Let's call it the Great American Snag. It's that moment where we realize that we're not going to have that Roaring 20s boom after all, certainly not the one that followed the Spanish flu's conclusion 100 years ago. No, this time we have something different, a discordant group of people who don't wish to be vaccinated and they are snagging the whole darned economy with their intransigence.
Right now we are seeing some classic signs of worry about the durability of what was once thought to be the quickest and greatest comebacks from the brink we've ever had in the economy.
If you go back to a little more than a year ago you realized that we were about to experience a second Great Depression as most of our companies connected with travel and leisure, a gigantic part of our economy, got socked by a sucker punch never expected: a pandemic that simply shut them down. We've never seen anything like it in our lifetime and if you recall we recognize that there was to be no quick fix.
We heard over and over again how hard it was to develop vaccines that really work. Heavens it took four years to develop a vaccine against the mumps, the mumps! You think you can tame this insidious, lethal illness in less time than that? Don't be ridiculous.
So the government poured money into the economy to serve as a bridge to when one could be created but it all seemed to be fanciful. Small business? The government hatched a plan to do a tide over for them, too.
The goal was to keep the nation's lights on while at the same time people should stay home to not give it to each other.
Out of nowhere we abandoned central offices, bought new homes, outfitted them with offices, made them palaces of entertainment for Netflix (NFLX) and video games and hunkered down with pantry stocking and learned to lead quiet lives with outdoors being our savior, from campers, to boats, to barbecues.
Then, boom, Moderna (MRNA) and Pfizer (PFE) came along and solved the problem, not with vaccines that were 50% helpful, like those of the flu, but much closer to those like polio, a horrendous disease that FDR, a victim, encouraged research for, and was solved during the Eisenhower years.
Oh those were different times. Eisenhower ordered the nation to get vaccinated and we queued up at the high school to do our patriotic duty and believe me it was patriotic.
The government was so fooled it's still in the process of throwing gasoline on top of the economic flame, trillions of dollars to create jobs while hundreds of billions of dollars are printed to make it so they don't need to be filled. The government's paying you to work and not to work. The government's paying you to shop and, with the new variant, it is paying you to avoid COVID infested workplaces.
Which brings me to the Great American Snag. Most business people have doctors. The doctors tell them to get the vaccine. The government tries to pay to entice people to take it. But what was once begged for now goes begging, millions of doses on the verge of being thrown away and a large swathe of our country want to live free or perhaps die from COVID, and it's so economically and unpatriotically and selfishly irrational that we've hit a gigantic snag in the comeback.
How does it manifest itself?
First, the people who buy risk free bonds are now in overdrive because they are convinced that we are on the verge of getting shut down again or at least being locked down again. The uncertainty over what was certain, a fundamental belief that people would want to avoid getting COVID, is now totally out the window and just like that the nation is beleaguered and beaten.
I am convinced that is what is taking interest rates to these ridiculously low levels. Those levels make it impossible for banks to make as much money as were expected just two or three months ago. We're back to where the fintechs, the stocks of PayPal (PYPL) and its doppelganger Square (SQ) go higher and all the banks that were thought to be the big beneficiaries of rapidly rising short and long interest rates languish. There's a lot more deposit institutions than non-bank banks so they are like lead weight tide to the markets.
We know that the travel and leisure industries are doing fine: we just got good numbers from Southwest Air (LUV) , American (AAL) and United (UAL) . But the traders don't trust the bullishness. They aren't waiting for Delta (DAL) the airline, to beat numbers, they are waiting for Delta the scourge to beat us.
In the meantime we've got chip shortages galore because Southeast Asia, is getting jarred by COVID while China slows because of its inferior vaccines, kind of the ones we feared having. How easy it is to take down the auto stocks based on some shutdowns that I think are even more transitory than Fed Chief Powell's view of our inflation.
So we are out of cars, an important engine of the economy. And we are out of homes, as we can't build them fast enough for people to move in. That had been an immense driver of financial activity.
It gets worse. The fears of a Delta Force slowdown are causing all sorts of good news to fall on deaf ears. Dow (DOW) makes more money than people ever thought but when CEO Jim Fitterling talks about how there's much more money to be made than previous thought, he's ignored. The stock gets clubbed. But then a strange thing happens: rates go lower quick and suddenly his 4.6% yield's darned enticing and then the earnings stabilizes the situation.
Plus we have price increases galore as we thought demand was going to continue. Now we aren't so sure. That means prices could be coming down from demand destruction.
Now here's the good news: the Great American Snag can end. The people who stand on principle of not being vaccinated even as their leaders are often people who got vaccinated anyway, they are lucky that we know how to care for the sick and they will take their chances against the grim reaper. They are willing to go out. Sure they seem like Fifth Columnists to those of us who have been vaccinated and we hear the endless breakthrough stories, a word that's become as contagious as the illness itself.
But remember I think it's all a snag and one that will be rectified in two ways. First, more of the unvaccinated will give in when the see the death toll rise and they will stop thinking it's no worse than the flu and instead understand that the flu kills all of the time and it isn't worth making a big deal about proving that COVID's no worse than another potential lethality.
Second, the unvaccinated will get sick and those that live have the antibodies that make it so they most likely will not get sick again.
Next thing you know we get unsnagged and the bonds sell off, the financials go higher, the homebuilders catch up, inflation cools and we've got a child tax credit to beat the band causing the malls to be packed with the vaccinated and the Amazons (AMZN) roaring once again.
So, don't be taken in. We saw what the snag can do during that three day selloff in the last week. It won't be long until we realize that the market was unwilling to give up the ghost because it was the snag that refreshed even as it scared the heck out of a third of the country that thought it was conquering this generation's polio and recognized, instead, that there were those who simply wouldn't take part because they had the right to give it to the rest of us and we are helpless to stop them.
(PayPal and Amazon are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)