Cramer: Could Riots Set-Off Big Downturn?

(Click for video linked to a searchable transcript of this Mad Money segment)

Don't ignore what's going on around the world, said Cramer. It will cost you money.

And right now the terrible riots in Turkey are the big thing happening in the world.

For nearly two weeks, thousands of people have taken to the Streets, protesting against the current pro-Islamic party which controls Turkey's government. The party, led by Prime Minister Tayyip Erdogan, is perceived to have parted with the republic's secular tradition.

In recent days, violence has escalated with Turkish riot police firing tear gas and using water cannons against the demonstrators.

As terrible as that is, what's happening in Turkey is political. And Turkey is a relatively small nation. Could events really set off a big downturn, here in the US?

According to Cramer, the answer is, quite possibly.

Turkish protesters in Taksim Square on June 5, 2013.
Charles Emir Richards via Facebook
Turkish protesters in Taksim Square on June 5, 2013.

Just as the flutter of a butterfly's wings can trigger a ripple that leads to a terrible hurricane, Cramer believes geo-politiccal events that seem isolated can ripple across world markets in ways unforeseen. In the worst case scenario, the result is a financial storm.

"We've had many a sell-offs triggered by overseas events including three brutal ones, Mexico in 1994, Thailand in 1996 and Russia in 1997," Cramer said.

Cramer can see it happening again. Already the riots have triggered a decline in the Turkish lira as well as Istanbul's stock exchange. And some European markets are starting to get hit. "Of course Europe is a lot close to Turkey geographically, so you might expect it," Cramer said.

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Here in the US the riots present more of an incremental issue - that is one more negative catalyst at a time when headwinds are swirling.

Wall Street is already nervous about the Fed ending its bond buying program. And there are broad concerns that a spike in interest rates could generate a negative ripple across housing. On top of that the Bank of Japan disappointed equity markets by holding its monetary policy steady.

And in a market that's this jittery, any additional wisp of downward pressure may break the back of the bulls.

That's especially true in this market, with the S&P 500 up about 15% for the year. The riots in Turkey could introduce just enough uncertainty to trigger significant profit taking.

"Is this how it all starts? The big downturn? The answer is, awkwardly, sometimes," said Cramer.

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