Thank you, Larry Summers, for bowing out

It's time for a Fed peacemaker, not a rabble-rouser.

By Jim Cramer Sep 16, 2013 9:25AM

thestreet logoCould people be more poorly positioned for this trade of Larry Summers' exit from the Federal Reserve chief race? You would have to have been long everything that had previously seemed like a logical short: regional banks, mortgage insurers, homebuilders, home suppliers and home-related retailers -- everything that was doing poorly and could have been expected to do even worse under Summers.

 

It's a nightmare for the hedge funds. It will require massive covering. In the meantime, everything that could have been expected to work for lack of anything to do with the housing market will become a source of funds when the futures gaffe the market with their power.

This one could not have been gamed. You didn't think that the Senate Democrats would break ranks with a tone-deaf president who seemed totally unaware of how divisive Summers' candidacy would be. Plus, did he not know that Sen. Elizabeth Warren (D-MA) was going to run a one-woman pillage of the former Harvard president who has been scorned by women of all levels, particularly former faculty members like Warren? Did Obama not know how Summers was regarded as a deregulator who got us into this mess, or someone who favored financial engineering above all? Summers was also allied with the banking universe post-White House, which seems to be hated now more than ever.

 

Federal Reserve Building (© Hisham Ibrahim/Corbis)This candidacy -- which required Summers to bow out in order to save the president some political capital and avoid gut-wrenching hearings -- was so ill thought out by the president that one can only wonder how horrendous the battle will be with the Republicans in a few weeks. It revealed the president as being uniquely out of touch with what Congress and the people want out of a Federal Reserve chairman -- which is exactly what they currently have: Ben Bernanke and his pro-growth policies. Summers stood for what the Tea Party wants without having the Tea Party's political bent. He would have been a lightning rod when what's needed is a peacemaker.


I know that Janet Yellen is now the putative front-runner. However, any president who had favored Summers has to have great antipathy for Yellen, because she's from the Bernanke school of thought. How ironic is it that Bernanke is pro-growth and pro-job creation but the president, so desperate to have Summers as chief, clearly wanted to spurn that direction? It's almost as if he was courting political strife and base-burning when it came to this appointment.

 

Oh, and one other thing is certain. The president never considered, for one minute, the views of investors -- unless he wanted to send a message that only rich people own stocks so they should just have to deal with the pain.

Thank you, Larry Summers, for taking your hat out of the ring. Your appointment would have led to months of anger and political wrangling at precisely the moment that the Fed's going to take center stage as it last takes its pedal off the accelerator. Interest rates have already soared on U.S. Treasuries, so maybe it doesn't matter all that much. But, nonetheless, this appointment could have become still one more reason why Washington has become so darned dysfunctional. It is time for a peacemaker in the Fed, not a rabble-rouser.

 

In the meantime, pity the short sellers who had it all figured out and the long-only funds that had abandoned housing as a theme for the last part of 2013. Today's just not their day.


 Cramer


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.

 

 

 

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31Comments
Sep 16, 2013 9:55AM
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The nomination of that clown is just the latest indication of how ignorant Obama is about economics and the economy, but then that should be expected based on his "knowledge" of foreign affairs and everything else.
Sep 16, 2013 9:36AM
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regardless of who is picked, who REALLY is in charge?
Sep 16, 2013 9:35AM
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This is all weather ballooning and placating at this point.  The actual selectee's name will not be mentioned until all the losers chairs have been filled.   Be smart and not get all excited about any of this political theater nonsense, at least not at this stage of the pony show. 

Sep 16, 2013 9:38AM
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Even Jim is now laughing at the Bears.  What was it Tog was saying about the euphoria thing.  Now is exactly the wrong time to become complacent.  JMHO
Sep 16, 2013 9:57AM
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NOBODY, has been NOMINATED for the FED Chair YET !!.
Sep 16, 2013 10:39AM
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Dow up nicely today. A sell signal to some, sadly a buy signal to most.

And what happens when a rubber band is stretched ever further?

Sep 16, 2013 11:10AM
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Yes, the trader exuberance will wear off over Summers not standing ... when the manipulators have had their fill at the pig trough ... after all. this lowlife profited from Syria ... war profiteering --  nothing is sacred to this cesspool that is Wall Street.  One day, they will be held accountable!
Sep 16, 2013 11:05AM
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Word is Assad begged Putin to let Obama attack.  He said he wanted the same kind of war Obama waged against the rich.  :) JMHO
Sep 16, 2013 10:24AM
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The moneylenders are in charge and have been since post WW2.
Sep 16, 2013 11:45AM
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This might be the dumbest article Jimmy has ever written. Each month, the Wall Street manipulators pick a different bogus news topic to manipulate Markets. One week it's Syria, the other week it's Tapering, then's it sequestering. They go back and forth between those and a few more. All BS crap just to play their usual games.

