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As soon as oil rebounded on Tuesday, stocks managed rally out of the deep hole they were in earlier in the trading day. And while Jim Cramer has been adamant about lower oil prices being good for the stock market, there is one giant dark underbelly that he thinks needs to be addressed.
"The longer crude keeps collapsing, the more stress there really is in the system, and the worse the fundamentals get for the financials that lent these oil companies money. That is why we are so glued to every tick up or down in the price of oil," the "Mad Money " host said.
Initially when oil began to sell off, there was a host of small companies that went belly up.
That is no longer the case.
Investors now worry about companies that used to be a lot larger, like Chesapeake Energy, which was right in the blast zone of the recent sell-off.
Chesapeake was once among the largest natural gas producers in the world. It was founded by Aubrey McClendon. The company borrowed large sums of money and bought key properties in the shale regions. It made some of the most monumental acquisitions with so much debt, Cramer thinks it may have contributed to McClendon's ultimate removal as CEO.
McClendon had the foresight to see that natural gas wasn't going to grow much, so he moved aggressively into oil. When he left in 2013, Chesapeake's market capitalization was $18 billion. It now stands at $1.2 billion.
Read more from Mad Money with Jim Cramer
More importantly, the company racked up a ton of debt during McClendon's acquisition spree, as much as $16 billion. This is a big problem, as cash flow has become hard to come by with oil prices so low, and it has $500 million in debt that will come due next month.
While Chesapeake has hired advisors to figure out what to do, Cramer stressed the importance of repercussions that could be felt from the company's actions.
"The chief thing you need to know is that this $1.95 stock has become incredibly significant to this market," Cramer said. (Tweet This)
Not only does Chesapeake owe a ton of money to people, companies and banks, but it could signal something about the rest of large energy companies. If Chesapeake is having a problem, than many other companies that share the same lack of financial discipline.
Additionally, Cramer does not think the market is ready for these large companies to default. Much of the debt is held in high-yield bond funds.
"If you haven't heard me before I am telling you that these must be sold. I mean MUST. This is no place to be reaching for yield," Cramer said. (Tweet This)
So, while most energy companies weren't as reckless as Chesapeake when they built their portfolios, Cramer used Chesapeake as an example to illustrate the damage that could be felt to the market — especially the banks and master limited partnerships.
Cramer does think there are more Chesapeakes out there, and they will be revealed in time.
"If we can get enough Chesapeakes to stop drilling, oil will indeed find a bottom," Cramer said.
In the meantime, he said to expect more pain to continue in the stock market every time oil falls.