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We start the new year with the disappearance of two household names in the financial world, Merrill Lynch which sold itself to Bank of America, (NYSE: BAC) fearing the worst of the broadly deteriorating financial markets; and Wachovia that not only feared the worst but lived through it only long enough to be acquired by Wells Fargo (NYSE: WFC). Both transactions completed yesterday while the market was closed.

The market has been up all day and both BAC and WFC can be upbeat as two of the world's survivors of the 2008 minefields that blew up some of the largest and most revered names in many generations.

The BAC deal propels it to be the No. 1 financial institution in the United States with about $2.7 trillion in assets. Merrill Lynch ends a 94 year run. Earlier in the year BAC acquired Countrywide Financial. These two deals allow Bank of America to stand tall as he largest originator and servicing company for new loans, just when home refinancing may take off based on new lower rates becoming available. It may be able to expand financial services when the world is hoping for even a modest recovery.

Citigroup Inc. (NYSE: C)'s CEO Vikram Pandit, chairman Win Bischoff, and board member Robert Rubin will forgo 2008 bonuses. This comes, of course, after the bank lost three-quarters of its market value and got a $45 billion U.S. bailout. Citi shares traded nearly 2% in premarket.

Time Warner Cable (NYSE: TWC) and Viacom (NYSE: VIA.b) have agreed to settle a dispute over carriage fees. This comes after Viacom threatened TWC with a blackout of its 19 ceable channels, including MTV, Nickelodeon and Comedy Central. With a deal in the works, TWC customers will suffer no blackout. TWC is expected to agree to pay a modest increase in fees to Viacom in the new deal.

Microsoft Corp. (NASDAQ: MSFT) has been the subject of much news, talk and rumors the past few days. First, on Wednesday, many of its Zune digital music player froze due to the leap year. Then, China sentenced 11 for software piracy. The allegedly sold at least $2 billion worth of bogus Microsoft software. And to top all that, the blogosphere was abuzz as rumors swirled that Microsoft was going to lay off 15,000 or 17% of its staff on January 15, 2009. With the current slowdown in the economy, it's not a stretch to accept Microsoft would initiate some jobs cuts; the question is at what magnitude. MSFT shares were flattish in recent premarket trade despite all the news.

Trillions of dollars have been introduced into the world economy since last July, when I thought it would be interesting to jump in and pick stocks prior to the carnage in the financial sector taking complete hold.

For the past eight months our government has been taking over financial institutions, absorbing debt, lowering interest rates, nationalizing some private companies, investing in others, and rebating taxes through stimulus packages to increase liquidity and spending. The Federal Reserve has essentially dropped the interest to zero.

The government was the last to announce that we are in a recession. Well, duh! However, recession or not the world is still open for business although less of it. Gold is down 30% from it's highs and oil having totally collapsed from $147 a barrel at the time of the original story to the low $30's now.

The original story was Serious Money: Tempting fate with 10 financials -- buying into a pool of financial stocks at a time when these stocks went unloved by all.

Eight of the ten financial stocks I wrote about are down or out at this point. When I last reported, the portfolio was losing 47% but it has sunk to new lows now standing at a loss of 58.56%. This compares to a drop in the S&P 500 of 29% or half the loss.

There are many analysts suggesting that we finally have arrived at the time to invest in financial stocks. Perhaps that is true, but do you invest in the downtrodden or the blue chips?

This post is part of our feature on Money Winners of 2008. See all 20.

Bill Ackman, who manages the hedge fund Pershing Capital, was one of the first major investors to realize what poor shape Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were in. He warned that the apparent back-up of the federal government wasn't going to do investors much good unless the company fell apart and had to be bailed out.

"It doesn't matter what the rating agencies say about their capitalization," Ackman told CNBC. "Implicit guarantees don't work in the market that we're in now." And he turned out to be right, of course. Ackman was shorting the debt of Fannie and Freddie.

While Ackman has had to take some heat from investors who blame him for profiting off Fannie and Freddie's collapse, some critics say he was a bloodsucker, others point to his keen analysis as the reason we should allow short selling: it's the only way to offer an incentive to investors not to believe the hype.

This post is part of our feature on Money Winners of 2008. See all 20.

