Eurozone is an unmitigated disaster

With each bond auction worse than the previous one, we're caught in an endless downward spiral.

By Jim Cramer Nov 17, 2011 11:15AM

the streetIf you know that every bond auction of almost every country in Europe is going to go badly from now on, if you know that any particular country, like Spain or Italy, has endless financing needs and no institution can afford to show that it has that paper on the books, then you are set up for an endless spiral down. You can't break it. It's as if every day a new Macondo well goes off and the only way to stop it is to let it run out.

 

You can see how untenable it all is just by watching the results of a given auction -- like the Spanish one this morning for 10-year bonds. The government wanted to raise 4 billion euros. There was demand for only 3.5 billion, and the interest rate skyrocketed to 6.975% from much lower levels. All-around bad. No redeeming features, except that you know this auction will fare better than the one after it.

 

With no plan for what to do with all of the debt to be financed, with no hope of the economy coming back soon, with no ability to put aside differences, the euro world is pretty much an unmitigated disaster. So you can see why we are totally hostage -- because as strong as our system is, the idea that there is another one that is going down the tubes pretty quickly across the ocean is very daunting.

 

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Now, you have to figure there is some price at which it would make sense to buy these bonds. But we know from what happened to Greece that we seem never to hit that price, and we certainly aren't going to hit it in the primary market. You would normally want to buy bonds when the economy is weak, but not when it is so weak that the issuer can't pay the coupon.

 

So we spiral and we spiral, with every auction now turning into a down 1% rout at a minimum, and there are auctions as far as the eye can see and not enough money from different entities to buy them all.

 

Ways out? Default, which would be devastating but would allow for a new beginning somewhere down the road. Restructuring, budget reform, lower standard of living, increased savings rate to buy the bonds? Obvious. But have you thought about the problems we're having here with our own debt committee?

 

It makes No. 1 seem more likely all the time, unless the policymakers come up with something that works. Lately, however, it seems not so much like they are squabbling as that they are recognizing that nothing is going to work, so maybe just let "it" happen, whatever the heck "it" is.

 

Then maybe someone will think of something.

 

Did I say vague, disheartening and frustrating?

 

All three.

 

jim cramer

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.

60Comments
Nov 17, 2011 2:35PM
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PLEASE look at today's action as evidence:

cramer is wrong....gold does not protect you in down markets...

IT IS A HEDGE AGAINST INFLATION NOT FALING STOCK PRICES

Nov 17, 2011 2:34PM
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Well, come on.  Heck, if they offered me Cramer's job, I'd take it.

 

Anyway, we need the stock markets.  That's where us smart folks buy Exxon, Chevron, ConocoPhillips, British Petroleum, Royal Dutch Shell, Valero.  We gotta earn too don't we?

 

 

Nov 17, 2011 2:33PM
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Cramer is an unmitigated disaster for the small investor. Puts the little guy into investments that the institutionals are exiting. It's called harvesting the chumps.
Nov 17, 2011 2:32PM
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high yielders and gold will get you broke in this market

 

following cramer will get you broke in every market

Nov 17, 2011 2:24PM
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How about we just get rid of the stock market and all financial speculations.  Let businesses provide a service or product and let people buy or not.  simple supply and demand.  A company has profits, pay them to the employees who have worked to make these profits not people who just buy a piece of paper that entitles them to some of the profit.  Profits still too big, well do something with it that will better the world and the people in it.  It's a drastic message, but  the world can get along just fine without all this BS.
Nov 17, 2011 2:12PM
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I wish people such as Cramer would distinguish between northern European nations and the southern ones.  Sure, I'm biased as my ancestry is Alsatian,  from the area around Strasbourg on the Rhine.  There are DiFani's in old Rome phone books and since I was born nine months after Pearl Harbor, I grew up with plenty of stories about the 20s, the Great Crash, the 30s and WWII.  Some forget that the Dow did not recover to its pre-Oct. '29 level for 25 yrs:  1954.  I still miss the late Louis Rukeyser from Wall St Week.  His roommate at Princeton decades ago was Wayne Rogers who was in the tv version of MASH.  No wonder Rogers is a highly regarded financial planner for Hollywood stars and producers, et al. 
Nov 17, 2011 2:09PM
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Sal Ution,

Excellent post.

  In our last state elections here in California we voted a lot of the same idiots that put our state in the turmoil it's in  back into office as well but we decided to one up every other state by re-electing a governor that already destroyed our state one time before. 

