Call it the $4.5 trillion (the size of the Fed's balance sheet) question: in a report released overnight, titled "Reducing Risk in an Expensive World", SocGen strategists ask what is perhaps the most important question right now: "Will the Fed allow Irrational Exuberance, Season 2?" and point out that based on CAPE valuations, the US equity market now has two choices: it will either proceed to another round of irrational exuberance, or it will correct sharpy and dramatically.

Then again, perhaps this question should have been asked back in March 2009 when instead of doing the right thing and letting bloated, overindebted companies fail, the Fed decided to fix a record debt problem with even more debt, in the hopes of ultimately spurring just enough inflation to wipe away this massive debt overhang, in the process making equity holders richer than they have ever been, and leading such "establishment" thinkers as Guggenheim's Scott Minerd to declare "The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity."

SocGen then tries to answer its own question by pointing out that the future of the market, driven entirely by trillions in excess liquidity, does not look very hot when extrapolating the S&P based on the size of the Fed's balance sheet.

The key assumption above, of course, is that the Fed's balance sheet will contract, which may be a bold assumption: recall that the Climate Contingent Fed may simply opt to do QE during "harsh winters" and then hike rates to 4% in the summer.

Of course, for the full answer we look forward to Ben Bernanke's next blog post. Then again, those impatient for an answer right now, are urged to simply #AskBen.