todays top stories
Thursday  June 8, 2006

'Speculation'

Tonight, Jim said that fools are abound, speculating in the market.  However, they do not know what they are doing.

"I love speculating, but you have to do it right," he said. "Speculating is not investing, when you confuse the two you get annihilated."

"You should only speculate if you are comfortable with it" Cramer said. "You have to separate it from investing. If you want to speculate right, this is the time to do it," he said.

Speculative stocks are small, cheap and usually have no earnings to speak of.  They are extremely risky and "there are usually one or two things that could make or break a speculative stock, so you must follow some ground rules," Cramer said.

1.  Never speculate with borrowed $$.  Too risky.

2.  Only speculate with money you can afford to lose,
     And he recommended 54 as the cut-off age for speculating.

3.  Never put more than 20% of your portfolio in speculative stocks.

4.  Do your homework! How did they get to this price, what is their                 history?

5.   Don't speculate on debt-ridden companies

6.   Companies like this usually need alot of financing.  You have to keep       track.

"The bottom line: Know what you are doing so you don't speculate when you mean to invest," Cramer said. "And when you decide to speculate, do it the right way."

Jim went on to announce that he has out together a speculative stock index!!  Here are the picks.  
We will track them daily.


The Mad Money Speculative Stock Index
Rentech, Inc. RTK 659.15M
Crystallex International Corp. (USA) KRY 759.58M
Ivanhoe Energy Inc. (USA) IVAN 544.35M
Transmeridian Expl. Inc. TMY 490.90M
Northgate Minerals Corporation (USA) NXG 721.59M
EuroZinc Mining Corporation (USA) EZM 1.25B
JDS Uniphase Corporation JDSU 4.63B
Conexant Systems, Inc. CNXT 1.23B
Ciena Corporation CIEN 2.59B
Finisar Corporation FNSR 1.01B

They are all risky.  They are all speculative.  And even though we've got everything from oil to tech to minerals to optical equipment, all these speculative stocks - they trade together as if they are one stock.

Not only have my speculative stocks traded together - very interesting; they've also been radically under-performing the rest of this market since the top on May 11th. 

From that top, my speculative index is down a whopping 15.49%.  I mean the DOW's only down about 5%... The NASDAQ composite's down a little bit more than 5% and the S&P is down only 3.67%.

Cramer's going to keep track of the speculative index.  I'm going to pick apart the winners from the losers.

Now our speculative index is cheap; this is when we start to get in.

The rule of thumb is:  If you have five $2 stocks, two of them will do nothing; two will go to zero, and one of them will go to $10.  That's how you make money speculating. 

Speculation is risky.  Which is why this index - this speculative basket is a smarter, safer way to speculate.

You've got a responsible, diversified speculative portfolio;  of course, you do what's right.  I can't shoe-horn it.


The bottom line!:
   We've got a new index!  The Mad Money Speculative Index!  It's telling me that these speculative stocks are getting cheap enough to buy, as long as you're speculating, as long as you're in it for the short haul, not the long haul.  If you buy these stocks and speculate, like a pro, I think you could make some Mad moolah.




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