As Europe goes, so do we

Our rally is based on the European stock rally, which signals the worst is over.

By Jim Cramer Aug 17, 2012 9:59AM

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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34Comments
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so the European crisis is over???

 

Cramer you are just about as far from reality as the prices on the stock market are right now.

Aug 17, 2012 10:44AM
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Who's Kool Aid did you drink this week? We're not better, Europe has solved nothing and the whole planet wreaks of financial manipulation. Name a stock that actually has relevancy today? There isn't one. Platform businesses with huge hoards of cash, no employees, who import, and operate just like the cardboard financial houses on Wall Street are NOT good for America. In fact, they are ANTI American. Please don't pump articles out to appease corruption.

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 the New Year. Where do you go once you've screwed the whole world?

Aug 17, 2012 12:27PM
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Spain, Greece, and possibly Italy are in a death spiral.  They are taking loans out to pay interest.  This is resulting in them taking on more loans while accruing more interest.  Things are really looking up for the Euro.  Plus Finland is preparing for the break up of the Euro.  Clearly they know more than you about the Euro situation.

Secondly the US stocks have been climbing the last month in hopes of the Fed starting QE3.  So the numbers are not based on Fundamentals but instead on hope.

My last point is that FB makes me know things are not right.  Initial public offering put their value at approximately $100B!  Now they are at around $50B.  Really?!?!  Who is going to play in this market?  Clearly no one and that is why the volume has been so low lately.  Corruption!  
Cramer you do nothing know nothing only exist to promote this corruption. 
Aug 17, 2012 11:21AM
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Cramer, you have been saying this for years.  Some day.
Aug 17, 2012 3:32PM
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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.

 

Aug 17, 2012 1:01PM
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Wow Cramer, what did you have for dinner last night? Thats the biggest pile of crap I've seen in a long time!
Aug 17, 2012 1:13PM
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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.

Aug 17, 2012 11:44AM
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WOW Jim, you must have found grandpaws old burried P.A. can filled with wakko tobbaco & dusted with PCP, b cuz of the way you wrote this BS story, LMAO! If you think we all believe this, you are subject to falling of the fisical cliff we all hear about on a daily basis, thats coming to the USA by years end! I think you need to take a real, real  long vacation & get your head screwed back on straight brother man, LMAO!!!!!!!!!!!!!
Aug 17, 2012 12:26PM
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"In other words, our rally is based on the European stock rally, which signals the worst is over." - Bobo

 

   Wrong. Our rally is based on fraudulent large scale automated algorithmic trading done on a daily basis by a bunch of computers on Wall Street owned by the banks and the major financial institutions.  More than 80% of all the trading on Wall Street on any given day is being done by these computers.  Real investors left years ago.  China just recently got out of our stock market once they realized it was totally rigged by the banks.  If Bobo is writing crap like this it can only mean one thing:  the collapse is coming soon and this con artist for the banks wants to get as many suckers back into the market before it does.  Remember this quote from Bobo a couple of  months from now when the global financial system completely unravels.  Get your money out of the stock market. Buy tangible things - commodities, real estate etc- and don't listen to this crook. 

Aug 17, 2012 1:20PM
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I just got a hot tip that i wanted to share. There is a new company soon to be offered on the penny stock market. I don't know if any of you have heard of it but I believe the name is Facebook (or something like that). Apparently it's supposed to be a sure thing!
Aug 17, 2012 2:46PM
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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.

Aug 17, 2012 2:27PM
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Question: Has Cramer EVER made a good call?

 

 

Aug 17, 2012 1:19PM
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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.

 

Aug 17, 2012 2:36PM
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The Germans are stupid selfish fools, and fickle as well you say?  I would say they are one of the few responsible players left.  Cramer had fun, fun, fun till the Deutsch took the T-bird away.
Aug 17, 2012 2:04PM
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Jim... at least two nations aren't recognizing the value of our Dollar today so no exchange rate. It impacts exports and logistics. how can you say things are improving here and over there when it's obvious that we aren't going anywhere good.
Aug 17, 2012 12:32PM
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Really, consumer confidence up?  Let's see, I know of one kid who got a low paying job, 7 adults who are long term unemployed and can't even get an interview these days, and one adult who is working but looking because she may lose her job.

 

Oh yeah, we can all see how consumer confidence would up, even when we walk through the store and shoppers with nothing but empty carts but the returns desk is full up.

 

And, how about writing some real news about what's happening in Europe?  Is it breaking up yet?  After all that is what economists have been predicting over the last couple of months.

Aug 17, 2012 2:26PM
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Cramer... the bald eagle!

 

What a joke...

Aug 17, 2012 11:51AM
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As Boehner would say, "I'll drink to that."
Aug 17, 2012 3:29PM
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I am awaiting the big market burst. It is going up as the big boys like it and then they sell out from under us. They make a killing and we lose our donkeys. The oil market is the biggest one that they play on. Speculators and wall streeters love to take our money from this. I guess we are stupid enough to let them take it. I wonder if Cramer is one of them?
Aug 17, 2012 3:43PM
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 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. 

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