What's holding Euro stocks up?

There are enough people out there who think the ECB can be like the Fed.

By Jim Cramer Jul 30, 2012 10:09AM

How can European stocks be at a four-month high? How can Italian 10-year borrowing costs come down so quickly to 5.5%? Is there any real individual or bank buying them? Is that all short covering? Hedge funds getting in ahead of ECB bond buying?


If everyone is suddenly buying these stocks and these bonds, is there any reason to believe that things are getting better? Or is this one of those moves like we have had before -- think LTRO -- where the buyers are saying "things aren't getting any better at all, but I better buy something just in case they say something positive on Thursday again?" Is it that same kind of LTRO-related buying where you could make a lot of quick money and then depart just as fast?


I think all of these questions can be answered in one way: things are getting worse in Europe, not better, and you are buying for only one reason, which is to play a rally that you think can go on longer this time because it looks like the discord/dysfunction part of the crisis is now over.

And if that part is over there are enough people out there who think that the ECB can be like the Fed and buy bonds until rates go lower and the natural course of things takes over.


Think about the latter. That's what has happened here. What's turned here? Autos turned because people, eventually, need to buy new cars and our fleet is the oldest -- still -- that it has been at 11 years. That mattered because not long ago we were selling only about 60% of the cars we are selling now.


What else?


Housing turned. There are still plenty of people who don't believe that housing turned. I do not know what figures they are looking at. We know from the PREPONDERANCE of data from Zillow, the NAR, the homebuilders themselves and the banks' balance sheets that the number of foreclosures peaked a long time ago, the inventory is almost all worked off of USABLE houses, the household formation, while not back up yet, has stabilized and the apartment building that's going on is frenzied to meet the demand that people have for reasonably priced places to live.


In other words, the pent-up demand for new homes is finally so great that it is being reflected in the buying figures, not the building figures. We are still building about half the single family homes that we build in a decent year until the crisis. But the existing homes figures are robust and are being kept down by a LACK of inventory, another data point people seem to leave out when they make the negative case.


Back to Europe: property is at the base of all the woes there. The lending has dried up because their best banks are where our worst major banks were in the crisis. Except our banks never owned really bad sovereign bonds, they just owned really bad mortgage bonds.

If you can get the sovereign bonds off the balance sheets over time and you get enough time to pass where you have the same kind of turn we had, then you can get out of the mess. Worked for us. It can work for them.

The problem was that when we got to the bottom -- March of 2009 -- there was nothing that showed we were at the bottom. But if you bought you made fortunes.


I think that a lot of people think that's where we are in Europe, a bottom like 2009 in this country. It is a huge leap of faith to believe that.

But that's what I see is happening based on the end of the discord and a belief that long-term solutions can work out now that austerity has been put through and the nations are united to save the euro.


It is a stretch.

But was there a bigger stretch than we had in this country in March of 2009?

I am not sure if we are at a bottom there or not. I don't have to think about it like that because there are so many ways to play the parts of our economy that are rebounding.


But it's a rebound trade that's working in Europe right now based on BOND YIELDS. And as long as the yields are headed lower for the periphery nations we can go higher there and therefore here.


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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Cramer you are so wrong about housing.


The reason new house sells are having increased $ is that the high end is the only place growth is happening the over $500,000 house sales are up like 27 percent.


Only the rich are buying new houses and they are not buying cheap $200,000 houses but $88,000,000 penthouses in New York. Of course new house sells are going up the super rich don't care about the money as they will just tell Bernanke to deposit another $1 trillion dollars in their bank accounts.


And the European stocks are up just like American stocks Bernanke is printing money and loaning it to Wall Street bankers at zero percent and they in turn are putting 3/4 of the money into their personal accounts and buying stocks and US T-bills with the rest.


The US economy is in total ruins and you say housing is making a come back you are so far removed from reality it is not even funny.



Jul 30, 2012 2:15PM
Cramer: What's holding Euro Stocks up?

Answer: Fake US Dollars.

No matter how you assimilate them, every EU nation rose from an independent culture that is still alive and thriving in sub-economic activity. America through Wall Street has 2/3 of our currency in bonds that will never pay, just decay. You went to Harvard. The first thing commonsense dictates about investing is-- if it has a front door, make sure it doesn't have a back door. What particularly was the collateral for all those bonds, Jim? Bonds... you know- a purpose and promise with fulfillment in the end. What was the purpose, who backed the promise? No one did. 100% of our debt buried in Europe is owed. It's why we endured QE 1 & 2 and now perhaps 3... because all that complex financial instrument hokum got tricked at the most fundamental of levels.

Close the banks. Reconcile. I promise you, I am correct. Get GITMO ready. 

Jul 30, 2012 12:36PM
us fed is proping euro stocks up cant anyone see this. put the banker ceo's in jail. and put a 0 intrest on the housing market until the economy settles out. i know its a band aid but consumers will spend more if they know there bills on morgatge is getting paid off
Jul 30, 2012 12:43PM
well yea cramer is a lame duck, why do you think he is a showman instead of a trader. u look at his show. hes all act now.if he told the truth he would be ousted from the media.
Jul 30, 2012 3:22PM
Forget the housing market. If the statistic that 50% of those working are working for $10 dollars an hour or less is correct that means that 25% are working for $15 and hour or less. You can not afford to purchase a new home unless we are going back to sub prime mortgages. Hopefully this is not what is happening but it would not surprise me as the banksters know they can get away with anything. 
Jul 30, 2012 1:25PM

those who can ..........do

those who can't recite history and sell advice

Jul 30, 2012 1:49PM

getting up early and reciting what has already happened does not constitute rigor


telling people alcoa was the BEST dow stock of 2011 at 18 constitutes downright fraud

Jul 30, 2012 1:26PM
this scumbag brags about how bad he treated his employees at his bust hedge fund
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