coronary artery. no word on when he might be discharged. prince philip is 90-year-old. last-minute christmas shoppers. you know who you are. procrastinators in luck today because a lot of stores will be open late this christmas eve. some like macy's have been open around the clock. thanks so much for joining us. i'm alina cho. remember to watch my holiday special. big stars, big giving at 2:00 p.m. eastern time. "your $$$$$" starts right now. america's economic future is uncertain. at stake is your money, your job, the presidency. welcome to "your $$$$$." i'm ali velshi. as 2011 draws to a close we're all about 2012 right now. diane swonk, mesirow financial. you're an economist yet you've been called upon to be a political strategist to understand what it is that's

going to happen in 2012. tell me where you sit right now is 2012 going to be a better year economically than 2011? is there going to be economic growth? are we possibly headed into further stagnation? >> well, you know, the political strategist side of things i've never had to look so much at politics to figure out where the economy was going. i tell you, it's like watching the keystone cops. it's ridiculous. going forward we do have momentum carrying us into 2012. we hope we don't lose it because of political ineptitude. that's what would kill it. we have a lot of icebergs ahead. we hope politicians are better at navigating turbulent water than the titanic. a glimmer of hope in the labor market. looks like the situation bottomed out after things fell apart last spring and the summer. we're seeing momentum return to job hiring.

some momentum but some is better than none. new business burst, that's important to the backbone of the u.s. economy. that's looking nor strength going forward-looking for new business creation to begin picking up again. not enough to take down unemployment to the point where it gets to long-term employed, which is what we really worry about but taking down unemployment nonetheless. we have a chance of reaccelerating in 2012 and doing a little better. >> to be fair, even the best projections, 5% unemployment where we were before the recession started, 2017. not talking about a big burst in 2012 but anything makes a difference. harvard university professor, author of "civilization the west and the rest." you bring something here, a deficit reduction plan, 2011 was undeniably a year of political gridlock or what diane calls keystone cops in washington.

leadership deficits have held us back. how do you see this playing out in 2012? >> well, it's hard to be too optimistic. one of the thins that gave us signs of life in the last quarter was a plunge in the savings rate. i'm not sure americans can really postpone deleveraging for more than a quarter before balance sheets hurt them again. my scene is the republican nomination race could end very badly, indeed, with an unelectable candidate getting the nomination. in other words, not mitt romney. then the possibility of a third candidate entering the race. that's going to increase the uncertainty hugely. if americans elect can get somebody like mike bloomberg to enter the list, it's going to be very, very hard, indeed, to predict the outcome of the presidential election. while that's going on, don't expect any insanity to prevail between republicans and

democrats in congress. i think total fiscal mayhem seems an almost guaranteed feature of next year. certainly nothing is going to help the economy. it's quite possible we'll get things that will hurt it. we'll end up heading towards this across the board sequestration, budget because the all around. >> that's the thing that could hurt the economy more. co-investment officer of pemco, we spent a great deal of time together in 2011, bill, in a market this uncertain, there have been some opportunities. what is your prediction for what happens to global economies in 2012 particularly from your perspective being a key bond investor. >> 2012 will resemble 2011 in that 2011 was dominated by

delevering. niall mentioned some on the verge of default in greece, for instance, banks forced to shed capital, key investments, individuals fleeing risk markets like stocks for bonds and safer havens, delevering risk reduction, long-term but destructive short-term because it reduces growth and lowers asset prices. does that continue in 2012? to our way of thinking it does. what does that mean in terms of what you should buy and what you should sell. you should prepare for euroland instability that speaks to greece and other countries dropping out. prepare for currency instability. that speaks to a stronger dollar. i think you should speak in the bond market for a bottom in yields in those what we call clean dirty shirt countries, united states, united kingdom and germany. they can only go so low.

>> analogy of clean shirts, your traveling, trip gets extended, you try to find the cleanest dirty shirt in the pile. in this case united states tends to be the cleanest dirty shirt. to what is this stuff happening, some degree of ineptitude in washington. to what degree does this actual threaten the rest of the world and america as a great economic power? >> you know, i think right now the biggest threat threat to western economies is coming from the other side of the atlantic. if it weren't for the fact europeans were in such disarray, things might be looking rosier in the united states. there are signs of recovery, there's no question of that, whether you look at unemployment or housing. if you cross the atlantic there's a far bigger mess there. it's almost important to sort out the eurozone without a shift of what amounts to the united states of europe. in other words, some system of

