Mad Money

For a Read on the Markets, Cramer Looks to This Stock

Jim Cramer

To get a sense of where the stock market might be headed, Jim Cramer said Wednesday he looks at several stocks, but especially Banco Santander.

After all, the "Mad Money" host noted that when the Spanish bank's stock hit bottom on July 24, it signaled the bottom for the entire European and U.S. stock markets. Cramer thinks Banco Santander has such a pull because "Spain is the ultimate battleground right now."

As Goes Banco Santander, So Goes the Market?

"As Spain goes so goes the world. See, Spain has a very large economy with a very big bond market and it’s right on the bubble," Cramer said. "It’s way too big to fail, and it would most likely lead to a collapse of Italy, which has the third biggest bond market on earth.

"As nutty as this sounds, Banco Santander may be the most dominant financial in the world today. It owns a huge amount of Spanish real estate that it doesn’t want. It has a gigantic portfolio of Spanish sovereign bonds," Cramer said. "In other words, it’s basically Lehman times ten because its failure could set a wave of unstoppable dominos falling that might very well be catastrophic for Europe."

Cramer noted that ever since Banco Santander bottomed and started to rally in late July, it pushed the stock market higher, too. Banco Santander has been able to raise money in its Latin American markets and the bond market, too, but Cramer thinks its stock has been able to rally because its a proxy for whether the Germans will help save Spain.

"If the Germans are actually cooperating with the faltering nations of Europe, then we will avoid a Lehman-like failure. If they don’t cooperate, well, we don’t want to know what will happen, but suffice it to say that about 100 percent of this latest ten percent rally in the S&P came because Germany changed its mind, becoming the rest of Europe’s savior rather than its scourge. And Banco Santander’s stock telegraphed the entire rally."

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