Mortgage market-maker Freddie Mac (NYSE:FRE) has been the very picture of a falling knife this past year. But Q1 2008 earnings, due out tomorrow, give this piece of falling cutlery yet another chance to bounce back.

We'll have time aplenty to dissect the specific numbers after the news comes out. But before we begin obsessing over Mac the Knife's short-term progress, let's use these last few hours to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 100,000 investors for their views on well over 5,600 companies, Freddie among them. Here's what Fools have to say about the company and its long-term prospects.

Up or down?
Nearly 700 investors have submitted ratings on Freddie Mac. Their verdict: Dang! This knife is sharp!

More investors expect Freddie to underperform the market than to outperform it, and among our very best investors -- the CAPS All-Stars -- votes run more than three to one against it. As a result, Freddie's rating has been sliced to just one single, solitary star (out of the five possible on CAPS). But that's hardly an uncommon fate among Freddie and its peers, where almost no one receives so much as a half-hearted three-star rating:

Mortgage Investment Group

CAPS Rating

Thornburg Mortgage (NYSE:TMA)

**

Annaly Capital Management (NYSE:NLY)

**

Luminent Mortgage (NYSE:LUM)

**

Freddie Mac

*

IMPAC Mortgage  (NYSE:IMH)

*

Doral Financial  (NYSE:DRL)

*

Countrywide Financial  (NYSE:CFC)

*

Wall Street vs. Main Street
Just like the rest of us, Wall Street is nearly split down the middle on Mac the Knife. Of the eight analysts who've taken affirmative buy/sell positions on the stock, the voting runs four in favor of Freddie, four against -- setting up a clash of the titans: The top 20% of CAPS players hate Freddie, while the bottom 80%, plus Wall Street, are split.

Bull pitch
The top-rated Freddie booster, Favorableodds argues:

FRE's current share price reflects investor panic and not the economic value embedded in this world class franchise. While its book value has been cut, FRE's returns on new business have increased remarkably, paving the way for higher normalized earnings power over the next cycle...and making this business, at current prices, absurdly cheap. ... The bottom line is that Freddie (with the exception of Fannie) possesses unscalable barriers to entry, and generates above average earning power during normal times, which common sense dictates is likely to only get stronger as current competition is nearly non-existent...Those with the patience to wait should be rewarded with returns approaching 100% from todays prices within 2-3yrs.

Bear pitch
As it so happens, the top-rated Freddie basher doesn't even necessarily disagree with the bulls' assessment. Writes EviLucius: "Investors in FRE are in for a long and painful ride." Two to three years long, perhaps, Lucius? He continues:

There is still more bumps in the road. With three and a half billion in losses last year and nowhere to sell their mortgage backed securities, their stocks will continue a downward slump for at least one to two years to come. No banks or institutions are willing to invest in such high risk mortgage back securities, which leaves investors in FRE holding the bag. Expect continuing losses in earnings as more homeowners go into default in the next year or two when their interest rates reset. Betcha can't take your eyes away from this train wreck.

Not for the next 24 hours at least, Lucius. Thanks for the warning.

Who said that?
To learn more about the wise Fools who penned these words, examine their records (and see whether they know whereof they speak), and to explore the plethora of additional financial data we've put together on the company, visit our CAPS page on Freddie Mac.