Europe's bad news won't bring us down

Six months ago, when the US was out of control, news of Ireland's $68 billion bank bailout and Spain's debt downgrade could have sent us into a tailspin.

By Jim Cramer Sep 30, 2010 8:42AM

jim cramerBy Jim Cramer, TheStreet


Why can't they just release all the bad news at once over in Europe? This morning I watched a pained Irish finance minister talk tough about the Irish bank bailout that will take years for the country to recover from. This was a long, drawn-out process that we all knew had to take place, all except the poor uninformed individuals who were still allowed to buy the common stocks of the Irish banks, even after it was obvious they were going to be diluted to death.


A tough-talking Brian Lenihan laid out plans for a $68 billion bailout that will include a cash induction for Anglo Irish and a majority control of Allied Irish (AIB), a stock that people have asked me about repeatedly because it "looks so cheap."


At the same time, Moody's cut Spain's bond ratings because of the large deficit in that country -- rocked again by a property bubble gone bad and overspending by the government -- and the gloom proceeds unabated.


Of course, though, Irish and Spanish bonds rally. They rally because almost everything you now hear is about Europe getting its house into order. The actions may have taken forever -- certainly compared with what we did with our banks -- but the adults are prevailing, and it is working. Hence the strength in the euro and the respect for the bonds that these countries print to deal with their problems.

We, on the other hand, handled things quite differently. We moved swiftly with our bank rescue plans, despite vicious attacks from the left and the right, and no one in this administration wants to point it out -- perhaps because it was a Bush plan -- but the Troubled Assets Relief Program was an incredible success. With the exception of the politically charged ones that were protected either by the Democrats in Congress -- think Fannie Mae (FNMA) and Freddie Mac (FMCC) -- or the unions in Detroit -- General Motors and Chrysler -- we're getting our money back, even from the incredible debacle that is being resolved right now at AIG (AIG).


But we've done nothing to cut back our government spending, which is why I now think the dollar is beginning a downward slide, one that could be larger than anyone thinks and may help the multinationals move higher still.


I know the backdrop in Europe is discouraging as you wake up to it every day, but the news is all part of the rearguard; the actions have been taken, and they are good ones. It's why they don't bring us down as they would have when things were out of control just six months ago.


At the time of publication, Cramer had no positions in the stocks mentioned.


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