Hank Paulson led the charge this morning talking about the need and credibility of the GSE's. Oil was up for a while but after Tropical Storm Dolly headed further south than the oil and gas infrastructure that locked in heavy oil selling. The major focus continues to be earnings and financial stocks in particular. Below are today's unofficial closing bell levels:
DJIA 11601.60 (+134.26)
S&P500 1276.80 (+16.80)
NASDAQ 2303.96 (+24.43)
10YR T-Note 4.097 (+0.03%)
52-Week Lows
Top Analyst Calls

American Express Company (NYSE: AXP) was one of the more poor financial stocks today after the company choked on earnings last night. It is also facing deteriorating business despite it being thought of as the highest quality credit card around. Shares were down 9.2% at $37.13 in today's final minutes.

MAJOR PAPERS:

• According to Yahoo! Inc (NASDAQ: YHOO), the Wall Street Journal reported that a severance plan investor Carl Icahn said is "excessively expensive" would come into play if Icahn is successful in his plan to take control of the company's board; Yahoo! maintained that the plan is structured to prevent Yahoo! from altering or dismantling it while under a proxy challenge.
• The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) almost reached a strategic deal with a group of Korean financial institutions as part of its recent capital raising initiative, and the investment bank may still sign an agreement with the Korean companies this year, inside sources said.
• According to the Financial Times, Merrill Lynch & Co Inc (NYSE: MER), UBS AG (NYSE: UBS) and Citigroup Incorporated (NYSE: C), which are most exposed to MBIA Inc (NYSE: MBI) and Ambac Financial Group Inc (NYSE: ABK), are facing further write downs of up to $10B after the bond insurers lost the battle to keep their triple A credit ratings in tact.
• A source familiar with the matter told dealReporter that Barnes & Noble Inc (NYSE: BKS) is conducting due diligence, but has not established whether it will competitively bid for Borders Group Inc (NYSE: BGP). Should Barnes & Noble indicate real interest, the biding process could be delayed, the source said.

OTHER PAPERS:

• The Detroit News reported that Ford Motor Company (NYSE: F), in an effort to keep up with changing consumer demand in the U.S., is assembling a plan that will shift entire truck plants to car production.

MAJOR PAPERS:

• UBS AG (NYSE: UBS) won't comment on write-down estimates, but according to the Wall Street Journal, investors are expecting it as prices for mortgage securities have significantly gotten worse over the past several weeks as evidenced by Lehman Brothers Holdings Inc (NYSE: LEH) profit warnings.
• Yesterday Lehman's stock fell 8.7% as the firm announced a projected $2.8B second quarter loss and a $6B capital raise. Options activity indicated a lessening volatility, the Wall Street Journal reported, a sign that perhaps the worst may be over.
• According to a person familiar with the matter, the Financial Times reported that China's Qingdao Haier has approached investment banks to advise it on a bid for General Electric Company's (NYSE: GE) appliance business.

OTHER PAPERS:

• A brief filed by plaintiffs in a shareholder lawsuit against Yahoo! Inc (NASDAQ: YHOO) and its directors claimed that an employee severance plan put in place to protect workers after a merger with Microsoft Corporation (NASDAQ: MSFT) should be repealed immediately. The New York Times reported that the plaintiffs believe the plan could skew the outcome of a proxy battle between Yahoo! and Carl Icahn for control of the company.

MAJOR PAPERS:

• General Motors Corporation (NYSE: GM) plants that were idled during the American Axle & Manufacturing Holdings Inc (NYSE: AXL) strike are set to resume production mow that the strike has been settled, the Wall Street Journal reported.

OTHER PAPERS:

• The Telegraph reported that Halliburton Company (NYSE: HAL) is expected to determine this week whether it will make a GBP1.8B counter bid for its British competitor, Expro International Group (OTC: EXPRF).
• The Telegraph also reported that U.K.-based Imperial Tobacco Group Plc (NYSE: ITY) could conduct a GBP5B rights issue this week. The company has suggested that it needs the funds in order to retain its investment-grade credit rating following its acquisition of Altadis.

WEB SITES:

• According to Bloomberg, regulatory filings show that banks such as Citigroup Incorporated (NYSE: C) are failing to acknowledge at $35B of additional writedowns in their income statements.

