Cramer's 'Mad Money' Recap: Disciples of Discipline

Latin America

He said his next rule is "provisionally true" and though at some time in the future he can see it being revoked, he doesn't believe it will be soon. The rule is that "Latin America is always a trade."

Every so often there's a "huge wave of interest in Latin American stocks," where everyone in the business who owns these stocks believes that Latin America is an "amazing, long-term growth story," Cramer said.

But be careful, he warned, because no matter how good the fundamentals of these stocks may look, these stocks "will always be a trade."

The reason for this rule is simple and has nothing to do with the company's fundamentals, he went on to say. It's because almost every institutional investor on Wall Street treats Latin American stocks as trades, not investments.

"These are the guys who move the market, and when they decide the trade is over, they clear out," Cramer said. "Everyone out there running money was trained to believe that Latin American stocks are levered to our business cycle, so they'll trade the stocks like that, even when they're wrong."

In August 2005, he got behind BanColombia (CIB Quote), and in March 2006, after the stock had almost doubled, he made the mistake of thinking of it as an investment and did not declare the trade over.

Consequently, people who stuck with the stock gave back most of their gains by June 2006, when Wall Street decided the Latin American trade was over.