Look for overseas exposure

Europe and Asia help to prop up stocks as the US economy sags.

By Jim Cramer Oct 21, 2013 9:34AM

TheStreet.com logoGlobe with money © PhotoAlto/SuperStockIf you do business overseas, a lot of business overseas, it looks like that is the difference maker. People keep asking me how, given all of the downbeat activity in this country, it possible that so many of our companies are doing well, I keep coming back to "how much Europe and how much China do they have?"

 

I think Washington truly did hurt the U.S. economy, but the U.S. economy has become all about housing and autos. While I think that the latter remains strong, the housing market has gotten much weaker. That's a large purpose that needs confidence and if there is waning confidence, as we all know from the confidence polls, then there will be fewer homes purchased and fewer new homes built. There will be less money spent on a home, which is why all of those groups, including Home Depot (HD) and Lowe's (LOW), fell despite the rally after the deal.

 

Now, like anything in this market, things have gotten very relative. If the whole market has been pulled up except the housing stocks, then I think it is fair to say that they can't fall much. But still, when the averages are this high you are going to be left behind if you aren't in the stocks of companies that are leveraged to the world's economies.

 

Case in point: General Electric (GE). GE has spent years trying to become independent of the United States. The timing was hideous because the expansion was heavy into Europe at a time of a big decline and into China when China was pausing. But if you go through the numbers last week you realize that GE was saved by Europe and Asia. That's one of the reasons why I think GE is just beginning to go higher and while there were plenty of doubters, particularly those focused on the revenues, it was all about the margin expansion that GE is now going to have as things get better. They've taken out a huge amount of costs without cutting back in their reach.

 

I am betting when we hear Ford (F) talk this week it will be similar. Ford didn't need to distance itself from the U.S. because car sales somehow came to be more secular than cyclical because of the age of the auto fleet in this country. Given that gasoline's never come down -- notice that? -- despite all the oil we have found, the payback for a car with heavy incentives is pretty decent. Plus, as more people are hired, more need cars. But Europe is what crushed Ford, not the U.S., and if you notice, Ford still isn't back to where it was almost three years ago, again because of Europe.

 

It's all about leverage right now. Who has leverage to the very markets that hurt companies so badly? Who is not going to have the swing from red to black pretty much in the way General Electric did?

 

That's why I am not as concerned about confidence data. I am not talking about buying the shares of Horton (DHI) or Pulte (PHM).

 

But one more word on those. When all stocks have run this high, even these stocks can be pulled up by the entire tide. In other words, they are not good shorts. They just aren't great longs.

 

Jim Cramer's headshot


Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long F and LOW.


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64Comments
Oct 21, 2013 10:11AM
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The same US funny money is propping up the overseas as well as American economies.  The FED is now the go to world wide for cheap American debt in order to keep the gas going that so many are continuing to count on to maintain these economies in at least slow growth. To now marginalize our economy and suggest we leapfog to overseas markets is exactly what is to be expected from this opportunistic Corporatist mentality.  We need to stop and recognize Jobs and wage growth is and always will be the answer to a naturally growing economy.  The present free trade polices create the exact opposite results here in America.  You want growth we need to change policies to build a foundation for growth.  Running off to Europe is way too dumb in my opinion.  But then again when is the last time this Guberment got anything right for American citizens?  You were sold Globalization and National health care.  We were told it was Globalization and free trade and health coverage for all but in essence it is Socialism plain and simple.  Central planning at its best.  We have seen how this worked out for the Russians yet we show a blind eye as we continue down a path we should all realize is hopeless.
Oct 21, 2013 9:43AM
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nice. 

 

the rats are fleeing the ship. 

 

we've finally tipped the scales to where USA isn't such a nice place to be anymore. 

Oct 21, 2013 11:32AM
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Obama has been President for 5 years ... will we ever see a stronger economy in his time?  How much longer are we going to hear him say -- we still have a long way to go!
Oct 21, 2013 11:18AM
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I wonder what company Obama will compare ObamaCare to today?
Oct 21, 2013 1:22PM
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You know the word "surge" does not really mix well with tech........ thus the surge protector.
Oct 21, 2013 12:04PM
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People down here shaking their heads, the arrogant, socialist, inept, narcissist, incompetent, lying buffoon had to show his ugly mug on tv once again and tell lie after lie....This idiot loves to hear himself speak.....Obamacare is a disaster, a train wreck and slowly but surely even the libtards and low information voters will realize it...Oh well...So sad.
Oct 21, 2013 1:08PM
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I see that ABS still puking in the public pool.  Later all. 
Oct 21, 2013 12:10PM
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ROME: You`re right.Obama didn`t get a silver platter.We were losing 800,000 jobs a month an in 2 endless unfunded wars off the budget.The country was like a stage 4 cancer person.
Oct 21, 2013 1:39PM
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Why does Obama feel the need to always have a group of people standing behind him for examples as he talks?

