NEW YORK (Real Money) -- The 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 selloff 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."
First, 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% 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 bothered with them anyway. That's no longer the case. They have become market leaders. They rallied after MH17, 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 Federal Reserve. 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 are the real drivers. The dollar's 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 and I think MH17 won't be a "bit of a game changer," it's the Rubicon that no one wanted crossed, but certainly looks like it has been.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in stocks mentioned.
Editor's Note: This article was originally published at 6:07 a.m. EDT on Real Money on Aug. 4.