Nov 17, 2011 2:04PM
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I wonder why none of our OWS demonstrators are not demonstrating in Washington. Isn't that wher congressmen are lobbied to pass loopholes that excuse the wealthy from paying taxes? Isn't that were congressmen can buy and sell stocks based on insider trading? isn't that where the decisions were made to bail out the banks and corporations? Isn't that where laws need to be made to readjust the tax code, and stop the cronyism? they don't think the top1% is going to voluntary surrender its billions in ill-gotten gains, does it? Maybe they ought to demonstrate at GOP debates and next year's campaign events. Maybe they ought to draw up a list of specific things they want.
Nov 17, 2011 2:02PM
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Jim,

 

It sounds like you need to be looking for another profession, one that you can warranty your opinions that you and your huge parent company publish  for public consumption, for a profit.  You might want to consider such a move before a group of consummers that lost their life savings acting on your advice file a multi billion dollar class action suit against you.

 

Have a good day.

Nov 17, 2011 1:56PM
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Cramer's statement is so stupid even if it is only because it is old news. Did anyone in their right mind think that Europe was going to recover from this crappy economy? Those who invested in the market over the past few months did so only for short-term gains. They know there is no long term positive prognosis. It's the same way with the American economy, It's just a matter of time before the collapse because no politician has the guts to make the right decisions to cut spending AND raise taxes. They're too interested in preserving their own political careers. The clock is ticking toward disaster. Congress is fiddling while America burns.
Nov 17, 2011 1:55PM
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note to capitalists everywhere

you are witnessing all the wealth in a few percent of the population while

the huge percentage is in a depression.............this is text book end stage capitalism

 

greece,italy,next spain,ultimately all europe,next usa.........profit by taking advantage of

the depression and its inherent volatility

 

or listen to cramer whine about europe and leveraged etf's while you go broke

owning his high yielders and gold

 

 

Nov 17, 2011 1:51PM
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The only way the poor wins if the Stock market crashes...Hope it does I like to see all those billionaire jumping out the widows starting with the Koch's brothers and a lot of bankers would be nice.
Nov 17, 2011 1:50PM
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Wow, Europe a disaster?  Where the heck have I been?  That Cramer is such a genius ... NOT
Nov 17, 2011 1:50PM
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note to cramer and madoff

some of us are smart enough not to be scammed

Nov 17, 2011 1:49PM
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How many times can you rob Peter to pay Paul?

Will the Radical Liberal Socialist Agenda that is bringing down Europe also happen here?

Have Government Ponzie schemes banckrupted our Free Enterprise Capitalist Economy?

Is it now even TOO LATE to re-elect no one?

You can bet whatever you have left in your house on it!

How can we have become so stupid to allow the economically uneducated masses to become the majority?

In NJ - the most politically corrupt and highest taxed State in the Nation - the same voters who elected Christy also RE-SLECTED the entire political incumbancy that IS the problem.

Talk about uneducated hypoctites!   

The Radical Liberal Socialist Agenda has suceeded in perverting our education System into  graduates (ignorant of economic principles) that vote for false promises.

There are none so blind, as those that will not see.  

 

Nov 17, 2011 1:45PM
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If only the governments of the day through out world could see the Euro zone crisis for what it is like through the eyes of JIm Cramer then maybe there is a way out but as long as denial rules their thoughts we will all be stuck in a down ward spiral
Nov 17, 2011 1:43PM
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Better stock up on French champagne now.

 

 

Nov 17, 2011 1:39PM
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the euro world is pretty much an unmitigated disaster.........bec​ause as strong as our system is
Embarrassed The eurozone is not a disaster, it's a prime example of economic justice. It proves that socialism only works until you run out of other people's money. Other people, Germans, are now saying enough is enough. It's not Germany's responsibility to take care of the Greeks, Italians and Spaniards. Guess what? Our system is pretty much a copy of theirs lagging  by about 10-20 years only we had the ability to keep printing currency and dumping it on the world markets. Printing more money (QE) is only delaying the real solution of matching revenues to spending. Stealing from people that paid for medical and retirement insurance is not the solution either. Quit whining and grow up.
Nov 17, 2011 1:36PM
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Cramer; vague, disheartening and frustrating is an understatement, one can not help but emphasize with the premise of the "occupy" not the tactics nor even close, the current climate, but their frustration.  It is not that there are the Rich, but that too many of the Rich have obtained it by cheating, deception, and fraud,...our government leadership seems hell bent on controlling power at all cost, and do not give a damn about americans. They are to often in bed with the very cheaters; and both groups, repeatedly have the audacity to justify their lack of integrity as within the law...Then Change it, so that it is not so self serving... 

Insider knowledge, privilege, and special rules for the Rich, Powerful and Famous, increasing their wealth, that is the true rule of life, MONEY...The true frustration is that we the people have nowhere to turn.    And, one can not help to feel like while the entire world economy is going to hell in a basket, the Rich are buying up everything they can.  It reminds me of the movie "Its a wonderful life"  When the common folk run on Bailey Bank, George Bailey rails, "Potter isn't selling, he's buying, 20 cents on the dollar"...We have become a Nation of "where everything goes, everything will".

Nov 17, 2011 1:33PM
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When Greece was approved by Merkel a few weeks ago, good thing I didnt buy when you said to buy on every little dip. Now your view of the market has made a complete 180.  
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