Germany's decision to ban naked short-selling and credit-default swaps on euro government bonds is the latest example of how governments around the world are panicking, Cramer said on Tuesday's Stop Trading!.
Amid fears of European contagion, Cramer said the German government is trying to uphold its financial stability, even as its market was up 3 percent. He thinks Germany is "simply being cautious" and called the ban a "proactive" measure. But with the announcement coming from a spokesman today and because the measures take effect so quickly, he wonders what's to come.
"They think there's a Lehman out there," Cramer said. "A Lehman II, as some guys are calling it."
Cramer believes the ban will do little to prevent naked short-selling because there are many ways around the law, he said. It will have a greater effect on market mentality and that's likely to be negative.
"I don't like being made to feel nervous," Cramer said. "I feel like I'm being made nervous by governments around the world."
In a time where governments have a greater influence over the markets or the Dow can suddenly plummet nearly 1,000 points, Cramer said it is important to "be prudent."
Aside from looking for yield protection, Cramer likes gold right now. The Mad Money host thinks it is your defense against fears of deflation, and the commodity’s scarcity makes its value all the more appealing. He especially likes SPDR Gold Shares , Eldorado Gold and gold bullion right now.
When it comes to uncertainties in the market today, Cramer thinks financial regulatory reformis chief among them. As drafted by Senator Blanche Lincoln, Democrat from Arkansas, he said reform will hurt American banks because they won't be able to offer the full range of services that foreign banks can.
Cramer noted that several US-based banks were downgraded yesterday, including BB&T, US Bancorp and SunTrust Banks . Goldman Sachs is "simply too hot to handle" because it has "too many moving parts," Cramer said.
The better plays are Bank of Montreal or German-based Deutsche Bank .
"We're at a bad moment here," said Cramer of today's market. "This is a moment where you have to have cash, gold and some conviction so that you can ride it out. Otherwise, you're going to end up selling at the bottom."
Cramer's charitable trust owns Goldman Sachs.
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