Mad Money

Why is Cramer enthusiastic about these declines?

Tuesday's silver lining

(Click for video linked to a searchable transcript of this Mad Money segment)

Jim Cramer promises to always find investors a bull market somewhere. Yet he's oddly enthusiastic about declines in at least six stocks.

No, Jim Cramer hasn't turned into a raging bear. In fact, he believes these declines are extremely favorable for bulls.

"That's because a good bull market cannot coexist with massive and irresponsible speculative behavior," said the "Mad Money" host.

And all the declines that he favors occurred in stocks that he believes were trading on irrational exuberance, if not outright froth. Therefore, he views the losses as a positive sign.

"I believe that the losses sustained on Tuesday in Tesla, Fannie Mae, Freddie Mac, Ballard Power, FuelCell Energy and Plug Power, while terrible for those who own them, might be the best news this market could possibly get right now."

Adam Jeffery | CNBC

Looking at the individual declines, Cramer said he had been deeply distressed by the advances in Plug Power, Ballard Power and FuelCell, all of which are bets on clean energy.

Although Cramer is an advocate of clean energy, he felt the rapid advances were not justified by the underlying fundamentals. For example, Ballard and FuelCell have each gained more than 100% in only a month, while Plug Power gained about 70% over the same time period.

Yet, there was no game-changing breakthrough; rather the advance was fueled by anticipation.

"On Tuesday, the fuel cell fever burst and all three stocks were simply crushed," Cramer said.

That's rational, he said.

Cramer added that the same was true with two other speculative favorites, Fannie Mae and Freddie Mac. "They had both been galloping up and up and up even though many believed them to be worth nothing." And on Tuesday the Senate Banking Committee introduced plans that could eliminate both entities.

"It was a huge wake-up call, and it stamped out the froth with a single blow," Cramer said.

In the case of Tesla, Cramer said the stock finally reacted to negative news in a way you might expect.

Specifically, the New Jersey Motor Vehicle Commission voted Tuesday to ban the direct sale of automobiles in New Jersey, effectively making Tesla unable to sell its cars in the state.

"For the first time since this Tesla fever began, there was a solid reason to actually sell the stock. And people did with it finally being dinged $4.48."

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Make no mistake, Cramer isn't taking joy in the fact that anyone lost money. It's simply that he thinks the price action in these stocks reflects a level-headedness that had been absent for quite some time.

"I never like hideous declines, and we saw them today. But in these cases, I think there's a silver lining. I think they were necessary, and because of them, I think the market can go higher again."

Call Cramer: 1-800-743-CNBC

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