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Oil is once again running the show for the market, even if it shouldn't be. That is why Jim Cramer took the opportunity to watch just how much it controls stocks early on Monday morning, and he was shocked at how insanely powerful it was.
When Cramer woke up in the morning oil was flat, which sent the futures skyrocketing. When oil broke down $1, that prompted the futures to take a nosedive. Oil roared back, and then the futures rebounded.
But does its weight really make any sense?
When Cramer drilled down, he found that only 16 states derive some income from oil and gas. Of those, only nine are truly impacted by lower oil prices that could be threatening.
The real issue with lower oil prices is all of the debt that the oil and gas companies have and what happens if they default.
"That is a real issue. Definitely. There is maybe as much as $300 billion in debt in this industry. That could be a big hit," the "Mad Money" host said.
But when he put it into perspective, the housing collapse that almost brought down the nation carried bad debt of 20 times that of the oil industry.
That means that if all $300 billion in debt went bad, it would still only be a tiny fraction of the $6 trillion in housing related debt that went bad during the Great Recession. And it almost brought down every bank in the country.
So while $300 billion is a big number, it is not one that could sink any bank.
Read more from Mad Money with Jim Cramer
However, $100 billion in defaults is enough to sink the funds that have invested a lot of money into the distressed debt of oil and gas companies, which is why investors have been so fixated on mutual funds.
Regardless of the fact that oil should not be controlling S&P futures, the fact is that the insanity of the linkage can drive stocks crazy.
Does it really make sense that a stock like Alphabet went to $762 from $736 just because oil reversed its downward trajectory?
"Of course not. That is why I keep saying we are in crazy town. Until this linkage is snapped, we are only going to be able to make money on the long side if something nasty happens to the supply of oil. The demand can't take us back up," Cramer said.
One day Cramer thinks the market will escape crazy town, and it will be monumental. It just hasn't happened yet.
"That's just how it is. I don't make the rules. I just try to help you understand them, even if they are as wrong-headed and stupid as I have ever seen them," Cramer said.