Fannie's Loss Is MasterCard's Gain

I wonder how much MasterCard (MA - commentary - Cramer's Take) will be up off the incredibly horrific Fannie Mae (FNM - commentary - Cramer's Take) news about the losses through 2009 and the dividend cut. It literally is that stupid that MA will go up, in the same way that Apple (AAPL - commentary - Cramer's Take) goes up on any tech disappointment, but that's how its played by the momentum funds that call themselves "growth" funds.

These two horses, MasterCard and Apple, are the most thoroughbred plays I have seen in this non-dot-com era. They won't quit. And MA is more appealing than ever when pure financials reveal the depths of the losses.

Today could be a very interesting day for MasterCard and its sister Visa (V - commentary - Cramer's Take), which are the polar opposite from the Fannie and Freddie (FRE - commentary - Cramer's Take) twins. Fannie and Freddie have become the vast repositories of toxic waste. Lately it has been revealed that Fannie took down a lot of subprime, something that was not supposed to happen, and that's part of what we are seeing today. Fannie loans had tended to be fairly high-quality in previous cycles, backed up by personal mortgage insurance, something that's not much of a backup any more. Judging by this quarterly report, many of the mortgages are obviously second-rate. (See my piece yesterday about shorting Fannie and how the shorts got it right, and the value guys don't care -- they will just buy more on the deal anyway.)

So now what happens? The guys looking to find their weightings in financials once again go to the two that have no credit exposure. The buyers are not value buyers -- those are the guys who will buy the FNM deal.

Most mutual funds that are growth funds need to have weightings in the major groups, of which the financials are still 11% of the S&P (although they're down from 20% a couple of years ago). MasterCard or Visa vs. Fannie and Freddie? The beautiful twins get bought, the ugly ones go the value attic.

Oh, and the rest of the banks? Usual hits, then usual snapbacks. Remember, post-Bear (BSC - commentary - Cramer's Take), with a decent yield curve now at work, no one goes under.

At the time of publication, Cramer had no positions in the stocks mentioned.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.