This past year has been a pretty rough one for CEOs in general. The stock market has tanked since October of last year, dragging down strong companies' share prices to some extent and weak companies' even further. It has been even worse for most financial executives, who have been ousted as their stocks fall to roughly zero and their company goes bankrupt or is taken over by a stronger institution. While many of these CEOs have golden parachutes that open upon their dismissal, much of their compensation is in the form of the company's stock and when that value dwindles, they feel the pain as well. One of our other 2008 Money Winners, Alan Fishman, who walked away with more than $11 million for three weeks work at Washington Mutual, had 600K shares of WM that he saw evaporate.

James "Jamie" Dimon, CEO and chairman of JPMorgan Chase (NYSE: JPM), has not had this kind of trouble over the past year, which places him squarely in the minority among his peers and makes him a money winner. Strictly speaking, Mr. Dimon raked in a salary for this year of "just" $1 million. His bonus allows for an additional $14.5 million, and the way things have been going for JPM, I'd wager a hefty portion of my savings that he gets the full amount. Plus on top of that, he has exercised options worth about $40.1 million this year, bringing the grand total compensation to $55.6 million.

This has been a terrible year for financial institutions. However, Wells Fargo (NYSE: WFC) has been able to make it through the obstacle course better than most.

The stock has been up and down with the market but the scandals and large write-downs that have tanked other companies have not been a part of the Wells story.

What has me wondering about Wells today is the prospectus I received from the company to purchase shares at $27 each. The offer is for 407,500,000 shares, far more than I could swallow at a cost in excess of $11 billion -- I have never seen that kind of money!

I'm sure they just figured I might take at least a few shares off their hands, and I have in the open market. If memory serves me correctly, this offering was announced about six weeks ago. The strange thing is that this came to me on a day when the stock closed at a price of $21 and change. Who pays $27 for a $21 stock?

It's been almost a year since December 12, 2007, when Vikram Pandit took over as CEO of Citigroup (NYSE: C). His performance has been outstanding -- and not in a good way. During the last four quarters, Citi lost $20 billion. Sure Pandit has plans to fire 52,000 people and he's raised at least $45 billion from the U.S., along with guarantees on $277 billion worth of Citi's bad assets. But he botched the acquisition of Wachovia (NYSE: WB). And Citi stock has fallen 81% wiping out $138 billion in stock market value.

By contrast, John Thain, who took over as CEO from the Bank of America (NYSE: BAC) subsidiary Merrill Lynch, was far more agile as things cratered around him. Arguably, Thain had an even worse hand than Pandit when he took over Merrill Lynch because his predecessor had loaded it up with mortgage-backed securities at precisely the wrong time. But Thain could see Merrill's stock plummetting as it got trapped in a short play. And he salvaged shareholders' investment by selling to Bank of America.

Now CNBC's Charlie Gasparino reports that Pandit has about half a mistake more to make before he's out of a job. But this is not a problem for Citi shareholders as long as its board can convince Thain to leave Bank of America where he has taken on a sub-CEO role so he can get back into the big saddle at Citi. Count me among those shareholders who would be happy to see Pandit exit stage right as Thain enters.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.

Citigroup (NYSE: C) is recently trading at $5.59 in pre-open trading, above its close of $4.71 Thursday. C November 5 straddle is priced at $1.18, December is at $2.83. C March option implied volatility of 187 is above its 26-week average of 67 according to Track Data, suggesting larger price movement.

JP Morgan Chase (NYSE: JPM) is recently trading at $25 in pre open trading, above its close of $23.38 Thursday. JPM December option implied volatility of 140 is above its 26-week average of 61 according to Track Data, suggesting larger price movement.

Wells Fargo (NYSE: WFC) is recently trading at $23.50 in pre-open trading, above its close of $22.53 Thursday. WFC purchase of Wachovia (NYSE: WB) for 0.1991 per share of WFC is expected to close in late 2008. WFC December option implied volatility of 137 is above its 26-week average of 60 according to Track Data, suggesting larger price movement.

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

This is the third in a four part series which I hope gives buyers, sellers, shareholders and dare I say management a platform for discussion.

The most valuable asset eBay (NASDAQ: EBAY) has is PayPal, the dominant internet financial transaction facilitator. When I started imagining what might happen if eBay started auctioning off its parts I envisioned that PayPal would be worth the highest premium.

