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Cramer: As Cold War heats up, unexpected ripples

Just one day ago Jim Cramer warned investors that unrest in Ukraine threatened to knock down stocks at any given moment. And in less than 24 hours, it did.

By the close of Tuesday's session, the S&P 500 declined sharply while the Dow Jones industrial average finished with triple digit losses.

Largely, investors ran for the exits after reports suggested that Russia was building up its military presence on Ukraine's border. Fears were magnified by comments from a political leader in Poland, who largely confirmed developments.

"The market is figuring it out," said Cramer. "Stocks are getting clobbered because investors fear Russia may be about to invade Ukraine," and the ripple could be almost impossible to anticipate.




Ukrainian troops patrol near the eastern Ukrainian city of Debaltseve in the Donetsk region, Ukraine.
Valentyn Ogirenko | Reuters
Ukrainian troops patrol near the eastern Ukrainian city of Debaltseve in the Donetsk region, Ukraine.

For example, Cramer said, you wouldn't immediately expect an overseas military action to drive down US interest rates; if anything rates should be creeping higher on better economic data.

But that's not what's happening. "Money is flooding into our country's bond markets, which is viewed as a safe haven. In turn, prices are going higher, and yields are going lower." Consequently, the lower interest rates are triggering a selloff in U.S. banks. You wouldn't expect it, but weakness in U.S. financials is due to Russia.

Cramer says the same is true in energy. Russia is causing lower oil prices—that's right, lower.

Typically geopolitical unrest is bullish for oil because it threatens supply. However, in current circumstances supply issues are being trumped by a stronger dollar, which is a result of geopolitical events. Because oil and other commodities are nominated in dollars, the stronger the dollar gets, the lower the commodities go. Again, lower oil prices are due to Russia.

Also Cramer said a number of companies that you might not expect to suffer from developments, in fact, say Russia could hit results.

For example, "JPMorgan today laid out its exposure to Russia. It was bigger than I thought," Cramer said. "And MasterCard already said it had exposure, which may be why it didn't rally after a terrific quarter."

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"I can go on and on," Cramer said, "but I think you get the picture." As tensions between Russia and Ukraine grow worse, investors are forced to grapple with the impact on stocks.

And given recent developments outlined above, it's nearly impossible for anybody to anticipate market moves with any degree of certainty. Therefore, until tensions ease, market action may be extremely erratic.

"If the market could just focus on earnings, I feel confident we'd have closed higher today. But with Russia rearing up, the market just can't do that."

(Click for video of this Mad Money segment)

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