Jim's
rating on
this stock

STOCK
SYMBOL

Closing
price that
day

Full Company Name

HTS

27.79

Hatteras Financial Corp (HTS)

Jim:      When I don't know a stock you ask about, I don't cuff it... I own my own ignorance, and I will look it up... like I will look up that Neutral Tandem, Inc. (TNDM) company I just got stumped on (in the Lightning Round)...

Besides that last caller, two other people managed to stump the chump (he's hilarious) this week... Donald in Connecticut with Hatteras Financial Corp (HTS). That was last night. And Kevin in Kentucky, with Diodes Incorporated (DIOD), on Wednesday.

Since I don't enjoy looking like a clown, I went back, did theHOMEZZZ, and now I've got answers for both of them...

By the way, Hatteras is a good example... I could have said, "Oh, that's an interesting North Carolina bank." It's not! It's a mortgage real estate investment trust that invests in mortgage-backed securities. It's similar to NLY, which I used to talk about a lot... This is a great example of a stock with what I call a "dangerously high" 16.6% yield. That yield represents a major red flag. It's too high versus all the other companies that I follow. That should make you worried. The Street clearly doesn't believe the company will be able to keep paying the dividend at the current level.

According to the "Is It Safe?" team at TheStreet.com where I'm chairman... these guys just look at this stuff all the time... Hatteras' dividend does not meet the standard that we want, which is the "(Actor, Laurence) Olivier in Marathon Man" safety test... Here's the problem... If you think the Fed's going to raise rates in the next two years, as we do in Cramerica, and I think it's pretty much of a given, then Hatteras will get pummeled. While the company's mortgage-backed securities are guaranteed by the government... so it's not a credit risk issue... most of them are backed by adjustable-rate mortgages. The majority of them don't re-price for at least three years. Meanwhile, all of Hatteras' funding, except for $500 million of it, is short term, so it's very sensitive to the rates that the Fed sets.

Alright, so what does this all mean?...

Basically, this is a stock that I think will get crushed like a bug on the windshield with its dividend getting cut the moment the Fed tightens. I would sell this one right now. I don't think Hatteras is worth the risk.

Next stock comments, for Diodes Incorporated (DIOD), continued in next block...

DIOD

18.21

Diodes Incorporated (DIOD)

Jim:      How about DIOD?...

Now this company is a key supplier of discreet semiconductors that go into virtually every electronic device, and it's one of Cramer-fave tech spec and mobile internet component, ON Semiconductor (ONNN)'s rivals. Remember, we recommended On Semiconductor. This is a competitor. We know the semis are in a major cyclical recovery, and DIOD, which is an extremely low-cost manufacturer, has historically outperformed the industry...

You know what?... I think the stock's worth buying. But here's my issue... I like ONNN more.

In early September, DIOD released a very positive mid-quarter update, boosting its sales expectations, thanks to strong demand for chips that go into LCD TVs... into panels, set-top boxes, mobile phones, netbooks... You know what? This is a good story. DIOD is in a really strong position to surf the mobile internet tsunami, and I'm very glad that Kevin in Kentucky brought it to our attention. How amazing are our viewers that I keep getting new ideas from them. Keep sending them to me.

Here's some mail...

ONNN

7.54

ON Semiconductor (ONNN)

See DIOD comments above for:
ONNN

na

na

General Question about Jim's intentions to keep pushing our legislators toward using natural gas a bridge fuel solution...

Q:         Jim,
I cannot thank you enough for what you do. You are truly an inspiration and the only source of unbiased information and news in the market. What do you think it's going to take to wake up Washington to natural gas as a bridge fuel and create much-needed jobs in this country? With elections coming, will you spend any time during the segments leading up to Election Day trying to knock some common sense into these elected officials?
Thanks,
- Tom

Jim:      Tom listen... I spoke at Borders when we were signing books for Getting Back To Even... and one woman stood up and she was furious about this issue, asking me what I was going to do. All I can do is continue to have good guests on, to talk about how important natural gas is as a bridge fuel, and also... let's just really understand each other... This is about America... it's about jobs... it's about success... We are going to go to Oklahoma - the heartland of natural gas - we will be there October 30th, and you'd better believe you're going to hear the natural gas story. I'm never going to quit on this issue... I'm never going to quit on anything...