What Greek Debt Really Means for US Stocks
Who would have guessed that Europe’s debt troubles would provide a better chance to buy stocks on the cheap than health-care reform in the States? But that’s just what happened on Thursday.
European Central Bank President Jean-Claude Trichet said that going to the International Monetary Fund for help with Greece’s debt load was “very, very bad,” Reuters reported. But the comments came just as Germany finally agreed to aid the Mediterranean country, though only if the IMF was involved. The news pushed the US dollar higher against the euro, and that sent American stock prices in the other direction.
Cramer admitted that a rising dollar does hurt US exports, but not enough to counter the positives taking place right now. He likened the market’s reaction to the sell-off we saw two days before Sunday’s health-care vote, which was followed by a rebound in stocks on Monday. Investors seem to be discounting a number of, well, sound fundamentals. Fundamentals so sound, in fact, that they should protect us against the debt drama taking place across the pond.
The first is employment. A better-than-expected jobless claims report today could mean a strong hiring trend in April, especially when you consider all the newly recruited census workers. And, as Cramer has been saying, job creation is essential to fighting everything from credit-card debt to housing foreclosures.
Also, what does Greece have to do with Best Buy’s great quarter? The retailer today said that all product categories were strong. That ripples out to include a number of different industries, including computer-related names like Hewlett-Packard and Microsoft , cell-phone parts makers Skyworks Solutions and Qualcomm and television plays Corning and Sony .
And if Best Buy is doing so well thanks to a resurgent consumer, then shouldn’t that translate into good numbers for Macy’s , J.C. Penney , J. Crew and Polo Ralph Lauren , too? Cramer thinks so.
Then there’s Boeing’s growing orders book. That, too, affects a host of related companies, such as Honeywell International , Alcoa , Precision Castparts and others.
Don’t forget the banks, either. US banks, barring Citigroup , are purely domestic operations now, having sold their international assets. That leaves little exposure to Greece. Also, Cramer said we’re seeing a peak in unemployment and bad loans, which is why Bank of America , Wells Fargo and much of the rest of the group are doing so well.
Lastly, there’s tech, a sector in which the US holds the edge. Cramer said he can’t recommend selling Oracle , Cisco Systems or SanDisk because Greece, representing just 2% of the European economy, is struggling.
The market may stumble on disappointing news from Europe, but things seem too good right now to expect more than that. Because if health-care reform couldn’t hurt the stocks Cramer mentioned tonight, then he doubted the Continent’s debt would affect the price-to-earnings multiple of Qualcomm or the earnings book of Boeing.
“And that,” Cramer said, “is what determines what goes higher and what goes lower.”
Cramer's charitable trust owns Bank of America, Cisco Systems, Honeywell International and Qualcomm.
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