Investors who are hoping, searching…even praying… for market-beating returns next year need to stop taking swings at their favorite financial institutions and start buying more of their stocks. But many of you have been asking me why now? Why not wait and see how the economic and credit market fundamentals evolve further?

Because, by then, it will be too late. Investors need to act now because the economy is growing—not shrinking like many of the naysayers in the news have been reporting.

In fact, much to the pessimists' dismay, the economy is actually up 4.9% from the first quarter. That growth rate is equal to 2004 and better than 2005 and even 2006.

Now, you might think this stronger-than-expected growth rate in the second quarter would set these recession mongers back a step or two. Nope. That's because in early October, the Labor Department came out right on queue with their quarterly Jobs Report which stated that the U.S. lost 4,000 jobs. Recession mongers seized on that number and ran with it—claiming it was proof that the housing mess would drag the economy down for years to come.

Wall Street then cringed and consumer confidence slumped… that is until the September jobs data and revised numbers for August, July and June were released. Not only did we not loose one single job in August, we created 89,000 new ones! June and July data were also revised upwards. The September numbers were even better than expected posting 110,000 new jobs.

The truth of the matter is that the U.S. economy has created new job growth each and every month for 49 straight months, creating 8.4 million new jobs in the process. In addition, consumer spending rose 0.6% in August, the fastest monthly pace in two years. But economists, market pundits and analysts were so preoccupied with mortgage rates resetting that they were blindsided by the August consumer spending data. They simply assumed that the August secondary mortgage market meltdown would stop consumers in their tracks.

Why The Mortgage Mess Impacted Wall Street… Not Main Street

In a nutshell, this whole mortgage mess impacts Wall Street much more than Main Street. American consumers have stable jobs, rising wages, and their spending remains stronger than ever. In fact, most homeowners are making their mortgage payments and have more than enough money left over to spend and help fuel our economy.

Now, what the naysayers never understand is the direct correlation between housing and employment.  The housing boom we saw a few years back was literally built on a strong job growth.

With more than 8.4 million new jobs created—just this summer—there's no way the housing market is going to drag the economy down into the depths of a recession. And that's great news for bank stocks. Buying bank stocks is no loner seen as a risky venture—it's now simply seen as value investing.

Battle-Scarred Banks to Buy Now for Profits in 2008

Banks are the world's supreme capitalists. They match up those with excess capital with others who need capital. Now, I own some of the best banks in the world—yes, they have taken quite a beating this summer—but those same battle scars—also make them perfectly poised to emerge from this financial crisis to deliver superior profits in 2008. Many of them have changed their management, many of them have changed their business models, but all of them have learned the hard lesson of

Bank #1: This global banking conglomerate took a $1.3 billion write down for bad loans in the third quarter. That, in turn, pushed operating profits down $0.90 from $1.04 a year ago. Obviously the mortgage meltdown and housing slump took it's toll. But this is temporary. This bank is highly diversified and well-positioned to resume outstanding growth going into 2008. In fact, watch for this stock to move on a dime at the first inkling of improvement in the mortgage market. 2008 earning estimates are running around $5.40 a share, making this banking leader one of the cheapest big-cap banks, trading at 8.6 times earnings. Earlier this year, this bank bought the parent company of World Savings Bank, an outstanding mortgage-lending bank with a 40-year track record of double-digit earnings growth and high credit standards. Smart move and impeccable timing make this my first bank to buy in 2008.

Bank #2: This bank was harshly criticized for raising credit standards and missing out on profits when the secondary mortgage market was booming. As the saying goes, hindsight is 20/20 and that turned out to be a wise decision on behalf of this Southeastern giant that serves some of this nation's fastest-growing markets. The stock is down $36 from last spring but that doesn't concern me. Earnings estimates for 2008 are on the rise and just hit $2.81. Also, this bank has a 50 million share buyback program in the works. I see little risk and high potential. It's time to buy.

Bank #3: This mortgage-banking company that specialized in Alt-A lending has been all over the news lately. The stock plummeted sharply due to the secondary-mortgage market scare and the short-sellers on the street are expecting it to fail. Not me. See, there are two very basic ways a bank can fail—liquidity and bad credit. Since this company has full access to the Federal Home Loan Bank which has more than $5 billion dollars (as of September 30th) at its disposal, liquidity isn't an issue. And believe it or not, on the credit front, this stock is not threatened by excessive credit losses. Its long-term record shows a management that is cautious and conservative. I truly think it would take something short of an economic catastrophe (something close to a depression) to make pundits negative expectations to come true. Be patient, and this stock will pay you back in 2008.

Banks managed to get through the last housing downturn and are financially much stronger today for it. Could it be that the reality, even in the case of subprime mortgages, is not anywhere near as bad as feared? The answer is yes.

Be bold and plan for the inevitable recovery. Demand for mortgage-backed securities and bank stocks will soar. Yes, it will take time to work down the inventory of homes for sale. But the secondary market for mortgages can come back long before then.

John's Dessauer's more than 30 years of practical, hands-on, global-oriented investing expertise has made thousands of his investors better off, financially independent and looking forward to a greater world of opportunity tomorrow. For the last 25 years, John Dessauer's Investor's World has averaged an impressive 12.1% returns per year through good times and bad! Click here to get the names of these 3 stocks in the November issue with a risk-free subscription to Investor's World!