Put Europe back on your radar

US investors should be on alert again after statements from the ECB.

By Jim Cramer Feb 11, 2013 10:18AM

thestreet logoEurope Photodisc SuperStockYou 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

Feb 11, 2013 12:05PM
For several months the market had this gloomy complacent feel to it.  Then we had a few weeks with a little glint and sparkle and now back to the complacent gloomy feel.  Any new products being introduced?,  Any new processes being introduced?, Any new ideas on managing the economy?.  No to all three.  We are in a funk plain and simple.  We are being held in check by the Fed, the do nothing DC crowd, and a world economy harnessed by debt and confusing politics.   I  see nothing new and dynamic on the horizon to be excited about.  All we hear from the DC crowd is we should or we are considering or we will talk about it.  There are now zero zilch decisions coming from anyone anywhere to change or improve anything right now.  So what are we waiting for? We need a cause  America.  The subject of our economic future is not being talked about by anyone in the Senate, Congress, or the liberal media.  Gun control?  What does that do to put food on the table?  It seems avoiding the issues is the best business practice for this lot.  And like a cancer when you avoid dealing with it it only gets worse. Very sad and the only question I can come up with is Why? 
Feb 11, 2013 1:04PM
So all of a sudden any U.S. business that has European business the Red Flags are going up spelling Trouble, Trouble.  Put Europe back on your radar people.  And guarantee you W/S will fall hook, line and sinker on any news that will drive sales. In the movie Trading Places Ralph Bellamy who played Randolph Duke, said whether our clients make money or lose money, Duke and Duke get the commissions. And the real clincher was when Billy Ray Valentine said sounds like you guys are a bunch of bookies.  Does this describe Wall Street?  So, place your bets today you ignorant investors.  As long as there is any news of any potential problems that Wall Street thinks will influence the market or that they will make sure influences the market, bet the ranch on it.  And if you lose, does Wall Street care, No, because they got a commission from it!!!!!!!!!!
Feb 11, 2013 12:42PM



It strikes me that the oil & gas fracking phenomenon could give our economy and job situation big lifts.....no thanks to the current administration.

Feb 11, 2013 3:44PM
I think we are seeing the really bad side of guberment and business now.  They are going to tax, extract, sue, manipulate the citizens  to get what they want to continue what they want to do.  They in my opinion are no longer  concerned with how the citizens are, but for how they are, and maintainining what they want.  From the federal down the line to the local the taxing going on right now is bordering on criminal.  We have school zone traffic traps netting millions, we have parking policies in local cities and towns in aggression mode, we have utilities raising their fees at close to double digit amounts with no clue or care as to the plight of the citizens.   The gasoline retailers same thing. And the Internationals and their fake customer service policies are no better.  Try the customer service of one of the megaliths.  From the airlines, cable companies, banks, and on and on.  The compression of this economy is continuing unabated for the masses.  Of course those with an interest like the media outlets refuse to recognize what is going on.  No entity is going to say yes we are  going to continue raising rates because we can and want  to.  Survival mode is a tough one to roust people out of. The thinking that is now becoming ingrained  is frightening.  But in my opinion that is what many organizations, both public and private, are now experiencing..  JMHO
Feb 11, 2013 1:15PM
Draghi is there to drag, we all know that. But the deterioration in people´s lives, with unemployment in Spain at 26%, officially, and more than half of the young job seekers not finding any jobs, the most critical countries will soon decide to create their own currencies again, even if in parallel to the euro. This is the new trend, and a viable "solution" to the difficult task of leaving the euro.  
Feb 11, 2013 12:48PM
So USA printing money, Japan printing money, looks like soon Europe will be printing money.  Seems pretty inevitable that commodities and precise metals will rise again.  Hopefully we don't have another 2008 with insane oil prices, though demand for it and plenty of supply certainly don't support it.  Guess Euro play if off.
Feb 11, 2013 1:43PM
Cramer, we should study Europe to better understand how the US will look in a few years.  The Obama folly continues to destroy economic growth and prosperity.  Only Obama and the media could couch prosperity as moral decay.
Feb 11, 2013 1:55PM
No real shocker this monday morning, once again very low volume and plenty of manipulators so we are dropping slowly but surely...We knew and warned that they would come out with guns blazing today and that's what they are doing...We tried to stage a rally but at 1230 hrs they called to accelerate so we are dropping fast again....Three long hours still to go, we will see what happens...More later.
Feb 11, 2013 5:21PM

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. 

Feb 11, 2013 11:06AM

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. 

Feb 11, 2013 8:04PM

All you Republican, Libertarian and Teabagger imbeciles wanted free markets, free trade, Capitalism gone wild, unregulated everything and rampant Anarchy,.... YOU GOT IT!



Feb 11, 2013 1:43PM

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.

Feb 11, 2013 2:06PM

Cat/Limo.....Pumpkin Fight;   Limo/Blond.....Pumpkin Fight....Here we go..!!


Kramer's Army on one side.......BoBo shooters on the other....Yea !!

Feb 11, 2013 4:59PM

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... 

Feb 11, 2013 5:55PM

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.

Feb 11, 2013 4:47PM
that's what they'll find when they have their heads so far up their ...
Feb 11, 2013 1:37PM
Just look at Germany, Norway and Switzerland just to name a few and their thriving economies, and Universal healthcare, and low crime rates, and so much more.




Long live Christian Socialism!

Feb 11, 2013 11:14AM

Steve...I'm assuming you wont be staying there...??


Not another job that the States lose to Foreign placement..?

Feb 11, 2013 2:25PM



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.

Feb 11, 2013 1:36PM



Yeh and APPL just marketed another telephone.


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