It turns out that Charles Schwab (NASDAQ: SCHW) and TDAmeritrade (NASDAQ: AMTD) may have sold auction-rate securities by using misleading marketing about whether or not the instruments were "cash equivalents." According to The New York Times, the "point of sale" activity at the discount and retail brokerages is similar, they said, and some of the discount brokerage firms use financial advisers or may have improperly listed information on their websites.

Schwab argues that it was only an "agent" and did not slant the marketing of auction-rates one way or the other.

It is safe to predict that Andrew Cuomo, the New York State Attorney General, will get discount brokerage firms to buy the auction-rate paper back from their customers. Cuomo can probably find some marketing material where the nature of the securities was represented the wrong way.

But, Cuomo's actions have stepped over the line. In all probability, many discount brokerage customers bought the auction-rates on their PC without seeing any information about whether their liquidity could be undermined. Discount brokerage customer often do their own research.

Cuomo won't care. He won't try to find out which people got their auction-rates without being attracted to them by marketing. He will get the discount firms to buy all of the paper back. The companies do not want years of litigation.

Cuomo is running for governor, or perhaps the U.S. Senate. He does not have time to pause for such details.

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

Talk about an interesting day for E*Trade (NASDAQ: ETFC). The broker, a competitor of TD Ameritrade (NASDAQ: AMTD) and Charles Schwab (NASDAQ: SCHW), reported Q2 earnings on Tuesday after the market closed. E*Trade saw its stock close up on the day by almost 11% on better-than-average volume ahead of the press release. Then, after hours, the stock was down over 15% as investors digested the data. It was a wild ride indeed, and I'm glad I wasn't on it.

E*Trade saw its total net revenue decrease by 20% to around $532 million. The loss per share came in at 19 cents. According to this Reuters article, Wall Street was hoping the loss would only be 14 cents per share.

E*Trade isn't out of the woods yet, and I think it'll be a while before it fully turns itself around and recovers from the financial crisis it's been suffering. In fact, the release mentioned how the broker lost value on investments in preferred equities of Federal National Mortgage Association (NYSE: FNM) and Federal Home Loan Mortgage (NYSE: FRE) in July and that the liquidation of the investments will impact the third quarter. Yeah, I'm sure shareholders of E*Trade love to hear the names Fannie Mae and Freddie Mac thrown around in the earnings report. They're sure to warm the heart.

At one time, I thought E*Trade was worth entering, and it obviously might have been worth trading ahead of the earnings (if you were quick to get out before the after-hours, that is). Now, however, I'm reticent to put any new money to work in the financial sector. It's going to be a while before the financial malaise finally lifts. Since E*Trade is still losing a lot of money and missing estimates, I see no reason to allocate any investment funds here. The stock has become too speculative, and if you want to speculate, I'm sure you can find safer sectors to place some bets.

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

Continue reading Before the bell: AMTD, MSFT, VIA, PFE, AAPL, YHOO, GOOG, BA

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:

• 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.

• 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.

Continue reading A takeover at E*Trade? Don't bet on it.

When E*Trade Financial Corp. (Nasdaq: ETFC) had its meltdown, I considered buying but I was too chicken. I mean, can you really blame me? When it got caught up in the financial crisis, the term "falling knife" never felt so accurate. A 52-week range between $2.08 and $25.79 is a pretty scary thing; to see what I mean in graphic format, feast your eyes on the chart.

Lately, though, I've been warming up to the idea ever so slightly of taking a shot on E*Trade. I can't say I possess strong conviction yet, but I'm not necessarily afraid of owning financial stocks. In fact, as an example, I own Newcastle Investment (NYSE: NCT), an idea that Sheldon Liber talked about recently, one that has a pretty frightening yield. E*Trade is a significant name in the online-brokerage industry, and its brand is valuable. When I saw the company falling off a cliff last year, my instinct to buy started to kick in, insisting that it isn't going to go the way of the dodo. Plus, takeover theories began, further fueling my fascination. In the end, I took no action.

Now, though, the stock has bounced nicely off its lows. And it reported January data yesterday that had a couple of good data points. Daily average revenue trades are up 18.8% for the month-to-month timeframe, and they increased 21.5% year-over-year. End-of-period retail accounts were flat month-to-month, and were up 6.2% year-over-year. Total retail client assets did decrease, however -- year-over-year, they declined over 12%. And, hey, for whatever this is worth, its Super Bowl "Talking Baby" ads apparently were a hit.

