Jim's
rating on
this stock

STOCK
SYMBOL

Closing
price that
day

Full Company Name

FRE

1.69

Freddie Mac (FRE)

Q:       Dear Jim,
Booyah from blazing Baltimore! With Freddie Mac back in the black for at least a quarter, and claiming to not need any further government assistance, could this be the bottom floor as it digs itself out of the sub prime hole it fell into last year?
Thank you, Charles

Jim:    Charles, I have spent a lot of time on this and Fannie Mae (FNM) today… it is really difficult what will ultimately accrue to common stock shareholders… because these stocks were basically bankrupt… and they got a huge amount of money from the government… and in the pecking order of things, the common stock is very low… I was listening to some of the great people on “Fast Money” today, during what they talk about in the Power Lunch segment… and they too were very skeptical about Fannie and Freddie… and I think that is right to be… if I owned Freddie, and you had that big gain today… I would ring the register… that is pure spec… we do not know how much of a call the common stock has in the turn in the company… if there really is a turn.

na

na

General Question...

Q:       Cramer,
A great big booyah from the land of 10,000 lakes. I have heard that, as an investor, one should manage risk rather than returns. I would like to know your take on using the key metric “beta” to balance risk and how it plays into your portfolio management. What type of factors should be considered when experimenting with my own beta calculations? Or is it all a bunch of mumbo jumbo chicken gumbo?
Booyah, Jeff

Jim:    Actually Jeff, not at all, it is very, very important… if you ask Lloyd Blankfein at Goldman Sachs, he would tell you that managing risk is the number one thing… but he is running a gigantic mortgage house that basically has within it a lot of exposure to all kinds of stocks and bonds… on ActionAlertsPlus.com, my charitable trust, which I work on with Stephanie Link, we spend a huge amount of time thinking about beta… at my old hedge fund, we spent a lot of time thinking about beta… meaning, that we did not ever like to be up 4% when the market was up 1%… that meant that we were taking too much risk… then we take off stocks that are high beta… the ones that really jump around… like the natural gas, the mining companies… you have too much exposure to those, you are not going to be able to sleep at night… so beta is probably the most important thing that I think about when I am managing ActionAlertsPlus…. and I have to tell you, if I did not think about it, then I think we could be up 40% and down 40%… and that is not the way you run charitable money.

na

na

General Question...

Q:       Hey Jim,
After taking your advice, I’ve built up a portfolio of strong stocks with good dividends that are working out fine. The problem is that I’d like to take some profits as you’ve suggested, but I don’t want to give up the great yields. What do I do?
Thanks, Ed

Jim:    This is when you scale out, Ed… as stocks go higher, you take some off the table… and then if we get a big sell off, like a lot of people would think, then you have got accidentally high yields as you go right back in… I don’t care that you have big gains and you want to keep them for the dividends… it is irresponsible to turn any gain into a loss regardless of the dividend… I need you to take something off the table.

MRK

30.60

Merck (MRK)

Q:       Jim,
After working a year and a half for Merck & Co., I returned to medical school. I am a 25 year old, full time student and own some shares of MRK. How do you feel about the merger and holding the stock over the long term?
Thanks, James

Jim:    James, I am not a believer… let me tell you why… I think that Fred Hassen did an unbelievable job cleaning up Schering-Plough (SGP) and getting it ready, and then getting a take over… I think a lot of the fat is out… there will be, obviously, some duplications… and unfortunately people will be getting fired. because Schering Plough is a big employer in my town… but I will say this, I think that there are some good drug stocks out there… but I do not think that Merck has the really great drug prospects… all you will really be having is cost cuts and consolidation… that is not enough to make me want to pull the trigger.