TheStreet.com's Jim Cramer says this year will see the mirror image of last year, when redemptions ended the game for many managers.

One year ago today, a quarter ended that put hundreds of bullish hedge funds out of business. Today, a quarter ends that will put hundreds of bearish hedge funds out of business.

Oh, sure, last year some of the bulls were able to stumble through the fourth quarter, but October was a horror show and they ended up getting huge redemption letters and spending the rest of 2008 selling into the strength of the rally to return capital to investors and lock in losses.

In this series, we take a look at the 25 stocks in the S&P 500 Index (SPX) that have turned in the worst performance during the past decade -- what went wrong, and what happens next.

I'll give you just one hint at the nature of the problems MGIC Investment Corp. (NYSE: MTG) is facing: MGIC stands for Mortgage Guaranty Insurance Corporation. In other words, things were going just fine for the Milwaukee-based firm until about, oh, mid-2007, when the slime known as subprime hit the proverbial fan.

What went wrong? At number 4 on our list of SPX stragglers, MTG lost 89% of its value from June 30, 1998 through June 30, 2008. From its July 2004 peak at $78.95, the stock is down 93%, and is now trading near all-time low territory.

In the first quarter of 2007, it was business as usual for MTG. The company announced plans to acquire its sector peer, Radian Group (NYSE: RDN), for $4.9 billion in the stock. The merger would have created a massive mortgage giant with about $15 billion in assets. Unfortunately, the deal was never consummated.

TheStreet.com's Jim Cramer says our problems are so widespread, he sees lots more IndyMacs before we're out.

You don't need me to tell you it's awful out there. You don't need me to tell you that there's no quick fix for any of these things. But what might help you understand why it feels so bad this time is that I have never, in my career, seen so many companies go off track at the same time. This is one unbelievable moment, and it is made more horrible by the day as companies' stocks just get pummeled, causing people to then question the very viability of the companies involved.

First, obviously, are Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take). We don't know what will happen, but we do know that their futures are much darker than their pasts. Their best hope: a Democrat becomes president and shows the usual love to both. But as investments, they are pretty much perma-losers going forward. The losses are that heavy. Yes, it is true that two years from now they will be better, but will the government let them limp through to that? View them as calls on a Democratic win.

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe. Any short-selling hedge fund could hire 30 actors and have them line up at a Washington Mutual or two and get a bank run going. Then we would have to hear about a "hasty" Treasury department plan to bail out WM. Hasty? How can these guys not see it coming?

TheStreet.com's Jim Cramer says Fannie and Freddie aren't the true culprits here.

The blowhards and bluff artists and the Gang of Four -- Ambac (NYSE: ABK) (Cramer's Take), MBIA (NYSE: MBI) (Cramer's Take), MGIC (NYSE: MTG) (Cramer's Take) and PMI (NYSE: PMI) (Cramer's Take) -- truly have blood on their hands for this moment. So do the ratings agencies, the mortgage insurers and the salespeople who packaged undocumented loans and pushed buying homes with no money down.

The whole apparatus stinks and we are now seeing the unwinding, but I think that the false assurances created by the Gang of Four and their insistence to not worry made everyone way too complacent. Their glib promises as well as the incredibly lax work of the ratings agencies, S&P and Moody's, enabled the whole edifice to be propped up.

And once it was clear to them that they needed more capital, they chose to forgo the window and attack the shorts. Had they raised the capital they needed and had the ratings agencies said they can't bless any more of this junk, we might have never been in this spot.

TheStreet.com's Jim Cramer says he has no confidence in these hated names, and neither should you.

The financials are flying -- there are finally bids for most of them underneath. Many, including Lehman (NYSE: LEH) (Cramer's Take), are running. What a great time to put the negative cards on the table and put the negatives in perspective. That's right, let's look at the financial Achilles' heels. What could go wrong? In other words, here's the companion piece to Doug Kass' positive conversion. Here's what I am worried about even as Doug thinks everyone's too worried and the bottom is being put in.

To get started, let's look at what's not causing the endless declines in the stocks -- don't worry, we will get to the financial dirty dozen when I finish this preamble.

First, it ain't earnings. Earnings aren't going to be that great. But that's why the S&P is at 14 times. It can go to 12 or 11, or most likely stays at 13-14, but the E goes down (earnings).

Second, it ain't oil. The stocks sensitive to the increase in oil have room to go down, but the price of oil is being factored in slowly but surely.

Third, it isn't inflation or recession. Those two are being baked in each day.

TheStreet.com's Jim Cramer says the mortgage problem is in the process of cresting, which is why the stocks have largely bottomed.

