Put Europe back on your radar
US investors should be on alert again after statements from the ECB.
You can't ever be complacent about anything as big as the still-wrenching economy that is Europe. I have said all year that Europe is not affecting us so far, that the measures put into place by the European Central Bank last year are working, meaning that Europe has shown a degree of stability that is welcome. I didn't want anyone to sell our stocks because of the declining economies there, notably Spain and Italy, as well as the potential for a real plunge in France.
That has been the right call so far during this bountiful start to 2013. In fact, it's been the right call since the summer, when Mario Draghi, the ECB chieftain, said he would do whatever is necessary to preserve the currency union.
Now that free ride looks like it is ending. Draghi talked about how the euro is too strong and how it is hurting European competitiveness. He did not, however, cut rates, taking back the second of two rate hikes that his predecessor, Jean-Claude Trichet, mistakenly put through since the financial crisis erupted in 2008. Oh, and I use the term "mistakenly" because I am trying to be a diplomat. It was a disaster.
By acknowledging that the economy is staying weak but not cutting rates, Draghi succeeded in only freaking out the world's markets -- our futures dropped precipitously after his statement. At the same time, he did get the euro down against the dollar, something that is not welcome for U.S. companies that have emphasized selling product in Europe in the last decade but is certainly welcome on the Continent.
Draghi's negative statements amount to an investing clarion call to put Europe back on the map of worries, even as we heard recently from a host of U.S. companies that Europe has started to stabilize, although it is a decidedly mixed picture.
Last week, for instance, on the fourth-quarter conference call by the tremendously successful retailer Ralph Lauren (RL), we heard that the U.K., Germany and Scandinavia are all improving. But the company noted, pointedly, that Italy and Spain remain weak. We also heard last night from the worldwide news and entertainment giant News Corp (NWSA) that its Italian business is soft. Heaven only knows how weak Spain, which has massive, Depression-style unemployment, really is. There's certainly enough weakness to merit a rate cut, but we now know we aren't getting one anytime soon.
So what happens next? We know the multinationals will take hits again, as will the financials, such as JPMorgan (JPM) and Morgan Stanley (MS), that are tied into Europe. That's what happened before, and it is happening again. But because the statements Draghi issued were so frightful, we know that the whole market has to come down first. We see the old Standard & Poor's 500 indiscriminate knockdown of companies that do business in Europe and companies that are 100% domestic.
Perhaps the best thing to do right now is to default to what happened in the tail end of the crisis, when the U.S. stock market was able to distinguish our domestic economy from Europe's domestic economy. That means the housing plays, including the retailers, would be places to go, as well as domestic health care companies that are also pulling back.
I am advocating that after being able to avert our eyes for some time, we now have to keep one eye on Europe again, while the other eye can be on domestic opportunities. You simply can't be as aggressive now as you might have been in January, given the run we have had and the ongoing ineptitude of the European financial and political leaders, who always seem to find a way to screw things up.
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 and is long NWSA.
More from TheStreet.com
It strikes me that the oil & gas fracking phenomenon could give our economy and job situation big lifts.....no thanks to the current administration.
Fracking has really yet to be determed whether or not, it's destroying the Geological Layers..Where it is being use...?? It is done quite deep below the Earth's surface...About a mile or so, and leaving NOT "big hollowed out caverns" for the surrounding territory to fall into..
It is cracking smaller fissues for NGas and oil to escape from heavely bound BedRock..I think mostly NGas...??
I might be a little un-nerving to People that live close-by...But then again many are paid well for the leases and mineral rights that are being utilized and extracted..
The surface water and run-off are probably the biggest worry...
NO NOT TRUE...It is providing "thousands" of NEW JOBS...With work within the Industry and other Spin-offs in the surrounding areas...Whole NEW towns are springing up, In the upper Midwest
And high paying jobs can't even be filled in some areas...And Basin areas..
Including the Midwest, a little Out West and back East in Pennsy,Ohio and some of the upstate Regions..
There will also be "pipeline jobs" coming on board to transport product.
We wanted off the "oil teat"...But we try and stymie it at every turn..We can't have it both ways.
AND NOT TRUE....Obama, has allowed more drilling, leases and fracking then the Bush or Clinton
Administrations together...Try reading and keeping up to date on some of the stuff going forward.
next week i'll be in the london area training to take over the job of my counterpart over there.
we're shutting down that design and manufacturing facility. it's not big, not small, but unnecessary to the business plans.
my counterpart is telling me small and big businesses are shutting down all over england. sad. the same thing continues to happen in usa.
All you Republican, Libertarian and Teabagger imbeciles wanted free markets, free trade, Capitalism gone wild, unregulated everything and rampant Anarchy,.... YOU GOT IT!
NOW GO DIE YOU GOD HATING, ANTI-AMERICAN MOTHER PHUCKING AYN RAND WORSHIPING IMBECILES!
christian? are you living in the flat earth dark ages? educate yourself........all ignorant people think THEIR god is true while everybody elses god is fake.
Cat/Limo.....Pumpkin Fight; Limo/Blond.....Pumpkin Fight....Here we go..!!
Kramer's Army on one side.......BoBo shooters on the other....Yea !!
NTU......Sorry I haven't NOTICED the markets being "complacent or gloomy" since early 2009..??
Or as some might say since Obama has taken office...I tend to agree.
I also agree TARP, all the QEs have also played into the game along with cuts in employment in some locations...And inventory built as needed..The Recovery was under way !!
Apple as far as new products along with others, Defense sector "was" humming right along..
Housing has picked up, in several areas; Along with "new products" and increases coming from the Auto Manufacturing Sector...Decent sales in the Pacific Rim areas.
Retail such Home Depot, Lowes, Menards and others doing fairly well..
New products and "pipeline products" in the Bio-Tech and Pharma World..
Sorry but it is quite hard to fault some of the "Warm Hard Facts", that I am seeing...
Kind of getting bored with MSN...When they have about 5 Articles "mentioning or touting" APPLE
(APPL) on the Front Page articles...
MSN...Maybe you need to put some "new writers" on Staff that are over 40-50...??
You are losing readership....And commentors.
WHAT A PARADISE!
Long live Christian Socialism!
Steve...I'm assuming you wont be staying there...??
Not another job that the States lose to Foreign placement..?
Fracking has produced economic and job growth where it is being practiced .
...and we have and will continue to spend less for imported oil.(Implying a net positive economic impact.)
...and may/will export LNG
...and before I forget, no thanks to the current administration.
Yeh and APPL just marketed another telephone.
Just anothser process!
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
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.