Oct 21, 2013 10:34AM
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SEEMS YEARS AGO TO HAVE this exposure, you would get bombarded with advice to buy or stay invested in certain Funds invested in Japan, Europe or SAmerica, then eventually China or India..

 

We finally got tired of Political strife or changing economies in those areas, ridding ourselves of Japanese, Taiwanese, Chinese and Euro investments...

And just go after larger positions in Multi-Nationals, and let them worry about how they will invest or profit from business in the other Countries...

I found they could do a better job at the decisions, then we could; And their exposures are layered in all the locations for diversification and profitable operations....or not.

And a few of dozens are mentioned in the article..

Oct 21, 2013 1:19PM
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Barry, I`ve got news for you.After working my way up to Distribution manager I retired 2 years

ago.Now they want me to come out of retirement and work full time.I declined.However,I`m going

to do consulting work for them for big bucks.I`ll make some training videos and help in other ways

for as much or few hours as I choose.

Oct 21, 2013 11:00AM
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NTU.....Yeah, pretty much true; But we have to remember all our trading partners have their own Central banks propping up their economies or injections from the IMFs or Governments.

 

Seems their biggest fears are of tapering by our own FED, probably causing World inflation spreading from here, and tipping the scales back to another major recession on a Global level...

If our Consumers aren't buying and theirs are already in trouble, it becomes a dire situation to many of those trading partners..

One of my biggest concerns are of Foreign investment in this Country of Real Estate, and outright ownership of established Corporations...And next is inroads to our Energy Sectors...Or Infrastructure.

Oct 21, 2013 12:52PM
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"".....Obamacare is a disaster, a train wreck and slowly but surely even the libtards and low information voters will realize it...""

 

It never ceases to amaze me the way that people talk about the ACA.  It seems as if they're Monday morning quarter backing during the first play of the game.  We have a ways to go before we see if the ACA will work or not.

Oct 21, 2013 12:13PM
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Brent, Historical Markets have fared better under Democrats than under Republicans. Anyone can guess to why, I won't even begin to try. Markets have always been Manipulated, regardless of Party. However, when Rome makes the Statement of how the Markets have been playing Catch-UP, what part of the equation does he not understand about Record Highs for the DOW and S&P500 and 13 Year Highs for the NAS.

If you just look at the Massive Recession the Economy had to deal with coming out of the Financial Crisis, it's literally a Miracle the Markets are doing as well as they have. Record setting comebacks. We can debate all day long as to why along with Monopoly Money involved. Fact is, the vast Majority of that Monopoly Money was created before Obama took office. $500-700Trillion plus in Scam Derivatives and counting.

Oct 21, 2013 10:47AM
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" they are not good shorts. They just aren't great longs." Thanks for the wonderful advice Cramer.

Oct 21, 2013 4:49PM
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$1,600,000,000 to Pakistan but we can't even balance our budget or get a stinkin web site working.
Oct 21, 2013 1:00PM
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Barry, I`m sorry your life is in the tank.I`m retired and living great in the land that never sleeps.

It`s 84 degrees,no NY hate,polution,crime and cod weather.Hope you don`t get mugged today.

Oct 21, 2013 12:47PM
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Brent, we know for A FACT that the vast Majority of Republicans would have an entirely different take on the Economy if an Republican was President with the same Results as Obama. Most would be bragging about how great the Stock Markets have been.

They would tell you if you didn't have a JOB, that's a YOU problem. So when you go on these sites mainly used by Republicans, RECS won't give you a true indications most times to what the American Majority actually thinks. Fact is, most folks are too busy surviving to get involved in the Details which affects their lives.

We all should be more involved but I can understand the difficulty when Corporations are refusing to pay a living wage and most outlets to better wages have either been outsourced and or dismantled.

Oct 21, 2013 10:30AM
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Housing in the USA was propped up by international investors, I think this is common knowledge.  89 billion from Chinese investors in 2012 alone.  It's time to realize that governments of the world need to focus on growth policies.  Once the economy is up and running, then start making cuts to the deficit, also much easier with the tax revenue from a growing economy.
On another note, while I won't look to seriously at Cramer's investment advice, I will take one thing from his article.  Being diversified in both asset type and location is the only way to invest these days.  You can't keep all your eggs in one basket in a wold economy as when one falters, another starts to rise.  Smart investors already new this though.
Finally all this take of trade deals I will say this, free trade does work and is a great thing if done between equals.  What I mean is countries with similar standards of living.  The deal Canada signed with the EU is an example of this.  Wages are roughly the same in a case like this and shipping costs outweigh minor discrepancies.  This allows regions to export their strengths and import their weaknesses, this will be a good deal and we need more of them.  
Oct 21, 2013 12:06PM
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Brent: Please remember the market has been in catch up mode much of Obama's term.
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