Bernanke It Is And The Market Likes It...

Wow! What a day -- the market posted its best gains in months and the SPX closed just below the significant overhead resistance level of 1205, which would confirm the start of the long-awaited 4Q rally. Now that the Fed Greenspan successor nomination is out of the way, and October is almost behind us, some long-only money may well step in and buy this market as a "value play". I think the odds are better than 50/50 at this point that we see that rally finally.

Back to the Fed chairman nomination. Bernanke is no genius, but he looks qualified on paper to pick up where King Al left off. Maintaining *continuity* seems to be the priority here, and Big Ben, with his mainstream economist credentials and a wealth of experience, both academic and "political" (to the extent that working for Bush qualifies as "political credentials"), surely looks like a good pick, so I expect him to be confirmed without too many problems. While the initial reaction looks positive, Bernanke will face significant macroeconomic challenges next year, inflation and high energy prices being the top of the iceberg, so to speak. How well the market likes him then, after he has had a chance to express his interest rate views, remains an open question. It all looks pretty rosy right now, but it may not be so easy, come next spring. Bernanke may well need to establish his credibility pretty soon after January'06, if the market is to remain convinced that he is indeed a staunch inflation-fighter, not only on paper but in reality.