I think there would be dozens of interested companies that would find it highly advantageous to acquire PayPal.

The reason eBay bought PalPal in the first place was that they had first hand experience trying to compete with it when it was a separate company, and even with its huge base of customers, eBay could not build much traction. As the old saying goes, "if you can't beat them, join them", or in this case buy them.

For starters, all of the major credit card companies would be very interested with MasterCard Inc'A' (NYSE: MA) and Visa (NYSE: V) leading the bidding and beleaguered American Express (NYSE: AXP) trying to find a way too.

Then there are the few prospering banks still left standing that would have to give this potential acquisition strong consideration. Bank of America (NYSE: BAC) which has already bought out Countrywide Financial and will soon add Merrill Lynch (NYSE: MER) would find this a must have. JPMorgan Chase (NYSE: JPM) has added Bear Stearns and Washington Mutual (NYSE: WM) to its group of enterprises and might be best suited to expand the company given its growing resources. Wells Fargo (NYSE: WFC) that recently agreed to acquire Wachovia Corp (NYSE: WB) after staying on the sidelines most of the year might want PayPal, but I do not think it would pay up.

Citigroup (NYSE: C) is reusing an old advertising slogan: Citi never sleeps. I guess the idea is that since it operates in 100 countries there is always a Citi employee who's on the job. The latest result of all that 24x7 brain power is a plan to let some its customers sleep in their own houses instead of kicking them to the curb. Which people? The people who borrowed money from Citi to buy houses and who are struggling to pay back the loans.

I found out about this proposal yesterday, although I did not know the details, when a radio network asked me to comment on it for broadcast today. But the news was embargoed until midnight so I can now blog about it. Citi says it will put a moratorium on foreclosures for borrowers who pass three tests: they have enough income to make "affordable" mortgage payments; they are working "in good faith" to renegotiate the loan; and the mortgage pertains to their principal residence.

Citi plans to focus on $20 billion in mortgages in states with the biggest foreclosure concentration -- Arizona, California, Florida, Michigan, Ohio and Indiana. Citi will assign 600 salespeople to adjust mortgage rates, reduce principal, or increase the term of the loan. In the next six months, Citi will contact 500,000 people, a third of its total mortgage population, who are current on their payments but who might need help keeping current.

TheStreet.com's Jim Cramer says tons of stocks look like good buys, and they go down all the time.

All weekend I heard it. Stocks have gotten too cheap. Put 'em away cheap. Don't worry about 'em cheap. To which I say, stocks are only cheap if the companies make it. Stocks are only cheap if the bondholders don't claim them.

Every day I see cheap stocks. Ford (NYSE: F) (Cramer's Take) reported this morning. Ridiculously cheap. How cheap is Sprint (NYSE: S) (Cramer's Take), for heaven's sake? Did you see the Sunrise Senior Living (NYSE: SRZ) (Cramer's Take) numbers? That stock should show up when you enter "cheap stock" in Google. Except Las Vegas Sands (NYSE: LVS) (Cramer's Take) comes up.

When Warren Buffett says stocks are cheap, or Jeremy Grantham or Steve Leuthold or Jeremy Siegel, it's very heartening. You just want to go out there and buy cheap stocks like CBS (NYSE: CBS) (Cramer's Take) and Williams-Sonoma (NYSE: WSM) (Cramer's Take) and Ann Taylor (NYSE: ANN) (Cramer's Take) and Talbots (NYSE: TLB) (Cramer's Take).

Most winners in play-money investing games end up wishing they'd invested real dollars. Not in this year's Stock Market Game for students in grades four through 12, run by the Securities Industry and Financial Markets Association. Well, except for that team that shorted Wachovia Corp. (NYSE: WB) in late September; they managed to more than double their fake money.

The lessons learned may be exactly the opposite of those the Securities Industry board had hoped.

The kids started the game shortly after school began this fall, so most students have experienced a steep slide in their faux portfolios. One student had it worse: he played the game last year and decided to try it out this year with real money, saving his birthday and Christmas money to buy into a mutual fund. Now he's afraid to open his statements (his fund is down 44.9% this year).

Michael Ashworth, a 13-year-old Delaware middle schooler interviewed by the Wall Street Journal, had been getting excited about investing and had asked his mother for stocks for Christmas. After the market downturn? "I told her not to do it. I asked for a parakeet instead," he said.