At any rate, I'm a bit more sanguine on E*Trade's stock potential. I may not buy just yet, but the closer it gets to $6 or $7 a stub, the better the chance it has, in my mind, of going to double digits again. Sure, Schwab (NASDAQ: SCHW) and TD Ameritrade (NASDAQ: AMTD) are the safer broker bets, but I can't help looking at E*Trade.

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.

Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Okay, and then, just finally, so far in January, the asset intake from E*Trade, is that still running at elevated levels versus historical trends and can you share any TFA data there versus history?

Joe Moglia, CEO, Ameritrade

I think again, for you to have clarity, I think it is appropriate for me to share that, we are not going to give specific numbers, but the numbers that we continue to see with regards to the inflow from them is significantly higher than anything we have ever seen historically.

Continue reading What Ameritrade has to say about E*Trade

Here are a few more highlights of this past week's earnings coverage from BloggingStocks:

• Charles Schwab Corp. (NASDAQ: SCHW) missed earnings estimates but beat revenue expectations.
• Citigroup Inc. (NYSE: C) posted a bigger than expected loss, due to subprime-related write-downs.
• General Electric Co. (NYSE: GE) reported a solid fourth quarter, bringing a hint of optimism to Wall Street.
• JPMorgan Chase & Co. (NYSE: JPM) missed estimates due to consumer lending issues.
• Merrill Lynch & Co. (NYSE: MER) posted a bigger than expected loss due to large write-downs.
• Schlumberger Ltd. (NYSE: SLB) missed expectations due to market conditions and weather factors.
• Sears Holding (NASDAQ: SHLD) lowered its fourth quarter outlook on weak holiday sales.
• State Street Corp. (NYSE: STT) beat expectations, after a subprime-related charge is excluded.
• TD Ameritrade Corp. (NASDAQ: AMTD) net income rose sharply on increased trading activity.
• US Bancorp (NYSE: USB) missed earnings estimates, but is "well capitalized" according to the CEO.
• Washington Mutual Inc. (NYSE: WM) swung to a loss due to the credit crunch, as it had warned.
• Wells Fargo & Co. (NYSE: WFC) reported its lowest quarterly profit in years, as analysts had expected.

See additional earnings highlights. Also, Jim Cramer ponders the ennui of the new earnings season. Peter Cohan mulls whether this will be the worst earnings period for the lending industry since the Great Depression.

Upcoming results to watch for include Bank of America (NYSE: BAC), eBay Inc. (NASDAQ: EBAY), Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE), Ford Motor Co. (NYSE: F), Southwest Airlines (NYSE: LUV), AT&T Inc. (NYSE: T), Caterpillar Inc. (NYSE: CAT), and Harley-Davidson Inc. (NYSE: HOG).

Visit AOL Money & Finance for more earnings coverage.

Continue reading Should you dollar cost average? 6 ways stores trick you into spending more & richest person in U.S. you've never heard of - Today in Money 1/17

• Boeing (NYSE: BA) was upgraded by Bernstein from Market Perform to Outperform. However, Boeing said this morning, PrivatAir has ordered an additional 787-model airplane for $162 million.
• Adobe Systems (NASDAQ: ADBE) and McAfee (NYSE: MFE) were downgraded from Buy to Neutral by UBS.
• Harley Davidson (NYSE: HOG) was downgraded by Citigroup from Hold to Sell. Shares down over 4% in premarket trading.
  
• Intel Corp. (NASDAQ: INTC) was downgraded by Charter Equity from Buy to Market Perform.
• Oppenheimer downgraded JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC) from Outperform to Perform.
• Piper Jaffray downgraded Jones Soda (NASDAQ: JSDA) from Buy to Neutral. Shares down over 3% in premarket trading.
  
• Friedman Billings, with its Outperform rating on Alcoa (NYSE: AA), lowered the aluminum maker's target price from $38 to $35.
• Altria (NYSE: MO)'s target price was upped to $88 from $79 by Credit Suisse, which rates the stock Outperform.

Continue reading Before the bell: AMTD, CAL, AAPL, JSDA, HOG, YHOO ...

