One couldn't help but feel the optimism of the talking heads over the past couple of weeks as the espoused their rosy 2010 outlooks. Deep down I know that we're in for a Tiramisu Market.
My wife is not a big dessert person, but when she's offered tiramisu she always ends up ordering it, even if she initially demurs. Invariably, when the waiter walks away, she says, "I just like the top part." When the dessert arrives, she proceeds to eat the hard, sugary surface while bypassing the ... goo? ... that lies underneath.
Welcome to the 2010 market. The top may be good and pleasing for the short term, but underneath we have problems that no one wants to address and that are easier to push to the side of the table. Just give it back to the server.
Unemployment is hovering around 10%; growth is stagnant; housing is being propped up by, well, us; there's a wave of mortgage resets and foreclosures; there's a "new normal" in consumer spending (i.e., not a lot); the government printing press is smoking; and Congress is hell-bent on ramming through legislation that no one wants. Oh, and people are trying to kill us. All of us. And unfortunately they're eventually going to succeed, despite statements that "the system works."
I wish I could be more upbeat about the prospects for 2010, but after the party since March I'm feeling a little hungover ... and the bill just came. As first-quarter earnings season kicks off, the market will be looking past the cost-cutting efforts that boosted many bottom lines and looking for no kidding, old-fashioned profitability.
It's hard to be bearish. No one likes to be Eeyore. I'm long-term bullish -- I have to be. But I'm worried in the short term that the underlying issues will persist until we see job creation, housing stabilization, and restrained government spending. The government needs to halt the printing press; it's running out of ink.
We got to witness this Tiramisu effect in Dubai on Monday. The monstrosity formerly known as Burj Dubai was unveiled in a shower of fireworks and lights. The debut was interesting on several levels.
Dubai roiled the markets in December when it made the mistake of telling the world that it had spent more than it had. This apparently shocked investors, who believed their individual countries could never do such a thing.
Abu Dhabi decided that a foreclosure in its neighborhood wouldn't be good for home values, so it tossed a boatload of dirham to its neighbor. In a show of thanks, Sheik Mohammed renamed the Burj Dubai to honor his cousin (and new banker), Sheik Khalifa bin Zayed Al Nahyan.
It appears that the members of the United Arab Emirates recognize the value of a bailout. I wonder what would happen if U.S. businesses had such respect for folks that bailed them out.
"General Motors is honored to announce that we are renaming ourselves 'Government Motors' in honor of our vengeful but kind overlord."
"AIG(AIG Quote) is proud to announce that we have changed our name to 'America Issues Us a Gift' and thank the American people for their generous contributions. We needed that money to pay our bonuses."
In a throwback to a 1988 cult classic, Lloyd Blankfein says Goldman Sachs'(GS Quote) ticker will remain the same but going forward it will stand for "Got You, Suckers."
And lastly, Citigroup(C Quote) is renaming its headquarters at 399 Park Avenue "Paulson Place."
Firing Line: This market may look sweet on the outside, but underneath there's a mess. Although I think a little hair of the dog might help for a while, I definitely plan on skipping dessert.
This post has been republished from The Street.