Jim Cramer's Best Blogs

Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

• the worst-case scenario,
• our myriad dangers, and
• the great stock sale.

Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.

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The Worst Case

Originally published on Monday, July 14, at 9:55 a.m. One-day squeeze in Fannie Mae (FNM - Cramer's Take - Stockpickr) and Freddie Mac (FRE - Cramer's Take - Stockpickr) or two-?

That's how I feel about it, because these two companies are in the fight of their lives to raise more capital, despite what you hear that they need no more capital and are well capitalized.

Why?

Because of the quarters. Because of the years. Because of the earnings.

There is an element of unwitting trading in these two stocks. The shorts want to break them so they can't raise money because their stocks are too low. The Treasury is willing to buy the stocks if they go lower. So you have a put on the stocks, but you also have a call that is sold against them -- the additional equity needed. Any additional issuance kills the squeeze.

Why cover? Because the companies do not go bust on these quarters. In fact, there will be analysts who will see the light in the tunnel because FNM and FRE have instituted a lot of fees and have little competition and will make a lot of money when the Bernanke vintages finish, meaning that when we see the mortgages fully defaulted that were taken during Bernanke's tenure, the pressure and pain will be off. Can they limp to that moment? That's not clear.