With today's rumors of Bank of America Corporation (NYSE: BAC) in talks to buy Countrywide Financial Corporation (NYSE: CFC), here are two more stocks that have gotten crushed, which may be targeted as M&A candidates. Here are 2 financial stocks that I think have a fairly good chance of getting taken over by the end of '08.

E Trade Financial Corporation (NASDAQ: ETFC), the online brokerage, has lost investors tons of money. The company is shedding non-core divisions and getting back to basics. Etrade usually is involved in rumors of either joining or buying TD Ameritrade Holding Corporation Corp. (NASDAQ: AMTD), and I think that we are going to see some movement in terms of selling the online brokerage firm. At just around $4/share, these stocks are beginning to look interesting again.

Washington Mutual, Inc. (NYSE: WM) has seen its stock drop by some 75% over the last year. The stock is trading with a PE of a bit more the 4, and has a dividend yield over 17%. Now I would guess that most analysts believe the dividend is going to be cut. I wouldn't be at all surprised to see a foreign bank that wants to get a big foothold in the US to make a play for the bank.

With stocks so low, look for cash rich companies to be on the prowl for interesting financial companies.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has a position and owns stock in ETFC and is long the stock. He has no positions in any other stock mentioned as of 1/10/08.

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.

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.

I've been writing about finance for longer than I care to admit (okay, 15 years, which feels like a long time, even if Floyd Norris might scoff). But one of the most surprising news flashes of my career has to be when I read in mid-November this year that E*Trade was tanking on concerns the company could go bankrupt.

E*Trade (NASDAQ: ETFC)? Bankrupt? I've seen discount brokerages come and go, but E*Trade has long been one of the survivors. It was up there, knocking on king Schwab's (SCHW) door, leaving competitor TD Ameritrade (AMTD) snapping at it heels. Or so I thought.

But it turns out that was the way things were before the mortgage market went bust. And before CEO Mitch Caplan decided to place a big bet on residential mortgages. Caplan, formerly head of a bank that E*Trade acquired, became CEO in 2002.

Continue reading Money Losers of 2007: E*Trade's Mitch Caplan steps down

As the holidays loom, not to mention the end of the quarter, here are some highlights of this past week's earnings coverage from BloggingStocks:

• Adobe Systems Inc. (NASDAQ: ADBE) posted solid Q4 results, but left its guidance unchanged.
• Bear Stearns Cos. (NYSE: BSC) swung to a loss, another victim of the subprime mortgage mess.
• Best Buy Inc. (NYSE: BBY) beat estimates in part on sales of the Nintendo Wii and flat-panel TVs.
• CarMax Inc.'s (NYSE: KMX) net earnings declined, and the company lowered its guidance.
• Circuit City Stores (NYSE: CC) posted another disappointing quarter on "transformation" woes.
• Darden Restaurants Inc.'s (NYSE: DRI) Q2 profits fell, leading the share price to a one-year low.
• FedEx Corp. (NYSE: FDX) beat low expectations, boosted in part by international growth.
• Goldman Sachs Group (NYSE: GS) beat estimates, but not enough to impress investors.
• Herman Miller Inc. (NASDAQ: MLHR) beat estimates despite restructuring and the soft economy.
• Hovnanian Enterprises Inc.'s (NYSE: HOV) dismal results had wide-ranging effects.
• Jabil Circuit Inc. (NYSE: JBL) posted a solid quarter but lowered its outlook due to coming restructuring.
• Martek Biosciences Corp. (NASDAQ: MATK) beat expectations and raised its guidance.
• Morgan Stanley (NYSE: MS) posted worse-than-expected quarter and full-year results.
• Oracle Corp. (NASDAQ: ORCL) beat expectations on the strength of software upgrades.
• Palm Inc. (NASDAQ: PALM), reported a Q2 loss and lowered its guidance for the current quarter.
• Red Hat Inc.'s (NYSE: RHT) earnings were in line with expectations, but it raised its outlook.
• Research in Motion Ltd. (NASDAQ: RIMM) posted a solid quarter and raised its guidance.
• Take Two Interactive (NASDAQ: TTWO) warned of a higher-than-expected loss for the first quarter.
• TD Ameritrade Holding Corp. (NASDAQ: AMTD) raised its outlook for first quarter earnings.
• Walgreen Co. (NYSE: WAG) posted a solid quarter on strong sales and cost controls.

Continue reading Earnings highlights: Financials, techs, retailers, and more

Continue reading INVESTools: Another holiday gift for you