Summers' Last Hurrah Before the Fall

"You know Harvard makes mistakes, too. Kissinger taught there."
--Woody Allen as Alvy Singer in Annie Hall.

Larry Summers is gone--back to Harvard University and/or Wall Street where he belongs. Good riddance. One more to go, but Treasury Secretary Timothy Geithner won't be gone until the whole thing has just about collapsed. Then we get rid of the Wall Street goons in favor of Elizabeth Warren, Paul Volcker and all the other economic politicos who favor middle-class America--if it survives.

However, it all may too little too late for a stock market that is just itching to crash.

Kenneth Denninger from The Market Ticker sums it up best in Anatomy of a Fed-Induced Bubble (Micro/Macro Level, NFLX).

As I write this entry, the Dow Jones is at a whopping 10,843 at 2:20 p.m. I'm not a stockbroker, or even close. I do know that housing market activity looks like a snail in reverse as people wait for an inevitable decline in home prices in most United States markets. Even though interest rates are at their lowest EVER, home sales declined during the summers, purchase applications recently fell and now we enter the slow time in the market.

Meanwhile, foreclosures will start to increase (after Ally Bank/GMAC--and others--rid themselves of illicit affidavits to foreclose on properties). Banks will eventually need to foreclose on squatters (people living in their homes without making a payment) and try to help those unemployed millions keep their homes as well, which they never will if the banks want their mortgages paid.

If the mortgages are not paid, then banks holding them in portfolio lose that money. If the loans are securitized, then bondholders lose their money. Either way, if there is no "extend and pretend" on these loans, somebody loses money.

Then, there's consumer spending. Here's another post from Denninger, Even A Blind Squirrel Finds A Nut (Reich), from The Market Ticker on consumer spending--or the unlikelihood it's going to get anywhere near 70 percent of Gross Domestic Product.

Now, this is all under the assumption that a European contagion doesn't take place and interest rates don't rise and a bond bubble doesn't pop in the process.

So, enjoy the market as we shoot for 11,000--just like the halcyon days of the Internet bubble. Maybe we'll get to 14,000 like the euphoric days of the housing bubble when everyone was "wealthy." Wouldn't that be great??

Yes, this is the last hurrah. As Lou Mannheim, Hal Holbrook's character in the 1987 film Wall Street said, "Enjoy it while it lasts, because it never does."