We don't want Darwin to run our economy. We don't want Billy Paul Williams to manage it, either. But that's what's going to happen if things continue in the direction they are going, and it's not tenable for it to happen. Who are these esteemed figures?
They are the gentlemen who popularized "The Survival of the Fittest" and "Only the Strong Survive." The first is a distillation of the notion of evolution and the species that adapt and thrive vs. those that fail to and die out. The second? Pretty simple: If you are all-powerful you are going to triumph, the rest? Forget about them.
The market's playing out exactly as Darwin described and Williams crooned. The averages are dominated by the stocks of the fittest companies, the ones with the strongest balance sheets that will survive this medically necessary pause. Others that need credit, not because they are reckless, but because that's how their business runs, look doomed.
Now I have said endlessly that we don't trade luncheonettes and we aren't shorting nail salons or buying gyms, although we will have Planet Fitness (PLNT) on "Mad Money" tonight. But we are investing in companies that supply these small- and medium-sized businesses. And, more importantly, if we keep getting numbers like we had this morning, numbers that show 3 million new people unemployed, then we will certainly lose all but a few giant companies that can't be competed with, because they are too strong and have the run of the show.
If we let that happen, if we just let things evolve, it will crush us as a nation. But will it crush the stock market?
In the last two days we have heard from a quadfecta of individuals who have put tremendous pressure on this stock market. First we had Dr. Anthony Fauci, who sounded very worried about the tremors of opening the economy and of spikes of outbreaks in the fall. He was pretty unequivocal, so unequivocal that President Donald Trump scolded him about it.
Now Fauci knows more about what can happen with this novel illness than I do. That's his job, although if you go back in time, you can see that the health advisers didn't know all that much about this incredibly dangerous, easily caught disease. They didn't or they wouldn't have said no masks. The didn't or they wouldn't have compared it to a really bad flu.
My job? Mine is to assess what Fauci's view would do to the economy and the stock market. I can tell you that we will have a second Great Depression if we keep things closed. The natural question to ask is, Does a second Great Depression create more health issues, not financial issues, but health issues, if we allow things to run their course.
Fauci hurt the market with his negativity, but not as badly as Fed Chair Jerome Powell did when he spoke on Wednesday. Powell traced out an almost apocalyptic view of things if we don't take more actions to save commerce. I think Powell's dead right and it was unfortunate that his testimony hurt the market. The worst thing that we could have is a clueless Fed chief who actually had a laissez-faire approach to things, who simply said hey, all we are doing is speeding up what Darwin would have said is going to happen anyway. I was an early critic of Powell, upset that he didn't see how powerful his words about the need for a whole bunch of rate hikes were just when the economy was about to roll over at the end of 2018. He saw this one happening before anyone and he's been instrumental in making credit available to any big company that needed it to survive.
We should have applauded him, not sold stocks.
But how could we not sell stocks, we also had two very important money managers say critical things about the market. Stanley Druckenmiller, so smart for so long, was quoted as hating the market, and put it in a harsh light. I didn't hear the speech. I am not even sure that was his view. But it was conveyed like that. It rang alarm bells. So did the words of David Tepper, another legend who called in to Scott Wapner's "Fast Money Halftime Report" and said he didn't like the set-up.
Now, after that pile on, with four guys down there giving the market the business, you can expect it to get crushed.
After all, this quartet will be right, because we cannot have 30 million to 40 million people unemployed in this country and expect that the stock market can climb forever.
But what happens if they are not. And what happens to the stocks of the companies that are left standing after the apocalypse.
That's where I come in.
I sometimes think that people believe that if your company borrows money it is somehow reckless. However, almost all businesses run on credit. That's just how commerce works. When your business is interrupted, because of storms or fires, you have insurance and it will pay and you might not even skip much of a beat.
But if you have a business and we have a pandemic and the government deems your business not essential, then you are almost always going to go into default. Take a look around at every business you see on the streets where you live. Most of them will not make it if this economy doesn't open wide. But the companies with the big balance sheets? They make it. That's why I included Walmart (WMT) , Amazon (AMZN) , and Costco (COST) in Cramer's Covid Index, which, by the way, I badly want to amend to put in Target (TGT) . We won't be like the old Soviet Union, which really only had one chain, GUM. But we will be close to it. What will we do with all of those tens of millions of people who work in retail or supply retailers?
We got some numbers out about Chipotle (CMG) from an analyst on Thursday morning who talked about because of technology, these stores will be making as much as they were before Covid-19. We got from another analyst that Wendy's (WEN) breakfast is a success. And a Seattle newspaper reported that Starbucks (SBUX) might be able to get some rent concessions because rents are going to come down.
But other than these three, plus McDonald's (MCD) and Burger King, Domino's (DPZ) and Wingstop (WING) , I don't know who else survives. The rest might just be dice rolls. What do we do with all of the other people who work at restaurants where social distancing and customer temperature taking crush the businesses that took the Paycheck Protection Program?
You can't have a country with less than 10 national retail and restaurant chains, not because you won't make money in the market. You will. Just go buy the ones I mentioned. They can handle all the new rules and have the balance sheets to prove it. We know people will shop and eat there because they are the only ones fit enough to survive. You can't have it, because it's a rigged survival of the fittest. If the government closes you, it should pay for doing so. The government is closing a lot of solid businesses that could thrive, that could be the next Walmart, for all we know, or just might be the best boutique treasured merchant in your community.
It's not the fault of these companies. That's why I liked the term business interruption insurance that Secretary of Treasury Steve Mnuchin talked about. Our government made businesses insolvent to conquer a disease it can't conquer. It's created a situation in which most companies, solvent or otherwise, will wither and die. The vast majority, judging by the action of the bank stocks until today, aren't going to get any credit/
I think that without more stimulus to help open this second stage of return, you just buy those companies I just mentioned. They are going to thrive either way. Are they expensive to these hedge fund managers? We will never know what they say. But I am telling you, without mutually agreed upon stimulus or a vaccine, you just got your shopping list for the revolution, not evolution, in the American economy.