Perhaps the rest of us would do well to follow the lead of Mr. Ashworth. If not a parakeet, perhaps a flock of chickens?

Around the world, governments are flooding the market with new currency in order to stem the tide of bank collapses and slippery stock market slopes. They are taking over financial institutions, absorbing debt, lowering interest rates, nationalizing some private companies, investing in others, and rebating taxes through stimulus packages to increase liquidity and spending.

So far all we can say is that the world is still open for business, but it is a different world. Even gold and oil are down significantly.

In concert with world markets, the stocks in my daring (maybe fool hardy) story I posted a few months ago Serious Money: Tempting fate with 10 financials -- buying into a pool of financial stocks at a time when the "hate 'em" factor was at a peak, or so I thought -- are down even more. I think I am turning into the web's leading glutton for punishment by posting such stories. However, while my stock ideas have taken a beating now and then, I hope my integrity has remained intact.

I took some major lumps during the collapse of Washington Mutual (NYSE: WM) as I candidly posted, Chasing Value: Not -- WaMu one week later - ouch!, and I lost some money also.

Nine of the ten financial stocks I wrote about are down or out at this point. When I last reported, the portfolio was losing 4.8%, and now it is losing 47% to date, not counting dividends. Only MBIA Inc. (NYSE: MBI) is up and there are question marks about this company too.

Minyanville contributor Minyan Peter 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.

I will make my visit to the soap box this morning very brief. When I read comments like the following from Wachovia (NYSE: WB) this morning, my skin crawls:

"The $18.8 billion in noncash goodwill impairment reflect[s] declining market valuations and the terms of the merger with Wells Fargo; the recognition of the impairment affected the retail and small business, commercial, wealth management and asset management subsegments. The goodwill impairment charge has no impact on Wachovia's tangible capital levels or regulatory capital ratios, because goodwill is deducted when computing those ratios."

Let me put what Wachovia just said in plain language:

'In hindsight, we paid $18.8 billion more than we should have for the businesses we bought. But it doesn't matter. The cash went out the door long ago. And because the regulators were at least smart enough to realize we were overpaying, they didn't let us count the $18.8 billion as capital. So none of this should bother you.'

So when you open your next brokerage statement and your stocks are worth less than they were last month, try expressing your feelings like you are the CEO of a one of the world's largest financial institutions:

"The $10,000 in noncash impairment that I took this month reflects declining market values, but that's okay, at least I didn't have to write a check for $10,000 this month."

Feel better?

I sure do.

Now I will get off my soap box.

U.S. stock futures were lower Wednesday morning, indicating stocks may have a second day of declines. As money markets worldwide continue improving, attention has shifted to corporate earnings and concerns are growing how a global slowdown would slow them. Asian markets closed sharply lower and European stocks tumbled at the open as well. Meanwhile, oil veered below $70 a barrel again despite a probably OPEC production cut on fears the U.S. economy is headed into a sever recession that would crimp demand for oil. Today weekly crude inventories will be released.

Apple Inc. (NASDAQ: AAPL) is one company that is bucking the earnings trend. The consumer electronics giant reported results after the close Tuesday, surprising the Street with higher earnings as all three product categories showed improvement. Specifically it sold far more iPhones than expected, actually outselling market-leading BlackBerry from Research in Motion Ltd (NASDAQ: RIMM). The company, known for always lowballing estimates, gave a weak outlook that didn't affect investors sentiment much. AAPL shares, which jumped nearly 13% in after-hours trading, are up nearly 8% this morning in pre-market trade. Analysts liked in general iPhone sales with Calyon Securities upgrading Apple to Buy from Add, and Goldman Sachs recommending investors to buy shares. Still, UBS has downgraded Apple from Buy to Neutral.

Yahoo! Inc. (NASDAQ: YHOO)'s show, on the other hand, was quite different than Apple's. While the stock is also up in pre-market action -- 2.7% (it was up 7% in after-hours trade Tuesday afternoon) -- it is mainly due to the severe cost cuts the internet giant has announced during the dusmal earnings release. As it was saying profit plunged 64%, Yahoo! also said it is redcucing its workforce by 10% or some 1,500 employees.