Greece, Goldman obscure healthy earnings
The big headline stories are obscuring the best group of earnings I've seen since the 1990s.
By Jim Cramer, TheStreet
Portugal: Good excuse or good reason? Spain: Good excuse or good reason? Greek two-year at 19%: Good excuse or good reason? Goldman Sachs (GS) in the stocks instead of selling stocks: Good excuse, or good reason?
To me, Spain, Portugal and Greece are decent reasons to sell but Goldman Sachs was an EXCELLENT excuse to sell. Last night on a late panel with my old partner Larry Kudlow, we were trying to suss this issue out.
Larry's convinced that you have to be a little shaken by the 19% rates. I came back and said that watching the disembodying of the most important finance firm in the country is jarring to say the least and that it created its own level of uncertainty.
Of course, when we hear Greece to Portugal to Spain is "Ebola," as I have heard today, and when you listen to people saying, "We are next," you want to sell everything because "everything" went down in Greece and everything is going down in Portugal. When you hear "meltdown" and "panic" from the media you feel you have to panic and melt down with them.
But there are silk purses. In previous contagions, the areas that collapsed were areas of tremendous growth and strong economic demand or were directly tied to our economy.
Mexico, by proximity and by lending by American institutions, had an impact on our economic growth. Asia, during the late-1990s contagion, had just become the biggest market to sell information technology equipment into in the world. American companies were working furiously to meet that demand and the demand dropped off a cliff.
Russia? Our institutions were hooked on Russia.
Greece, Portugal, Spain? Not economic drivers here. Not important markets. Not capable of stopping the nascent recovery. We are not on the hook.
That doesn't mean that we aren't going to be dented. Doesn't mean that things are "better." We can't be that glib.
However, we always have to remember the notion of the flow of funds. If you are a wealthy company or individual in Europe, you must send your money here. You have to. What I am saying is that money coming here vs. the economic damage that is being exported can be a push or even a positive.
It is really important to remember that these big headline stories are obscuring the single best group of earnings I have seen since the 1990s -- that's right, the 1990s. I have not seen these kinds of healthy numbers with healthy balance sheets and excellent prospects since the Clinton era.
I also believe that a strong economy can mean that many things can go right, including employment and taxes, which have not been going in the right direction.
I was shocked last night to be on a panel where someone contested the notion that things are getting better and that it will matter to our federal and state finances. You know it isn't all about spending. It isn't. But ideology can temper reason.
Anyway, now that the hearings are over, the month is almost over -- end-of-month buying, challenged, of course, by the "Sell in May" ditty, and the defaults of Greece, Portugal and Spain are being factored in -- and we might focus on earnings again.
If we do, it's really hard to go down hard. The earnings are just too darned great.
Random musings: Yes, I thought Goldman CEO Lloyd Blankfein did a great job, although he had a lot of work to do because the first panel did make it sound like Goldman was the Wild West. I prefer to think of what Goldman was doing with these synthetics as being a facilitator of merchandise to the most sophisticated players on earth and that those players knew or should have known that Goldman might have been selling or shorting the merchandise. … As I said last night, I don't favor synthetics because they introduce too much leverage into the system for the sake of putting on a fast trade.
At the time of publication, Cramer was long Goldman Sachs.
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