US, Not Europe, Finally Drives Markets
In trading Tuesday, stocks turned around following news the Obama administration will work with Republicans on the tax dispute and an extension of unemployment benefits. Even though stocks failed to end in positive territory, Cramer is happy that news out of the US—not from Europe or elsewhere—was what was driving the markets.
It's about time, Cramer said, that investors aren't distracted by problems around the world.
For example, the markets dropped every time the US dollar went higher in the past few weeks. The relationship between the dollar and the euro is getting so much attention, it's obscuring positive earnings in the US, Cramer said. It also blinds investors to the prospects of individual names, like Cramer fave Baldor Electric, which got a sizable takeover bid on Tuesday. Had you been worried about the greenback, you might have missed this 40-percent gain.
Why is there so much attention being placed on the dollar, the euro and Europe in general? Cramer said it's because hedge funds are shorting the stocks and bond holders of numerous European countries, as a way to save their 2010 performance. As these money managers try to break the euro, Cramer said our stocks get crushed.
Macy's, for example, can take advantage of a stronger dollar by sourcing more cheaply overseas, but it, too, got hammered. Restaurants benefit from the lower oil prices that are caused by a stronger dollar, but they're also getting slammed, even though the restaurant business is flourishing.
"But today that dollar-stock market linkage, it cracked midday," Cramer said. "While we don't trust Washington, all it took was a picture of Obama on the screen mentioning compromise to send the market rocketing higher like liquid oxygen from the tail of a rocket."
The hint of any kind of clarity on taxes was reason enough to get back into the markets, Cramer said. So, too, is the possibility of government spending to extend unemployment benefits. Being as government spending weakens the dollar, the hedge funds are buying stocks, not selling them. A sign of positive news caused the markets to make up some of their losses.
Positive thinking, said Cramer, is just what's been missing lately.
"I am seeing a stunning lack of traders who are willing to make a bet on any good outcome in Spain, Portugal, Ireland, Italy and now even Belgium," Cramer said. "Everyone believes it is obvious that the worst must happen."
But when something is obvious to everyone, it's almost never right, Cramer said. That group-think negativity was proved wrong on Tuesday and Cramer hopes it won't continue to work.
Call Cramer: 1-800-743-CNBC
Questions for Cramer? firstname.lastname@example.org
Questions, comments, suggestions for the Mad Money website? email@example.com