MAJOR PAPERS:

• U.S. mall owner and operator General Growth Properties Inc (NYSE: GGP) is reportedly shopping its portfolio for capital to pay off $18.7B of debt coming due over the next four years to potential joint venture partners, according to the Wall Street Journal.
• The Wall Street Journal also reported that Merrill Lynch & Co Inc (NYSE: MER) is expected to reported another quarterly loss this week, as well as up to $8B in new write-downs, a person familiar with the matter said. This would bring its total to more than $30B since October.
• The Financial Times reported that General Electric Company (NYSE: GE) is planning to invest up to $2B in China in acquisitions and other deals in order to double its revenues in the country...

WEB SITES:

• Barron's Online said Gildan Activewear Inc (NYSE: GIL), the leading maker of undecorated t-shirts and sweatshirts for the U.S. wholesale market, might be worth a look. All of the company's shirts are now made in Gildan-owned factories in Central America and Caribbean, allowing Gildan to achieve cost benefits of offshore manufacturing before competitors like Hanesbrands Inc (NYSE: HBI). Gildan has recently broadened its market with the acquisitions of two sock makers.

MAJOR PAPERS:

• In a diversification move, Martha Stewart Living Omnimedia Inc (NYSE: MSO) will reportedly acquire the media and licensed properties of well-known TV chef Emeril Lagasse for $45M in cash and $5M in stock, according to the Wall Street Journal.
• According to the Wall Street Journal's "Heard on the Street," the current quarter for Lehman Brothers Holdings Inc (NYSE: LEH) will not be good and it also has a sizable amount of commercial real estate loans which could lead to bigger write-downs. The latest estimates are of an approximate $1.3B write-down, above recent estimates, and higher than the $830M in the fourth quarter.

OTHER PAPERS:

• The Australian Financial Review reported that General Electric Company (NYSE: GE) has emerged as a new contender for Allco Finance Group's transport leasing, property and power assets.

WEB SITES:

• Motorola Inc (NYSE: MOT) is suing Research in Motion Limited (NASDAQ: RIMM) claiming the company violated seven U.S. patents covering mobile-communications technology, Bloomberg reported. Research in Motion also filed a suit against Motorola claiming the company infringed on Research in Motion patents.

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

Wall Street is the place where it's always darkest just before it gets pitch black. Pessimism (also known as fear) can grip investors firmly and paralyze them, particularly when it comes to buying stocks related in any way to mortgages. Many investors are afraid and fear the worst is still ahead. It may be. But it may not be.

The fear is certainly founded in experience. Any one owning stocks such as Countrywide Financial Corporation (NYSE: CFC), Citigroup Inc. (NYSE: C), Merrill Lynch & Co., Inc. (NYSE: MER) or Washington Mutual, Inc. (NYSE: WM) saw tremendous losses in 2007. These stocks lead the financial sector on the way down. And they should have. Their losses were catastrophic with writedowns of mortgages and derivatives in the billions of dollars. And no one really knows how bad the next surprise will be. So the natural and survival related reaction is to simply stay away from these stocks.

That would be a mistake. These are some of the largest companies in their fields. They are leaders. While they got greedy and paid the price, these firms have been around for a long time and have made profits for years. Countrywide had 25 years of profits before it took its first loss last quarter. It may take another loss for the fourth quarter of 2007. Management stated early in the quarter that it would show a profit. But investors are skeptical. The stock continues to hit new lows.

While it's prudent to be skeptical, it can be short sighted to simply ignore these sectors. No one knows how bad the fourth quarter was for these and other financial stocks. We'll find out in a few weeks when earnings are released. But what if the worst is behind these stocks? What if profits are back even if only by a small amount? If so, these stocks will soar. They're priced for the worst case: more losses with more to follow.

MarketWatch's David Weidner got a nice quote from Punk Ziegal & Co.'s Dick Bove that pretty much sums up my reaction to the recent round of subprime write-offs, and Wall Street's reaction:

"This is a reason to sell not buy. The theory that if the company writes off $2 billion it should see its stock price up $1 and if it writes off $6 billion the stock should jump $3 is not one I can embrace."

Yes! Exactly! Another thing that investors should be wary of is the possibility that some of these firms are engaging in cookie jar accounting: taking aggressive write-offs so that they can book windfall profits when the securities in question rebound. Given that Wall Street is rewarding terrible results from the big banks this quarter, this would have to be tempting.

In just a few months, an interesting shift has taken place in terms of how investors are viewing these write-offs. First, everyone was whispering that the banks weren't going to take big enough write-downs for fear of seeing their stocks get pummeled by big losses. Then, when this rumor had circulated, the banks responded with huge write-offs -- and the the Street cheered their honesty. But now we're wondering just how honest they were really being.