European Central Bank drops the ball

Poorer countries like Italy and Spain need to know there's a backstop as they adopt austerity measures. And bond investors need reassurance.

By Jim Cramer Dec 9, 2011 9:59AM

Image: Euro bank notes, close up, soft focus (© Robert Kohlhuber/Photodisc/Getty Images)

the street

Still reeling that the European Central Bank didn't do more. Reeling that they didn't understand that the sovereigns need help in return for the austerity they have to administer to their budgets.

 

Yes, these poorer countries like Italy and Spain have spent too much, have profligate welfare states and have let others pay for their errant ways, but if they are going to continue their belt-tightening austerity ways, they need to know there is a backstop. They need to know there is a rescue or else it isn't worth it and they will just risk going under.

 

No wonder, after all the tremendous bond advances in Spain and Italy, they got killed Thursday. Those who bought those bonds believed, reasonably, that the ECB would stand behind them.

 

Lost in all of this is that the governments in Europe had begged these banks to buy this debt not that long ago. That doesn't absolve these banks from the reckless borrowings they made against them. It doesn't absolve these banks from their moronic risk controls and their inability to take losses. Nor does it absolve the authorities from demanding capital raises earlier. Thursday's announcement that the banks have to raise 115 billion euros seems too little, and for some, too late.

 

Related Articles

Everything was going right early Thursday morning. Copper was rallying off the idea that there might be some pro-growth initiatives out of Europe beyond the rate cut we got.

 

Gold (-GC) was rallying on the supposed knowledge that the ECB would print euros to backstop countries. The CurrencyShares Euro Trust (FXE) was moving up in recognition that the euro would be saved.

 

Then everything reversed. Copper slowed, FXE went the wrong way. And gold showed that the ECB has taken a deflationary course, the opposite of what is needed for equity markets.

 

jim cramerJim 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.

13Comments
avatar
Crammer you did not do your homework. THE ECB by law can not bail out European governments in debt trouble. THE FOUNDERS OF THE EU thought this would keep member countries from going heavy into debt. 

No wonder, after all the tremendous bond advances in Spain and Italy, they got killed Thursday. Those who bought those bonds believed, reasonably, that the ECB would stand behind them.
Dec 9, 2011 12:10PM
avatar
crooked .............but stupid enough to think he is good
Dec 9, 2011 12:12PM
avatar
MSN...........PLEASE DUMP THIS PITIFUL ACT
Dec 9, 2011 2:22PM
avatar
goldman does a great job of grooming crooks. many of their graduates end up on cnbc to receive upper level degrees in being political hacks and shills for anything rich. Buy American and support our Troops.
Dec 9, 2011 4:06PM
avatar
Cramer's hypocrisy is too much to bear. The ECB should print Euros in order to "backstop"  (subsidize) banks who made bad bets. So should we assume he thinks "Helicopter' Ben Bernanke should print dollars and give them to poor and suffering Americans, instead of wealthy banks such as Goldman Sachs, Citigroup, Bank of America, etc...?? Of course he doesn't. Backstops go to only the well off. The rest of us are on our own.
Dec 9, 2011 1:56PM
avatar

Buying those bonds is like buying a black and white TV with the promise from ECB that it will turn in a colored one; maybe, but are you still alive to see it? I still think like… never. To reduce a deficit of over 1 trillion by doing cuts that in the end are still increasing you debt but slower is brilliant. I like when the market goes up because the politicians think of doing something or having a decision that in the end does not solve the root problem. Keep up the good work everybody!

If you have been thought by a university economic laws that bring nations and market like now then do not expect much.

Dec 9, 2011 12:57PM
avatar

Hey cramer... 

I don't know if you heard.....the Beatles are thinking about breaking up!

 

Your always a day late and a dollar short!

 

Dec 9, 2011 12:02PM
avatar

dupont.......another gap down pick from the rigor and homework of

the pump and dump unfunny clown...........his owners may be giving him

even more air time

Dec 9, 2011 4:49PM
avatar
THE MASTERS COMMAND AND THE UNFUNNY COMIC PUPPET DANCES
Dec 9, 2011 2:01PM
avatar

Jimmy : I read somewhere that first impressions are vital in business , but you have put some serious holes in this thought process for me , Really Jimmy, look at your mug shot here , you have the smirk of a shady person . When I see your actions on TV I ask my self, how did he get that job .When I here you speak you remind me of a pitchman selling vitiams on some infomerical.

 Your like a bad show that does not get cancled , there is kno logic here .A couple bright spots I see is ,your pundent Buddys are just as bad,or worse and there is a little bit of entainment value in what you do

go jimmy go hasta nunca

Dec 9, 2011 3:34PM
avatar

every time this clown touts his "thesis" of homework,rigor ,and high yield please

remember the following facts:

 

NOBODY can legally know if the books are accurate or the yield is safe so gambling on individual stocks is VERY risky

if you have an opinion , etf's offer instant exposure and instant diversity long or short

and can be hedged using options

 

PS......THE UNFUNNY COMIC WHINES ABOUT THESE ALL TIME TIME SO YOU KNOW THEY ARE GREAT

Dec 9, 2011 3:15PM
avatar

the unfunny comic isn't compltely without humor....witness the following jokes that he

performs over and over:

 

dupont....RIGOR, HOMEWORK, PROTECTED BY HIGH YIELD

 

NO

 

JUST ANOTHER GAP DOWN BLATANT PUMP AND DUMP......HA HA HA HA HA

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123
123 rated 1
262
262 rated 2
480
480 rated 3
651
651 rated 4
649
649 rated 5
629
629 rated 6
616
616 rated 7
496
496 rated 8
346
346 rated 9
111
111 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION9
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.