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Ben 'Buzz Lightyear' Bernanke and the Fed's New Challenge Ahead


Having achieved market compliance, policymakers face more difficult obstacles than they and investors think.

Even more, I am troubled by the self-assured certainty that market participants now have regarding central bank strength and the resulting compliant behaviors that I see. What I am afraid most investors miss is that our confidence in central bankers reflects our own level of confidence. Go back and look at what financial and media pundits were saying about the willingness and ability of policymakers to act and the effectiveness of policymaker actions at major market bottoms. From Jim Cramer's "They know nothing!" rant to The Economist's "BE AFRAID" cover – both of which tie to major market troughs – the sentiment is clear.

What is uncertain to me is how falling confidence will impact a clearly now-compliant market; and with the divergence between equity market values and consumer confidence at a record extreme, I don't trust the market's true underpinnings. As we have seen recently with Arab Spring, the societal migration from uniform compliance to a condition that reflects very weak underlying social mood can be dramatic and quick. Even more, the rebuilding process thereafter is worrisomely volatile and slow.

To be clear, I hope that all of these thoughts prove to be the concerns of a worrywart. Still, I can't help but take note of the self-assured certainty that I see in the markets today.

Needless to say, it will be interesting to see where it all goes from here.

Peter Atwater's groundbreaking book "Moods and Markets" is now available for pre-order on Amazon and Barnes & Noble.

"Peter Atwater brilliantly provides a framework for understanding both the socioeconomic hubris that led to the great credit bubble of the past decade and the dark social-psychological hangover that has resulted from its collapse. In so doing, he offers an invaluable guide to what promises to be a very difficult and turbulent period ahead as we experience what he calls the 'me, here, and now' behavioral tendencies of the post-crash world." -Sherle R. Schwenninger, Director, Economic Growth Program, New America Foundation

Twitter: @Peter_Atwater
Position in SH and JPM.
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