They refuse to talk about real issues like 500-700 in fake Banking Derivatives. They refuse to talk about the Real issue which is the Black Hole of Reality which is China. They refuse to talk about soaring unemployment in Europe and or soaring Debt Globally. If Summers had been actually elected, it would have no different than if anyone else had been. All this BS talk would have gone away quickly just as all other BS stories have. Of course, our least informed poster thought it was a great article.
Sep 16, 2013 5:09PM
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Jim - Interest rates are going WAAAAAAY UP!  The Fed is not going to be able to unload its bond portfolio without selling at a steep discount.  Moreover, they have printed trillions of dollars to "buy" these bonds with just a few key strokes each time.  The whole bond market is "rigged" and so are interests rates.  With the poor balance sheet of the Federal Government, 30 interest rates should be 25% or more.  Inflation is going to kick in and destroy the economy and markets.  I think they should start raising rates immediately to correct the speculation and excess in this "farce" of a recovery.

 

All Bernanke has done is steal from the people who actually save and live within their means.  This includes millions of Senior Citizens that have had their "pockets picked" via lower CD yields and inflation!  Meanwhile, speculators have been rewarded for borrowing once again and will want us all to "hold the bag" when their "investments" don't work out -- including homes, cars, credit cards, derivatives, stocks and commodities.  Enough! Start rewarding people who save and live within their means and punish speculators with higher rates!  Short the bonds at every opportunity -- today they rallied and then faded big time -- this signals the "party really is over" this time!

Sep 16, 2013 12:39PM
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Heaven forbid if we get a Fed chairman that has fiscal responsibility.  It's all a big joke, and the joke is on us, the Middle Class!

 

We will only wait (like we have for 5 years) to see if the new Fed chairperson can help us.

 

Oh, by the way Mr. Cramer, the Fed has been at center stage for too long!

 

Sep 16, 2013 10:00AM
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We are a couple of steps away from being Euphoric about the Markets...

 

But as John Templeton says..."That's how Bull Markets subside or end."

Sep 16, 2013 2:03PM
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My short picks, MSFT, FB, CMST,VZ, and of course AAPL.  Folks will need to break their internet and  cell phone habits in order to survive.  No time limits on these as timing is 50% of how one can go wrong in this market.  I think these are getting ready for a little haircut.  JMHO
Sep 16, 2013 1:05PM
Sep 16, 2013 10:56AM
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Summers would be good pick at a different time, he is brilliant but not for this economy.  I hate to agree with Kramer, the last thing we need is another thing like the sequester cuts and austerity when the economy STILL hasn't come back and labor participation is creeping lower and lower.
Sep 16, 2013 2:56PM
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How did Obama's war against the rich go so so bad?  After just five years of the POTUS declaring war on the divide between the rich and poor the divide has become the biggest ever. Many many times last year I quoted the historical fact that anytime a politician claims he will take from the rich and give to the poor the poor tragically suffer.  Always been a human fact and seems it probably always will.  Does Obama seem to do the exact opposite of what he prates to the masses about?  Correlation seems like about 95% to me. Perhaps he was merely campaigning?
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ROFL

 

The US economy is in even worse shape than it was 5 years ago. The Federal Reserve is going to have to pump an extra $85 billion a month into the stock market and bond market to cover all the new debt and baby boomers taking their money out of the stock market for the next twenty to thirty years.

 

Has anyone even taken a look at the cash flows out from the stock market and bond market minus the cash into flows from banks borrowing money at zero percent from the Federal Reserve and direct Federal Reserve buying.

 

This is why they say we are still in a crisis folks. They have pushed stocks up to 30 to 40 times earnings when the stocks should be at 10 times earnings at most.

 

The housing market is still declining if you take out the super rich buying their huge houses. Why do you think the average price of a house in New York is over $5 million ??? When you have a couple of deals where the penthouses sell for $189 million each that kind of pushes up the average.

 

If you take out the top 10 percent of the housing sells and compare past years adjusted the same way to current months you will find the use housing is still on a down hill trend.

 

Get real people and take out the top income earners and you will find the average wages for Americans have dropped in half from a decade ago. We are in serious trouble folks.

Sep 16, 2013 1:33PM
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No surprise we lost a little ground while the liar in chief was spewing his marxist remarks....This guy is a total amateur clown....Sad....Oh well, over 2 and a half hours to go still and anything can happen....We are not home free....Stay vigilant...More after the close.
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