thursday afternoon at 4:30pm EST, the company will report its Q3 earnings in what could be one of the most hotly anticipated earnings calls of this season. Although many investors are more concerned with how Yahoo, Inc. (NASDAQ: YHOO) is faring and what it plans to do in order to recapture its former glory, Google pundits are waiting to cheer the company's shares to new highs if it meets huge (again) expectations in a few days.

Analyst consensus expectations are for a $3.25 EPS figure come this Thursday, which would put that number far ahead of the year-ago EPS of $2.36. If Google fails to meet these numbers, does it mean that advertising in general may be slowing down? With the consumer economic situation this year having been a roller-coaster of mortgage, gas and commodity price changes, it could happen. Then again, Google does not have a history of quarterly result disappointments. Stay tuned right here Thursday afternoon, as I'll be covering Google's results live as the conference call and webcast begins at precisely 4:30EST.

Visit AOL Money & Finance for more earnings coverage

According to The Wall Street Journal, Swiss bank giant UBS (NYSE: UBS) will announce a tremendous loss for the third quarter. The problem is primarily in its fixed income division, which holds, among other things mortgage-related assets.

The loss will be in the $510 million to $600 million range, based on a write down of assets that could be six times that large. The Journal writes that the "losses resulted from applying sharply lower market values to asset-backed bonds."

And, that is the core of the matter. Some of the fixed income instruments held by banks cannot be sold right now, or would have to be sold at a huge discount. Banking accountants use models to set asset values for reasons of earnings reporting, but those numbers are based to some extent on theory.

The problem is acute enough that it could spread to big U.S. money center banks like Citigroup (NYSE: C) and Bank of America (NYSE: BAC). After suffering sharp declines in August, Bank of America is now down only 5% for the year. Citi has not recovered as well and is off 15% over the same period.

Bad news out of a major U.S. bank would almost certainly cause the firms to test their lows again.

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