Michael Jackson meets Literary Genius

The financial version of "man in the mirror"? The modern, digital age form of Dorian Gray's portrait? What we've been forced to recognize over the past year is a distortion of our economic foundation and model. A failure to see the skewed, unscaled truth of how unbalanced our economy became has led to a sorely painful refitting and resizing. Spurred by necessity, we're reluctantly returning to a nation of savers and moderate growth - we hope. The alternative? A nation of cheaters and manipulaters - who craft another secret financial instrument (similar to subprime mortgages) to drive up asset prices to fictional levels and encourage a false sense of security and wealth among those who can't afford to believe in such a tale.

Personally, I believe we (the regular folks of the US and this story) will be taxed and, essentially, fired into a more moderate lifestyle of savings and fiscal responsibility. A recent study/poll came out today discussing the emotional bankruptcy that has hit America. Nearly 50% of American say that their spending habits have been fundamentally changed - either due to a belief in greater frugality or simply not having a choice to be lavish. Other studies show that spending effects from recessions linger for about 2 yrs from the end of the recession. That means that consumers will be more spendthrift until July of 2011 (and that's assuming that this was an average recession, which it wasn't).

As for the markets in the short term - whats this mean? It means serious headwinds. My tunnel prediction for 2010 is the 1025-1200 range, although I'll be the first to admit that's not much of a courageous prediction. Once the year has started I may try and hone that in a bit. The 1025-1200 range would allow a 10% correction for the S&P which I would find accurate and healthy and/or a nice 8% jump in profit by year end. That would be an average S&P year but would be truly spectacular considering the aforementioned consumer headwinds the economy face. Additional headwinds include a continued prolonged weakness in housing as well as unemployment.

But regardless of all of this - and for the sake of everyone's 401(k) investments - lets hope that we, as a nation of consumer, experience a Dorian Gray-esque revelation with profound effects and not just an accidental lapse of frugality.