Alabama regional lender, Colonial Bank, just became the 6th largest bank failure in U.S. history and the largest since Washington Mutual last year.

Regulators seized Colonial last Friday, selling the bank’s deposits and assets to their competitor BB&T. Colonial was founded by real estate developer, Robert E. Lowder in 1981. The bank stayed true to its roots, right to the end (of the housing bubble).

In a 2006 interview, Lowder said, “We’ve always been a real estate bank. We understand real estate lending. For us, we think it’s a good safe market to be in.” Evidently, they didn’t understand the market as well as they thought. The bank sunk under the weight of $1.7 billion in losses on bad real estate loans.

The real question regarding the failure of Colonial, is what this will do to the Deposit Insurance Fund (DIF) maintained by the FDIC.

The FDIC Deposit Insurance Fund started 2008

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If you live in the United States, there is a good chance the crisis in California is going to affect you. And if you own municipal bonds — either directly or indirectly through other investments — what’s happening in California could have a major impact on your finances.For years, state government budgets have been expanding as the economy grew and the rising housing market swelled property tax coffers. But the severe recession that has brought rising unemployment and a collapse in property values has drastically cut revenues from income, property, sales and corporate taxes.

And state governments are feeling the pinch. According to the National Conference of State Legislators, there are only three states (Arkansas, Wyoming, and North Dakota) that do not face budget shortfalls for fiscal years 2009 or 2010. In other words, 47 states are currently projected to run short on cash in the near future.

And California – the

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“You’ve got to try the crab cakes,” I told Steve McDonald. “I live in Baltimore. Why the hell would I come to Florida for crab cakes?”  We had just concluded a full day of meetings for the Investor’s Daily Edge quarterly editors’ conference and were taking our seats around the table at Dada, one of the finer establishments in Delray Beach.

The atmosphere is casual and eclectic and the food is some of the finest gourmet fare you will find anywhere. If you’re ever in this part of South Florida, don’t miss it. And order the crab cakes (Even if you think you’ve already tasted the best in the world).

But I could tell that Rusty McDougal, our resident natural resources expert, had more on his mind than a great meal and the Alexander Valley cabernet the waiter was pouring in his glass. He wanted to know

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The mutual fund industry has done their best to convince investors that the long-term return of the stock market is just over 12%. That is their justification for “buy and hold.” But you can throw that number out the window. The annualized return of the S&P 500 from 1929 through 2008 is actually 8.9%. And for most active investors the return would be significantly less.

But what if I told you that you can make two to three times the long term stock market average (15% to 30% annual returns)… without taking stock market risk?

Considering the return of the stock market the last couple of years and the fundamentals going forward, I hope you’ll give this your consideration. So how do you beat the market, without putting your money at risk in Wall Street’s casino? Corporate bonds.

Most investors avoid bonds because they think they are boring and the returns are too

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Smart Investing: Paying Yourself First

by David Fessler, Advisory Panelist

Everyone knows a tightwad or two. I came by my savings habits from my father, who’s a spendthrift. Growing up when he did - as a child of Depression-era parents - taught him the true meaning of a dollar..

But before they paid any bills, they paid themselves first with a little smart investing. They put some money into a savings account every week.

After a successful career in the printing business spanning 42 years, my father retired at the age of 60. By that time he had achieved the title of Vice-President of Operations. (I used to marvel at the fact that he knew the names of all 942 employees who worked at the plant.) But it’s his penchant for saving that I admire most. Now nearly 88 years old, he’s still saving before he spends.

It’s a lesson that

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Casino Stocks: The One Sin Stock You Should Be Betting On

by David Fessler, Advisory Panelist

Casino stocks have been more than down on their luck lately. In fact, they’ve been on the ropes more than one of their prizefighting boxers. And it’s no wonder.

The recession has hit consumers hard. And many have cut their spending, doling out their dollars for the necessities: food, shelter, clothing and gasoline - but little else.

To say business has been bad doesn’t really capture the scope of the damage.

It’s easy to see the effects on casinos - the top dogs in most markets - and we don’t always notice the impact to the rest of the food chain. Restaurants have plenty of empty tables these days. Those little beepers you get while waiting in line are just sitting around collecting dust. Malls resemble ghost towns; most of the visitors are store ...

Luckily, I was bearish on oil until recently. I said to short oil when it was at $120 per barrel on 04/23/08. I was a little early to the party, but oil did drop below $33 a barrel in December of 2008. Oil plummeted $114 a barrel after reaching its record high last summer.

But, now I think oil has bottomed and will head higher. My fundamental and technical indicators are pointing to higher oil prices.

It’s disappointing that Americans seem to forget about our dependence on foreign oil as oil prices drop. In the 1970’s we got a wakeup call when people experienced gas shortages and rising fuel costs. Then it happened again, when oil spiked up to $147 a barrel last July. You heard lots of talk of switching to electric cars and cutting off our addiction to foreign oil. It’s disheartening that you don’t hear much about this

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Steve McDonald of Investors Daily Edge doesn’t want to see you get ripped off at the gas pump again. He recommends two Oil ETFs that will play out as part of the “the best buying opportunity since the market collapse of the late 70’s.”

This from Steve:

It’s time to stop worrying about the bottom of this market and start taking advantage of the carnage the gross mismanagement of this country’s affairs has left us. Oil is a good place to start.

$40 Oil? Are you kidding me? This is what I call a slap in the face investment. It’s so obvious it’s hitting you in the nose.

This temporary worldwide slow down, and it is temporary, has pushed oil down to a point most people never thought they’d see again. After all the speculation driven price increases of the past few years, it is a nice break, but it won’t

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Everyone has been dumping stocks for the last year and retreating to the relative safety of Treasury notes. But where will we invest when that ride is over? We may soon find out.

In a recent Bloomberg article, Kim Heeseok, who oversees South Korea’s National Pension Service, said the time is now to get out of Treasuries.

“The stimulus plan may cause inflation. The U.S. will raise the benchmark interest rate.”

To illustrate the point, investors in South Korea have reduced their Treasury holdings by almost half in the last year, down to $28.6 billion in November.

Taking a bit of a contrarian standpoint it seems is China, which continues to up its stake in the U.S. and now holds $681.9 billion in Treasury notes as of November.

So what does this mean to you as an investor if the prediction by Mr. Heeseok holds true?

According to Bloomberg data, if you bought Treasury notes now,

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Steve McDonald looks ahead to the investment climate in the new year. He sees a bounce in the Dow reaching as high as 11,000. But an economic recovery will depend on whether the Obama administration can restore confidence in the public. For 2009’s top money-makers, Steve picks six high-dividend stocks and two corporate bond plays.

This from Investor’s Daily Edge:

So, for what it’s worth, here are my predictions for 2009, please adjust the time frame as necessary.

The bailouts will work. The banking/credit crisis will ease in early 2009, and with it businesses should be able to start borrowing again.  Once the money flows open up we should see some relief from the recession.

Ford (NYSE:F) will survive, I’m not sure about General Motors (NYSE:GM). Chrysler has been dead for a long time.

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