So, the EU Bailout Doesn’t Matter?
How could the market close down on Tuesday after nearly $1 billion was committed to the debt crises in Europe? Investors would have to believe that the bailout didn’t matter at all, Cramer said during Mad Money.
He’s not sure how anyone could come to that conclusion, though. Not after the European Union and the International Monetary Fund took radical actions to stave off the Greek, Spanish and Portugal debt contagions that threatened the Continent and hurt stocks across the globe. Still, he hasn’t seen one article yet that suggested the aid package would work. Was $1 trillion not enough?
Cramer chalked it up to bears looking for any excuse to dismiss how important this past weekend was to Europe and the markets. And while he could possibly see the logic in one of their arguments – that these countries won’t change their free-spending ways – that’s not a concern with the IMF involved. He called the IMF “the grim reaper,” saying that a country taking money from this institution gets its house in order, stat. So the cuts, the austerity, they will happen.
That’s why Cramer thinks this bailout is “the real deal.” It takes large European bank failures off the table, and it takes enormous pressure off the American markets. Remember how many investors thought the Dow deserved to be down 1,000 points last Thursday? This rescue plan changes their outlook.
There’s been a lot of talk about China and gold prices, too. But Cramer doesn’t think we should be worried about them either. China’s property values are too high and real-estate building is overheating, but the Chinese Communist Party has turned out to be pretty good capitalists, which is why Cramer’s confident they’ll keep that market in check.
At the same time, gold hit a new high of $1,219.90 on Tuesday. But that’s a good thing, Cramer said, because it means we won’t be crushed by deflation.
With these problems in their proper place, investors can focus on the much stronger US economy. Housing prices are appreciating, employment is improving, and corporate balance sheets are in great shape. There are a number of reasons to be bullish on American stocks.
Of course, that doesn’t mean you buy right here, though, Cramer said. After Monday’s 400-point run, investors should avoid paying up for or chasing stocks. Instead, they should buy on the dips and use any rally as an opportunity to sell the companies that they don’t like. That and keep an eye out for accidental high-yielders.
Admittedly, things aren’t perfect, Cramer said, and they’re not solved. But they’re not nearly as dangerous after the EU bailout and the IMF’s involvement. He urged viewers to stop thinking of the US as a Third World exporter of goods and start recognizing that it’s “more of a First World locomotive when we get it right.”
“And I'm tellin' ya, we are getting it right,” Cramer said.
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