"I think some of this is a backlash to the Justice Department's willingness to bless too many airline mergers, with the straw that broke the camel's back being the American Airlines-US Airways deal. That raised prices big-time across the entire group," Cramer said.
Mergers have been in the doghouse ever since.
Cramer thinks there are too many oil and oil service companies out there. Halliburton and Baker Hughes recognized this, but the merger was blocked.
The oil patch itself has had many opportunities to combine, but nothing happened.
Meanwhile, there are also a large number of big pharma companies. Yet, when Pfizer tried to merge with Allergan, the government shot down the deal. The combination of the two companies would have allowed it to stop paying taxes in the United States, so Cramer understood why it did not go through.
"Boy did it ever freeze mergers in the pharmaceutical space," he said.
Cramer also had the Dow-DuPont deal, Walgreen's takeover of Rite Aid the Anthem-Cigna merger on his radar. Those don't seem to be getting done, either.
"Put all these blocked or stalled deals together and you can see there is something big going on here, big and bad for stocks," Cramer said.
The government's increased resistance to M&A deals is a large overhang for the market. It prevents new money from flowing into stocks and creates record-high cash positions. Buybacks can help shrink the existing supply of stock, but it is not enough. Takeovers are the answer.
"We need mergers that let these retailers sell real estate, while giving them more pricing power versus their suppliers and creating tremendous opportunities for cost cutting," Cramer said.
Companies aren't taking a chance, though. Perhaps they also think their deals will be blocked.
While there isn't a likelihood of large companies like Lowe's and Home Depot merging any time soon, Cramer did spot a few opportunities. He recognized media companies, auto parts, and Twitter as all being ripe for deals.
"The clock is ticking. The bids should be made, but it sure doesn't look like that will happen," Cramer said.