Downing of jet could be a market game changer

The incident set in motion events that could cause more pain in the weeks ahead.

By Jim Cramer Aug 4, 2014 11:53AM

Members of a group of international experts inspect wreckage at the site where the downed Malaysia Airlines flight MH17 crashed, near the village of Hrabove (Grabovo) in Donetsk region, eastern Ukraine © Sergei Karpukhin/ReutersThe market initially got it wrong. That's how I feel in retrospect about the downing of MH17 over Ukraine. That July 17 event I now think set into motion a lot of what caused last week's sell-off and could cause more pain the weeks ahead.


It didn't hit me until I read last week that Ben van Beurden, the charismatic CEO of Royal Dutch Shell (RDS.A), described the crash as the event that could be a "bit of a game changer" from "a trade and investment perspective."


TheStreet.com logoFirst, it was on the conference call of a terrific earnings report and the stock went higher, which threw me off. Initially I dismissed it. But then, when I mentioned it to BP (BP) CEO Bob Dudley, he was pretty matter of fact that it's a big deal. Considering that BP's partner Rosneft pumps roughly a million barrels of oil a day from Russia, much more than any other company, the game-change comment seems far more than just a throwaway.


In reality it represented a change of sentiment along so many measures of business. First, because Vladimir Putin apologized for nothing and seemed hardened by the incident, one has to presume that it would mean nothing to him to turn off the natural gas spigot to Europe.


It is inconceivable to me that the continent wouldn't almost immediately be thrown back into a recession if that happened. It's one thing to be cold. You can put on a sweater. It's another thing to have shut-down plants that use natural gas, and given how it is the fuel for much of industrial Europe these days, shutdowns would seem likely. Europe cannot sustain a business interruption. It would either have to come to the peace table and say to Russia you can have Ukraine, something that at least in our president's eyes seems to have a real historical parallel to the appeasement of Germany when it came to the Sudetenland of Czechoslovakia, or it would put through sanctions that at another time would mean -- let's just say it -- war. You have any other answers? I know I don't.


There was another impact that I didn't think about until I read a poll commissioned by TheStreet.com that said 36 percent of people are now afraid to fly internationally since MH17. We have had these scares before, as planes have been bombed or have been hijacked and used as bombs, and they have led to a temporary cessation in flying.


Normally the airline stocks are so horrible that few investors bothered with them anyway. That's no longer the case. They have become market leaders. They rallied after MH-17, no doubt in conjunction with good earnings reports. Now they are rolling over, and I think that's because of fear of flying, however temporary it might be, coupled with a commensurate increase in insurance costs. Cutting numbers on airlines. 


Finally, the stock market got it wrong because of the pundits' endless obsession with the Fed. There's plenty of money sloshing around that's betting the Fed is behind the curve so stocks will go down. But stocks go down because of profit peaks, and I think the combination of worries about Ukraine and Israel coupled with a potential slowdown in Europe will be the real drivers. The dollar has been a rocket ship all month, and it only strengthened after MH17. A strong dollar is no friend of American business. Nor has it been a friend of oil, which is plummeting. 


Who is obsessed with the Fed? It's the same cottage industry as always, the Free Marketeers and the people who make a craft of Fed watching.


Sorry, but these ideologues and professional Fed watchers better cast their eyes a little more toward Europe, because that's where the profit erosion is. I think MH17 won't be a "bit of a game changer." Rather, it's the Rubicon that no one wanted crossed but certainly looks like it has been.


Jim Cramer headshot


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.





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46Comments
Aug 4, 2014 1:31PM
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no one cares about the plane being shot down. 

 

while it's a crime and a tragedy to the families, from an investment point of view, no one cares

Aug 4, 2014 1:38PM
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What the hell is Cramer talking about??....He has went over the edge...!!
Aug 4, 2014 1:01PM
Aug 4, 2014 2:09PM
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plane crash could be market game changer? the market could go up and it could go down. pay for my book and my sage advice
Aug 4, 2014 3:14PM
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Little Jimmy Cramer sat on a wall,

Little Jimmy Cramer profits from all

Tell us to sell, then tells us to buy

Now it’s a plane crash making him cry

Oh for the loss of innocent souls?

Lament for Washington’s fiendish goals?

No….not our Jimmy his time thus to kill

Little Jimmy Cramer, the shameless market shill

Aug 4, 2014 2:37PM
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But Cramer said that it didn't matter last week -- aaaaaaaaaand he changes his mind again. I know he needs topics to be able to write about daily, but come on! It's as if he just throws crap out there that has a kernel of truth, and then says the opposite several days later, all so he'll just have something to post.


Cramer is like junk food: you know he's not really good for you, but it's difficult to stop going back to it. I'm working on weening myself off of this clown.



Aug 4, 2014 12:05PM
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It wasn't the MH17 downing, it's the total amount of uncertainty that keeps accumulating including the FED rate increases, foreign crisis, political bickering, upcoming elections and on and on.  Markets like to see into the future with some amount of clarity and this isn't going to be possible until we get through the November elections and 3-5 more months of economic data points.  In the meantime, dog days of summer will cause this market to go under.

