Cramer: Troubled companies that must reorganize

When Jim Cramer reflected on recent activity in the stock market, it wasn't just bad stocks that made him so nauseated. It was the bad stocks trading as if there is no price that makes them worth owning.

Cramer was shocked at how many stocks seem to be in a similar position to Encana (Toronto Stock Exchange: ECA-CA), Genworth (NYSE: GNW) and United States Steel Corp (NYSE: X) (US Steel). "Stocks that, if you didn't know any better, can't make it in their current forms and will have to reorganize in some fashion," the "Mad Money" host said.

Encana recently made a gutsy move when it slashed its dividend by 79 percent and sold a large amount of non-core assets. While that did allow the company to raise and save cash for continued drilling, it still has a mountain of debt — including $7 billion in long-term borrowing.

"Most stocks do not recover from going down to $5. I think this one can't either," Cramer said.

Genworth Financial has a long-term care cost problem, which Cramer thinks the company has attempted to minimize. But the problem is that many of Genworth's long-term care policies were written before life expectancy increased, and the medical care budgeted for many elderly people is way too low.

So, while many of its other businesses have real value, Genworth's stock continues to go down. The losses from the long-term care division are unfathomable, and Cramer thinks the company remains in denial mode.

US Steel is another story that amazes Cramer. It has had tough times before, but always managed to make it through. However, this time around, Cramer doesn't see a bottom in sight for the stock. The company faces big steel imports, lots of dumping and a high cost infrastructure.

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"The problem with these slippery slope single-digit names is that we cannot figure out if the stocks have fallen too much because of an overabundance of fear, of if the declines are saying 'don't you dare touch me, these are going to zero,' " Cramer said.

The scariest part of the market is that the danger is not just limited to these three companies. Cramer saw similar situations all over the place; in some ways, they are emblematic of the moment. The same issues can be found with bottom fishing the oil patch, and the entire steel group.

In Cramer's perspective, all of these troubled companies had the same issue: they took down debt that won't be easily crunched without wrecking the equity first, and now they are lost in oblivion.

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