• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Markets

Put Europe Back on Your Radar

Today's statement from the ECB tells us that U.S. investors should be on alert once again.
By JIM CRAMER Feb 07, 2013 | 12:17 PM EST
Stocks quotes in this article: RL, NWSA, JPM, MS

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. This morning, 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 this morning 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.

Just yesterday, 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. Today we are seeing 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.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long NWSA.

TAGS: Investing | U.S. Equity | Markets | Stocks

More from Markets

Doug Kass: It Is Time to Take Aim Against the Growing Bullish Sentiment

Doug Kass
Jun 10, 2023 1:49 PM EDT

Just as it was in rejecting the overwhelming negativity in late 2022...

3 High Dividend Bank Stocks With Safe Payouts

Bob Ciura
Jun 10, 2023 9:00 AM EDT

These regional banks offer above-average yields and reliable dividends for income investors.

FS Insight Weekly Roadmap

Tom Lee and the FSI Team
Jun 10, 2023 8:00 AM EDT

Stocks Officially Enter New Bull Market

The Potential for a Market Correction Is Increasing

Guy Ortmann
Jun 9, 2023 10:00 AM EDT

Here's why we think a more defensive approach is appropriate now.

Japan's Stocks Weather Bumpy Week to Star in Asia Again

Alex Frew McMillan
Jun 9, 2023 8:50 AM EDT

Japanese equities appear to be moving "for no discernible reason" but have rebounded after two sharp days of losses and look set to sustain their gains.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:45 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Bulls, Bears, and Market Predictions
  • 11:31 AM EDT CHRIS VERSACE

    We're Adding to a Position on Weakness

    Check out what's going on in the Action Alerts PLU...
  • 07:19 PM EDT CHRIS VERSACE

    AAP Podcast: This Company Is Not Going 'Solo'

    Listen in as I talk with the very diversified Solo...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login