Summers Throws In The Towel
The markets roared higher over the weekend when Larry Summers withdrew his candidacy for Fed Chairman. This makes Dr. Janet Yellen of the San Francisco Fed the current favorite for next Fed Chair.
Truth of the matter is that neither candidate should be considered for Fed Chairman.
Summers was one of the chief architects for the 2008 meltdown, repeatedly pushing back on anyone who wanted to regulate the derivatives markets. This in of itself should bar him from ever being considered for a position of influence in the financial markets.
Yellen on the other hand is yet another academic with no business or banking experience. She was one of the primary forces behind QE at the Fed and has repeatedly advocated for more QE despite the fact that there is no evidence it has succeeded now (nor is there any evidence that it succeeded in the past).
Thus, we literally had a choice between one candidate who helped blow up the entire financial system and another candidate who has no idea of how the economy works outside of textbooks.
Regardless, the markets perceived Summers as hawkish and so they are ripping higher today believing that the next Fed chair will continue to maintain Bernanke’s policy of leaving a paper weight on the “print” button.
The markets are going positively manic on the news.
This feels like the final push before a more serious correction. The Fed meets on Tuesday and Wednesday at which point it is expected we’ll see a QE taper announcement.
The fact of the matter however is that Bernanke has created a bubble that is even bigger than that of 2007.
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Phoenix Capital Research
Graham Summers is Chief Market Strategist for Phoenix Capital Research, an independent investment research firm based in the Washington DC-metro area with clients in 56 countries around the world.
Graham’s clients include over 20,000 retail investors as well as strategists at some of the largest financial institutions in the world (Morgan Stanley, Merrill Lynch, Royal Bank of Scotland, UBS, and Raymond James to name a few). His views on business and investing has been featured in RollingStone magazine, The New York Post, CNN Money, Crain’s New York Business, the National Review, Thomson Reuters, the Glenn Beck Show and more.