Cramer explains the rapid sell-off: 'When the market’s not trustworthy, no one buys'

  • "Mad Money" host Jim Cramer considers the effect of bonds on the stock market's multi-day decline and explains why investors will hesitate to buy in.

With markets reeling, one theory that has surfaced to explain the sell-off is that it was driven by the bond market. But CNBC's Jim Cramer isn't convinced.

"That's just one theory," the "Mad Money" host said. "Let's say it's the earnings that were driving the rally. Then I could argue stocks as an asset class aren't that overvalued, so you can buy the weakness, especially because the whole market has already become a heck of a lot cheaper in the last few days."

The problem is that the inverse volatility trading products that Cramer has been railing against are clouding the real reason for the sell-off, making it difficult for him and others to discern whether bonds or earnings are to blame.

"Look at like this: we know we're taking enemy fire, but we won't know where it's coming from until the VIX-related smoke clears," Cramer said.

As issues in the volatility market become more widespread, Cramer worried that investors might give up and decide that they don't want to lose any more money so quickly.

"We're now in a place we've visited a couple of times before where you just can't trust the prices," he said. "People don't care if it's because of bonds or VIX blowups, do they? They just know that the market isn't working right, or if it is working, it's working against us."

Traditional metrics like price-to-earnings multiples or earnings successes don't matter to investors, either, the "Mad Money" host added.

"When the market's not trustworthy, well, after a while, no one buys. They sell," Cramer said. "And they keep selling until prices stabilize and/or mean something pertinent to the value of the enterprise underneath."

Cramer found it important to note that this kind of market "vortex" will keep weak-handed buyers out of the market until stocks recover, no matter how low prices go.

Even if stocks become downright cheap or interest rates somehow decline, investors won't risk stepping in the metaphorical quicksand, he said.

"What can I say? That's the situation we're in and until the big volatility bets unwind, ... we're going to be stuck in kind of like a no man's land," the "Mad Money" host concluded. "I can't make it better, but at least I can explain what's happening so you don't drive yourself crazy wondering what the heck is going on."

WATCH: Cramer discusses the impact of bonds on the sell-off

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