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Jim Cramer told "Mad Money" viewers Friday that he wanted to talk about "the deep-six of '06," referring to the recent market rout.

"It was a classic dive with everything in free fall. ... This wasn't just a soft patch or some weakness," he said.

So why did a market that looked so good a week ago suddenly kick us in the teeth? Because Wall Street collectively realized that the

Federal Reserve

could raise short-term interest rates to 6.5% in an effort to cool speculation in hot markets and keep inflation in check, said Cramer.

Back in 2000, with the

Nasdaq

-- "the heart of speculation" -- roaring, Cramer said, the Fed crossed the line. On May 16, 2000, the central bank began to raise short-term rates.

Cramer said that this was "the biggest and most stupid mistake imaginable," and that the effect was like launching nukes on stocks. It sent everyone for the doors. The carnage was unprecedented, he said, and people lost fortunes as we headed into a genuine bear market.

People on the Street are worried that this doomsday scenario is going to happen all over again. Maybe the speculation that the Fed is worried about is in commodities, not in the Nasdaq, but Cramer said that it doesn't matter. The central bank uses "the same blunt instrument of short rates to crush speculators wherever they may be," he said.

So, that explains why everyone is in panic mode as signs of a 2000 redux pop up everywhere. The car market is crippled by high gasoline prices, the housing market has peaked and, as rates move higher, consumers are getting nailed by the bad loans and bad mortgages. Moreover, he said, you can see that consumers are weakening in the fact that both

Target

(TGT) - Get Report

and

Home Depot

(HD) - Get Report

recently reported weaker sales.

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It wasn't an earnings problem and it wasn't bad companies that caused the deep-six of '06, he said. We had too much supply in equities, and it got too expensive to borrow money to take them down.

Now that we're "playing chicken with the Fed," Cramer said, he believes the Fed will take rates up. And he said that the only way to avoid getting nailed is to have a balanced diversified portfolio. That way, if one sector is crushed, your other stocks can offset the poor performers.

Five Stocks on Sale Now

After the market is put through the meat grinder, Cramer said, viewers should be like vultures and profit off of the remains.

He said to think of what happened this week as a huge sale. When merchandise is marked down 10% in the store, you get excited, he said, adding that investors need to feel the same way about stocks.

In order to pick through the rubble for the winners, he starts by finding the worst-performing stocks on the

Dow

, the Nasdaq and the

S&P 500

. He scours the bottom fifth of these stocks, meaning the ones that really got killed, and then picks out the ones that just reported strong numbers and have good fundamentals.

This insulates you from the idea that something may have happened in the company that caused the stock to be hit, he said. Then the key is to create a diversified portfolio from these options.

The stock you pick might still be in a flailing sector, but diversification will insulate you from this too, he said.

The five diversified stocks that he told viewers to take a closer look at included

Freeport-McMoRan Copper & Gold

(FCX) - Get Report

, which was down almost 22%. He said that this is a good mineral-and-gold play, a sector that people are still bearish on.

He said he has been a buyer of

Halliburton

(HAL) - Get Report

, which he owns for his

Action Alerts PLUS charitable trust portfolio. He likes it not just for its oil, but because he believes it's a great infrastructure play.

He likes

JPMorgan

(JPM) - Get Report

, saying that it's the best bank in the Dow. The stock is down 7%, which also makes it the hardest-hit bank.

He said that he would look at

Tellabs

(TLAB)

. He said that it's the best tech and telco play and that it's down 13%.

And finally he said that he likes

Boeing

(BA) - Get Report

. The stock fell 7%, but has already bounced back 2%, he said, adding that it's really a buy on any decline, he added.

All five of these companies had huge guide-ups, he said, which suggest to analysts that they will do better than Wall Street believes.

A Natural Gas Play

As we pick up the pieces of a shattered market, Cramer said to take a closer look at the fact that natural gas prices have plummeted to 15-month lows.

Don't fret and don't cry. Instead, figure out who benefits, he said.

Cramer said to look for a company that uses a lot of natural gas, but won't be passing on this huge savings to the consumer soon. Most chemical companies should immediately pass on the huge savings from low natural gas prices, but he said that

Georgia Gulf

(GGC)

will buck this trend.

As the price of its biggest expense falls, he said, the chlorine-maker should save 62 cents a share annually for every $1 that natural gas prices fall.

Since it's pool season, he said, the company should be able to keep its prices along with its other expenses steady. And since no one thought that natural gas prices would fall like this, the stock is in serious need of a revision.

Cramer said that the stock also has a "high quality problem." It has so much cash on the books, it doesn't know what to do with it.

The company has two options for returning its excess cash, he said. The first is to repurchase shares, and the other is through a leveraged recapitalization, both of which should be great for the stock and could equal money in your pocket.

Lightning Round

Cramer was bullish on

Peabody Energy

(BTU) - Get Report

,

Gymboree

(GYMB)

,

Essex Corp

(KEYW) - Get Report

,

Smith & Wesson

(SWB)

,

Hain Celestial

(HAIN) - Get Report

,

Whole Foods

(WFMI)

,

Disney

(DIS) - Get Report

,

Lowe's

(LOW) - Get Report

,

Centerpoint Energy

(CNP) - Get Report

,

H&E Equipment Services

(HEES) - Get Report

,

Cerner

(CERN) - Get Report

and

Starbucks

(SBUX) - Get Report

.

Cramer was bearish on

United Natural Foods

(UNFI) - Get Report

,

Home Depot

(HD) - Get Report

,

Playboy

(PLA)

,

Sony

(SNE) - Get Report

,

Burger King

(BKC)

and

Chipotle

(CMG) - Get Report

.

For more of Cramer's insights during the most recent Lightning Round, click here

.

Want more Cramer? Check out Jim's rules and commandments for investing from his latest book by

clicking here

.

At the time of publication, Cramer was long Halliburton.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.