As Europe goes, so do we
Our rally is based on the European stock rally, which signals the worst is over.
Are you sitting down? If you invested your euros in the Italian stock market index, the year that Italy is supposed to file bankruptcy, you are now up on your investment. That's right. You are profitable.
Spain? Look out. That market rallied another 1.85% today on top of Thursday's 4% gain.
These are some of the biggest moves I have ever seen. They are emblematic of small-cap stock short squeezes, not bourses of major nations, including one with the third-largest bond market on Earth, Italy.
When we look back at this remarkable rally in our nation, we will see a few things that will shake us, including those of us who talk and write about the stock market for a living.
First, we had been told endlessly that we couldn't really rally with QE3. Or we hear that this rally is based on QE3. Or we hear that the market only goes up on the Federal Reserve. Go check the minutes. That's just not true. The people who opine on these matters won't acknowledge this, I believe, but the Fed wasn't part of this and no tip to the media, no speech, or no wink and nod had anything to do with it.
Two, the fiscal cliff chatter? It did a terrific job of making everyone sell. I don't know if it will be resolved or not, but I do know that if you came in now, you missed a fabulous rally. Again, just a fact.
Three, there was no real change in claims or any other data that signaled this rally. Nothing. Not one piece was really all that good except some homes data, and most people still don't even believe that prices for homes have stopped going down. Either way, we are still building very few homes, so the turn is off a small base.
No, what happened is that Germany relented. Germany held the whole world hostage for months. They held it hostage because they were fighting Weimar when they were really fighting the deflation that gripped the world from the Depression.
They were selfish fools. They were stupid. And the only thing that should give you pause about this rally is that they are fickle and they could change their minds.
This is a rally based on the Europeans' ability to deal with their problems, not solving them. Many big money investors didn't even think the Europeans could deal with their problems, let alone would deal with their problems.
It looks like they can. That's the spark. Doesn't mean they will succeed, but it does mean they can try, and that's actually reassuring from where we were a couple of months ago. Enough doubts have been resolved that they are not suicidal, that they will address the problems, that people are buying.
In other words, our rally is based on the European stock rally, which signals the worst is over.
In our country, the rotators have left the defensives and piled into the techs and the industrials as long as they don't have too much China, which is still in the not-able-to-deal-with-problems cloud.
There are still tons of values in this phase. Retail may have run too much for now, but anything connected with housing, autos, aerospace, (non-fiscal cliff) oil, tech, chemical, wood or exports is going to get money from the bond market -- the bond market being the great repository of money that thought the Europeans wouldn't get it together and another Lehman would ensue, except, as the bears always told us, it would be ten times worse than Lehman.
So, you can listen all day to those who make a cottage industry about Ben Bernanke or employment or Washington, in general.
The big multiple compression and the big earnings shortfalls, though, were caused by the European economies.
And their stock markets tell you that better -- not happy -- but better days will soon be here again.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.
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"No, what happened is that Germany relented. Germany held the whole world hostage for months. They held it hostage because they were fighting Weimar when they were really fighting the deflation that gripped the world from the Depression.
They were selfish fools. They were stupid. And the only thing that should give you pause about this rally is that they are fickle and they could change their minds."
DUMBEST COMMENT EVER............ Yeah the Germans should give there money to people who they know will not pay them back. What should They do it with a smile now too.
VL ,you do realize that we won the war and dictated every part of Germanys reconstruction territorial, financial and industrial. For close to 50 years we and the other allied forces decided what they could make and how much they could keep (War reparations), and their boundries.
“The Governments of the United States of America, the Union of Soviet Socialist Republics, the United Kingdom and the Provisional Government of the French Republic, hereby assume supreme authority with respect to Germany, including all the powers possessed by the German Government, the High Command and any state, municipal, or local government or authority. The assumption, for the purposes stated above, of the said authority and powers does not effect the annexation of Germany.”
—US Department of State, Treaties and Other International Acts Series, No. 1520
As a final part of the Bonn-Paris conventions Germany did not become a full sovereign nation again until March 15 1991. That they have become the industrial and financial backbone of the EU is stunning.
V_L makes an interesting point and never thought about it with German control to that extent. This sounds a bit familiar to me but won't go there. Hmmm. Mentioning thw Swiss in connection is also rather pertinent. Hmmmm.
Cramer is just Cramer as are most of the 'pundits". They are not to be taken seriously. The euro survives for one reason and it is not the US as some may want to think. W have a littany of countries hanging on....we all can name them. So, won't bother with that. Their is not optomism here in the States....none. The carnage done and any damage control may be impossible, now.
I laugh when some talk about deflation not knowing where it leads in hard money value and actual inflaction...the deflation is the decreasing demise of the dollar and worth in purchasing power which directly leads to money printing and inflation.