Aug 4, 2014 2:20PM
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Maybe it was the catalyst.  Maybe.  It certainly was not the reason.  Jim Cramer has always been starved for media attention.  If you started watching him years ago on CNBC, he always had to be the loudest and most obnoxious of the bunch.  It's that 'little man' complex that so many men of his stature possess.  I just ignore him or sift through the BS and take what I want.  You should too. 
Aug 4, 2014 2:00PM
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The "markets" mean absolutely zero.  They are manipulated and contrived as suits.  There is no valid connect between the "markets" and the real economy.  None, period.  Cramer has gone entirely "overboard"...he needs  a 'buoy" thrown to him and quickly before he ends up in an asylum.    
Aug 4, 2014 2:16PM
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I think Jim's comments have a lot of validity, but if Russia sells the natural gas to Europe, then if they stop they also stop making money from it.  Sort of cutting off your nose to spite your face.  Income is after all income.

 

 

 

 

Aug 4, 2014 2:49PM
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That event will not affect long term stock values.
Aug 4, 2014 4:22PM
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I think the Russia-Ukraine conflict has a potential to become bigger trouble if Putin comes to the conclusion that Russia may lose it if he gets held back by US-EU sanctions and decide to win it at any cost. Obviously, Russia´s military forces are much stronger than Ukraine´s. In order to offset sanctions, he may coordinate a division of global trade into 2 blocks, significantly reducing Western markets. 
Aug 4, 2014 3:09PM
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this guy is so simple it hurts.........the scam of telling half the people the steelers are going to win and half the people they are going to lose........then calling back the half you were right about and selling half of them steelers win and the other half steeelers lose .........etc etc
eventually you will have some loyal followers who think you are a genius

Aug 4, 2014 7:06PM
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Why would Russia shoot down or want a commercial airliner shot down? If you are talking about

the fact that Russia gave or sold weapons, don't we do it all the time? McCain wanted us to go into

Syria and give the rebels ( that we can't even validate) weapons and the sad part is a lot of innocent people get hurt with these conflicts. People that have nothing to do with the power struggle, control struggle and who makes what dollars.

Aug 4, 2014 4:00PM
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Jim, it took comments from two ceo's to bring you to this obvious conclusion? Of course it has an impact and the further sanctions against Russia of course will have an impact. Were you sleeping? 

And within this article you dismiss the Fed as having any real market effect but at the same time say they could be behind this drop? Somewhat contradictory. Again, have you been sleeping? Yellen only needs to say tomorrow, the US economy is doing well and we are going to start cutting QE. Then what? The market waits for Europe to fall. Come on Cramer. The Fed is going to cripple the US and anything it says or does is going to have a more significant impact on the market, good or bad, than MH17 or Russia or Europe, although those are all factors.

I like to read your articles but sadly for the most part no substance.
Aug 4, 2014 7:16PM
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Jim: I suggest that the Ukraine/MH17 incident could lead to Putin blackmailing Europe, but losing a million barrels a day from Rosneft should reduce global market supply, make Europe more desperate for alternatives, and drive the price of Western crude up, not down.
Aug 4, 2014 5:31PM
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Cramer, I agree with you. It is bad enough that a commercial airliner was shot down, but the response from the US and Europe is an order of magnitude more frightening, nothing. The US State Department felt compelled to announce "there is no proof Russia was involved". There is much to be said about knowing where you stand, know you allies know your friends. In this environment dose anyone know anything?  
Aug 4, 2014 10:48PM
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Call around and ask area hotels if they have electric car recharging stations. Many dealerships, malls and the best hotels already quietly do. Imagine where we would be if the most worthless do-nothing GOP Congress ever had used government money to expand rechargers across the country and modernize our aging energy grid. This is the progressive future Obama has given us. Please cut the ties to BIG OIL. Please do not ever again put a religious fanatic Tea Party do-nothing Republican into public office. Your children deserve better. Our country deserves a better future. Not leadership that puts us 60 years back into poverty and ignorance. The more we can do to become energy independent the more we can ignore the middle east. It's always easier to carpet bomb than put boots back there on the ground. I am sick of a lifetime of losing Republican wars over OIL. Don't forget that Creamer also told his viewers NOT to buy stock in Tesla right before it zoomed from $39 to $239 a share. What an idiot.
Aug 4, 2014 2:17PM
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Israel, enough is enough. Take back GAZA. Provide security and continue the embargo by sea so Hamas can't sneak in any more rockets from Iran. Seems so easy to say. America is so freakin' tired of hearing about Palestinian squatters that it is sickening. If you don't have the balls to solve the problem, then maybe it explains our GOP Congress allowing 100 million illegals into our country before dumping the border issue on Obama before their vacation. All Mexican adults should be forcibly returned to Mexico to serve in their military to combat drug trafficking and end the Mexican Civil War. We don't need anymore cowards over here flying the flag on their rearview mirror and dealing dope.
Aug 4, 2014 1:24PM
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Garbage from cramer but clearly he is only following orders.

Putin has been played like a cheap fiddle ....we have masses of nat. gas here that needs a customer -  Europe - soon no russian gas but they will have to buy US gas and also there is nat. gas of the coast of Gaza and israel (which is why the israelis are murdering women and children by the busload) - in january the Gazans signed a gas exploration deal with a russian company !! The israelis though have their own plans to steal the gas and pump it through egypt which is why those DBs are keeping  their mouths firmly closed to israels war crimes.

Putin is handcuffed now - lets see if his billionaire buddies find a way to oust him. I doubt it though.

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