We are in the heart of default country, and we knew we would be. This is the toughest moment. You need to go back and look at the calendar to realize the astonishing acceleration in defaults. It's simple: This moment two years ago is when the underwriting standards were the lowest, and this is the moment when the defaults will be the highest because the loans are resetting at high levels and most of the lenders, lenders like Countrywide (NYSE: CFC) (Cramer's Take), are more interested in getting as much out of a borrower as possible before kicking him out than working out the loan.

Think about it.

In the second quarter of 2006, the housing industry was going strong. We were in the 7-million-homes-changing-hands mode, and the vast majority of those homes required little money down, with home equity loans being taken out immediately to pay whatever little interest was being charged. These were the moments of the ultimate no-doc-high-fee loans by New Century Financial, Ameriquest, Resmed (Ditech), American Home Mortgage, Novastar, and of course, Countrywide. This was when the homebuilders' mortgage arms lent the most terribly.

TheStreet.com's Jim Cramer says we know how it'll play out. Besides, there's money to be made elsewhere.

Nobody's dissing the credit crisis. We all see it. We know when it is back. We know that the write-offs for the banks and brokers and Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) will be gigantic if and when the Gang of Four (Ambac (NYSE: ABK) (Cramer's Take), MGIC (NYSE: MTG) (Cramer's Take), MBIA (NYSE: MBI) (Cramer's Take), PMI (NYSE: PMI) (Cramer's Take)) finally chokes to death. But we also know that Boeing (NYSE: BA) (Cramer's Take) and Honeywell (NYSE: HON) (Cramer's Take) and Schlumberger (NYSE: SLB) (Cramer's Take) and Lockheed (NYSE: LMT) (Cramer's Take) and all of the other stocks that are on the move, not to mention anything oil and gas, just aren't that levered to the crisis. I know that is heresy for many of you. How could the crisis not bring everything to its knees?

Because these companies are basically foreign companies. They are just not that important to the credit crumble.

MOST NOTEWORTHY: Ford, Imperial Tobacco and Schlumberger were today's noteworthy upgrades:

• Soleil upgraded Ford Motor Company (NYSE: F) to Buy from Sell as they expect improved sentiment towards shares given new product launches, cost cutting efforts, North American capacity reductions, and better than expected performance on the cash side.
• Imperial Tobacco Group Plc (NYSE: ITY) was raised to Buy from Hold at Citigroup to reflect FX benefits and pricing in continental Europe.
• Morgan Stanley upgraded shares of Schlumberger Limited (NYSE: SLB) to Overweight from Equal Weight following the company's Q1 results, as they expect consensus estimates to move higher over the coming quarters.

OTHER UPGRADES:

• B. Riley raised Wilmington Trust Corporation (NYSE: WL) to Buy from Neutral.
• Morgan Keegan upgraded Healthcare Services Group Inc (NASDAQ: HCSG) to Outperform from Market Perform.
• Bear upgraded MGIC Investment Corporation (NYSE: MTG) to Outperform from Peer Perform.

MOST NOTEWORTHY: Mortgage Insurers, Thoratec Laboratories and Callaway Golf were today's noteworthy initiations:

• Keefe Bruyette resumed coverage of Old Republic (NYSE:ORI), MGIC Investment (NYSE:MTG), PMI Group (NYSE:PMI) and Radian (NYSE:RDN) with Market Perform ratings and a $16 target, $13 target, $7 target and $6.50 target, respectively, as they expect increased capital needs to generate operational headwinds in the near-term.
  
• JMP Securities expects FDA approval of Thoratec's (NASDAQ:THOR) next generation HeartMate II VAD any day now and for the company to meet/beat 2008 sales guidance. Shares were started with an Outperform rating and $20 target.
  
• Callaway Golf (NYSE:ELY) was assumed at Stephens with an Overweight rating and $19 target. The firm is positive on Callaway's leadership position, strong balance sheet, new products and international opportunity.

OTHER INITIATIONS:

• Kaufman Bros. initiated Bancscares of Florida (NASDAQ:BOFL) with a Buy rating and $15.50 target.
  
• Raymond James started Dialysis Corp of America (NASDAQ:DCAI) with a Strong Buy rating and $9 target.
  
• Intuitive Surgical (NASDAQ:ISRG) was initiated at Lazard with a Buy rating and $420 target.

TheStreet.com's Jim Cramer says you can call him all the names in the book, but he's right, and the shorts know it.

It was a cause I didn't want to take up. I didn't want to take it up because I knew the short-sellers would paint me as a naïve, clueless defender of the bull, and the long owners wouldn't really understand the idiosyncrasies of the subject. It was a cause I knew the brokers would never defend because their best business that is left is prime brokerage, and they need giant hedge funds to trade with them and can't risk alienating them.

I am talking about the uptick rule, the 70-year-old rule put in by the SEC to stop the process of "raiding" stocks, meaning sending them down by knocking all bids down underneath to where panic could and would ensue.