"The Germans are fiscally responsible as a nation and savers as individuals. That is why they are the backbone of the EU. To call them selfish fools and stupid is a stupid statement. The Germans did not create this massive EU financial problem"
Pickle juice. Germany represented a fellowship called the European Union but under their breath it had an ulterior motive. Only Germany had an Industry base and global reach that could make rigid demands that- if not met- garnered parts for free. Since the establishment of the EU, each non-Germany nation lost nearly 100% of it's economic stability and thus, it's workforce. It's more than a coincidence that Switzerland maintains a robust economy. No one cares about Swiss Made watches but the Swiss watch over plenty of VISA transactions and there remains a huge store of no-tell bank accounts. There is zero difference between non-German nations and the plights of all the other nations of the world including ours. IF things were as they appear, we would not have German made cars at all, there would be no market and Germany would be as idle as a Greek feta factory. Stuff your pride where the Sun doesn't shine and KNOW that we're engaged in a multilayer reprisal of historic bamboozler plots being re-executed by many of the same families we should have executed when they failed with the individual versions. Can you deny Loan Sharking in the Debt Bond fiasco? How about Central Banks and push for a single World Currency? How about Fiat Money Inflation and Inflationism? I do not condemn Germany but when it comes to unbridled greed, they rank pretty high in the hurdle stats. They are also a very stubborn people who will screw us all instead of admitting error and letting a bad course crash and fail. YOU realize that the same people who terminated personnel worldwide are the holders of the debt that escalates because of the massive unemployment, right? If Germany just said "no" and let the EU fail, a lot of well-known families would wind up in jail. I for one, am not interested in selling my great grandchildren out for a few extra bucks in a hyper-inflationary era today. I'd rather cut bait today and attempt to rebuild what we can so there's an Earth for those grandchildren.
Close the banks. End the Fed. Get rid of Wall Street. If you aren't 100% invested in job recovery, you won't be here by New Year.
bond market being the great repository of money that thought the Europeans wouldn't get it together and another Lehman would ensue, except, as the bears always told us, it would be ten times worse than Lehman.
Well if we lived in a true capitalistic, non-government supported (bailed out) market then it certainly would have been 10x worst. We would have had the failure of pretty much every major bank in the industrialized world. This is not a scenario that the average person can understand, the ramifacations this would have had. The illusion of money printing and paying off debt with new dollars/euros fabricated out of thin air seems to fool/satisfy the masses (and Kramer) that everything is okay and getting "better". All this debt has to be payed off with real (if there is such a thing anymore) money earned based on a productive society that produces ideas and things. This cannot happen with high unemployment, especially the levels seen in Eurpore and elsewhere in the world.
Perhaps better days for a few weeks or months, but the $hit will hit the fan eventually. It is inevitable.
The worst is over? The Eurozone is in a heap of trouble. GDP continues to fall. Finland is making plans to leave the Euro. Chinese exports fall from 7% growth to 1% growth.
And America isn't even deleveraging debt like it needs to do. Government Debt is merely taking the place of Private Debt.
And when austerity measures are implemented in the U.S., God help us all.
The Germans are fiscally responsible as a nation and savers as individuals. That is why they are the backbone of the EU. To call them selfish fools and stupid is a stupid statement.
The Germans did not create this massive EU financial problem. Their reckless EU partners, Spain, Italy, Greece, Ireland, Portugal, and France built up massive debt over decades of self indulgent behavior and bad business decisions, and now they can’t pay any of their debts. That is foolish and stupid.
The Germans are being asked to save Greece, Italy, and Spain, while continuing to help Ireland, Portugal and to an extent France. They should take a moment to realize just how serious an impact this will have on their national economy. This is not just a few past due mortgages or credit cards.
Placing the blame on Germany, the frugal savers, is typical of the systemic dysfunctional thinking ingrained on Wall Street. Clearly there are a lot of US Banks that are going to be in big financial trouble if Germany doesn’t act quickly enough for Wall Street.
Mr. Crammer
I some times wonder if you know a hole in ground from a hole in your head. You talk about issues that you know nothing about. You have been a huge downslide since cnbc gives you a place to rant and sell your bad stock off. Please learn what it is your speaking about before you open the other hole in your head which seems to be so wishy washy you end up making no sense at all and talking bs.
It's just killing those on Wall Street that so many of us have taken money out of the market because we are tired of getting ripped off. This guy is no exception. Trading volume is down to 1995 levels.
Europe hasn't solved their problems. They have issued new debt to replace old debt. This country hasn't done anything to fix our fiscal problems either.
Eventually these problems will come to roost. No one can predict when the tide will wash us away but that doesn't mean it is not coming. I'd rather risk not getting any sort of upside to avoid losing everything I have worked for 30 years.
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