Cramer's 'Mad Money' Recap: Beware of Market Froth (Final)

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NEW YORK (TheStreet) -- Froth is the enemy of good investing, Jim Cramer told the viewers of his "Mad Money" TV show Monday.

When speculators start reaching, buying even the worst of stocks at inflated prices, that's froth, said Cramer. And froth is what caused today's market reversal.

Cramer said he's always encouraged speculation and has eve recommended as much as 20% of your non-IRA portfolio could be in speculative names. But, he said, speculation involves discipline.

Take Citigroup (C Quote), which Cramer has championed in recent days. Cramer said when he saw this stock up another 25 cents at today's open, he knew speculators were reaching, taking the stock too high, too fast. He's sticking by his $20 price target in 2012, but noted that the stock needs to come down before he'd get in.

Cramer said speculation was rampant in Fannie Mae (FRE Quote) and Freddie Mac (FNM Quote) as well. He said speculators are hoping to make a quick buck in these names, despite the fact the Federal Reserve hasn't decided how much money these companies need to repay the government. The common stock could be worthless, said Cramer.

The same is true of Sirius XM Radio (SIRI Quote), a stock which Cramer called "a used lottery ticket." He said it's dangerous to speculate without the facts.

What are some good spec names? Cramer said he still likes the regional banks, those with good balance sheets and those poised to expand as dozens upon dozens of weaker regional banks fail. Cramer likes Fifth Third Bank (FITB Quote), along with Huntington Banshares (HBAN Quote) and Regions Financial (RF Quote) good stocks.

In technology, Cramer said stocks like RF Micro Devices (RFMD Quote), Triquint Semi (TQNT Quote) and ADC Telecom (ADCT Quote) are good stocks to speculate on, but not Level 3 (LVLT Quote), which has an awful balance sheet and is not part of Cramer's mobile Internet thesis.

Cramer said no company wants their stock to fall into single digits, so knowing which ones to invest in is crucial.