Today's typical. The Journal breaks its seeming 10-year embargo on mentioning me or my show with a piece that basically says I have no idea what I am talking about and am a fool to bring it up. It quotes James Bianco, from Bianco Research right after me saying, "Anyone who thinks the removal of this rule is somehow causing havoc in the financial markets is hopelessly lost in the bark of one tree and may never be able to see the forest." He then goes on to say, "To suggest that the removal of this rule is causing the markets to go down is to loudly announce, "I don't understand the credit crisis and I am incapable of ever understanding it.'"

Yahoo! (NASDAQ: YHOO) is up over 3% on a brokerage upgrade.

Hoku (NASDAQ: HOKU) is up 10% on a new contract to install its solar-power systems.

MGIC (NYSE: MTG) is off over 10% on a downgrade from Moody's.

Force Protection (NASDAQ: FRPT) is off 9% on a delisting notice from Nasdaq.

Shares may trade differently in the pre-market than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

TheStreet.com's Jim Cramer says Bernanke's laissez-faire "policy" is at the heart of the mortgage crisis.

Spitzer's right. Believe me, much of what is happening in the bond market world in the insurance of bonds is about Darwin and laissez-faire and Ayn Rand. It is about letting the marketplace rule, and of letting capitalism run wild and roughshod. That's why I was so glad to hear Eliot Spitzer say as much on CNBC this morning.

Sure, many of the people who took these mortgages shouldn't have. But we have known since time began that you can fool people who aren't clever and who are greedy, so you have to protect them from themselves.

That's not what we did. Instead, we figured that the marketplace will take care of everything, that capitalism produces the best result.

Barclays analysts say banks that obtained $72 billion in funding to replenish capital depleted by subprime-related losses may need another $143 billion in capital infusions if credit rating agencies downgrade bond insurers several levels, Bloomberg News reported Friday.

Barclays analyst Paul Fenner-Leitao Banks wrote in a research report published Friday that banks will need at least $22 billion if bonds covered by insurers MBIA (NYSE: MBI) and Ambac (NYSE: ABK) are cut one level from the current AAA and six times that if they are cut four levels, Bloomberg said. The capital amount is based on Barclays' estimates that the banks hold as much as 75% of the $820 billion of the structured securities guaranteed by bond insurers.

Meanwhile, the markets awaited word on New York Insurance Superintendent Eric Dinallo's meeting with banks on a bail-out package for bond insurers. Shares of some key bond insurers fell after Dinallo issued a statement that the negotiations were complicated and would take time, leading some in the market to doubt the New York agency's ability to marshal private resources for the initiative.

MBIA fell 79 cents to $13.61, Ambac gained 15 cents to $11.48, PMI Group (NYSE: PMI) rose 17 cents to $8.97, and MGIC Investment (NYSE: MTG) declined 6 cents to $16.68.

U.S. Federal Reserve Chairman now has more leeway to reduce interest rates further and quicker, after concluding that inflation concerns have subsided enough, Bloomberg News reported Wednesday.

However, economist David Wang told BloggingStocks Wednesday that although there's a tendency among some media outlets "to fixate on the Fed and interest rates," investors should concentrate on the multiplicity of tools at the Fed's disposal, as well as the global effort that Wang believes is necessary to prevent both a U.S. recession and a major slowdown in global growth.

"Look for the Fed's term auction facility to play just as important a role as the Fed's rate cuts in the months ahead," Wang said.

Last fall, the Fed established a term auction facility to provide short-term liquidity to banks. Bernanke has underscored that the term auction facility will remain open, "for as long as necessary."

Given the U.S. market's 400-point sell-off in its initial minutes of trading, "a Dow close down just 300-points would look like a moral victory" according to one economist.

"All things considered, from a market standpoint, a 300-point down day is a relatively small consequence," economist David H. Wang told BloggingStocks Tuesday.

Amid the sell-off, the U.S. Federal Reserve, in an emergency monetary policy action, cut key interest rates Tuesday morning - - cutting both the Fed Funds rate and the discount rate by 75 basis points. The Fed cut the Fed Funds rate to 3.50% and the discount rate to 4.00%.

Larger matter: mortgage insurers

Of utmost importance, in Wang's interpretation, is the health and fate of mortgage insurers, primarily MBIA (NYSE: MBI), and Ambac (NYSE: ABK), but also PMI Group (NYSE: PMI), and MGIC (NYSE: MTG).

Wang said the mortgage insurers "form a critical foundation in mortgage insurance, and as a result, in the mortgage process."

"A failure by MBIA or Ambac would mean several banks would not receive insurance payments for mortgages that go into default, substantially reducing the asset values of those banks," Wang said. "That would prompt another market sell off, possibly resulting in a failure by one or more banks."