federalism. the political obstacles to that are enormous of the headwind from europe is probably the strongest head win for everybody right now. it's after all appropriate from my point of view as somebody chronicling the crisis of western civilization the epicenter of crisis have been athens and rome. i don't think this crisis in europe is in any way over and i anticipate further blood shed as europeans struggle to overcome a profound german resistance to long-term transfers to a less productive periphery and profound german resistance for easy money to the bank. the ecb would like to be the fed. i'm sure itching to do some qe quantitative easing but brakes applied by berlin that means we're certainly going into a u.n. or eurozone recession which can't be good for the united states. >> we're close now. rome and athens haven't been this important in two years. diane, niall, bill, stick

around. let's talk about the economic future of the united states and whether our obsession of what's going on in washington is actually founded. maybe they can only tinker around the edges. we'll talk about your economic future and how it's going to look in 2012 next on "your $$$$$." need some help, ma'am? grrrrrrr! [ in high voice ] oh thank you. these things are heavy. zzzzzzzz! [ male announcer ] built for work. and everything you work for. hey, honey. i'm glad you're home. [ male announcer ] the chevy silverado. our most powerful hd yet. from fathers to sons, [ boy ] dad! [ male announcer ] chevy runs deep.

there's a moment where everything comes together. where there's magic. and you now understand what nature's been hiding. ♪ at dow we understand the difference between innovation and invention. invention is important. it's the beginning. it's the spark.

but innovation is where we actually create value for dow, for society, and for the world. ♪ at dow, we're constantly searching for how to use our fundamental knowledge of chemistry to solve these difficult problems. science is definitive. there is a right answer out there. [ male announcer ] the same 117 elements do the fundamental work of chemistry. ♪ the difference, the one element that is the catalyst for innovation, the one element that changes everything is the human element. ♪

picking up where we just left off. niall ferguson said the threat coming from places like rome and athens, europe. europe's debt crisis puts the entire global economy at risk and could drag america, which is showing some signs of recovery, back into a recession. diane swonk joins us again. you say it's possible we've only seen the tip of the iceberg when it comes to europe and the political leadership in the united states needs to steer this country in the right direction not only to protect itself but try and veer off any trouble, further trouble europe can get into. that begs the question what

role, if any, should the united states play in dealing with eurozone crisis. >> it's a very difficult question and has a very difficulty answer. the most notable is what the federal reserve has done. we saw a coordinated effort by banks around the world, notably in the eurozone but canada, switzerland joining in, all these baerngs around the world doing a coordinated effort to provide liquidity to european banks. we're all interconnected. nobody is an island in global economy. through the financial system is where we're most at risk for contagion. should europe go down, as we already know from 2008, we need to have our oars in the water to get through this time. that's an important role the central bank makes. listen, the ecb would like to be the fed but they can't, law prohibited and berlin making a huge wall of that.

puts the on us on the fed. not because they are trying to rescue european out of al truism but protect from repercussions should it worsen, which is a real probability and one far too high at this stage of the game. >> bill, what do the numbers say? you look at what the world is saying about these countries and their futures based on the yields, on their bonds. how serious does it look for you? >> the global markets, ali, say stagnation and in some cases recession in euroland is going to continue for sometime, certainly for 2012 and maybe beyond because bond markets are basically anticipating no change in what we call policy rates, feds fund rate, 25 basis points for the next two, three, four, perhaps even five years because unemployment is still high and

inflation remains contained. global bond markets say things aren't going to improve any time soon. there's another point to consider here. i agree with what diane said in terms of interconnectedness. to the extent that yields are to low, it reaches a point where there are disincentives to invest. we're seeing money market funds, for instance, close down because they can't properly offer a return to their asset holders. we're seeing banks close branches because there's no longer the profit that was assumed at higher yields. >> sure. >> as we move lower and lower to what we call zero bound in terms of interest rates, it might have a deflationary interest rate in that of in flation area. >> growth in the united states do depend on savings rate dipping. while we're trying to get people to build up savings rates, there's no incentive to do that. federal reserve have sent out a

message there will be no ensint i was for savers for years to come. we keep money cheap to invest, then they don't use money to invest, then we don't do anything for folks who are saving. >> i agree with bill gross. i think you begin to see diminution returns from near 0 interest rate policy just as we've seen diminish from fiscal stimulus. the u.s. has run a huge deficit, 10% of gross domestic product in an attempt to pay off the crisis. the payoffs have been meager. we're learning some things about economics including the fact economists don't understand the way the world works as well as they thought they did. massive monetary stimulus, massive fiscal stimulus and a very, very anemic recovery. the good news is the u.s. is not in a situation of a country like italy, which despite being an extremely depressed condition is seeing an uptick, more than

that, a huge spike because of fears of default or possible breakdown of the eurozone. my worry has always been at some point -- i don't know when it will be, at some point people asking the same kind of questions about u.s. fiscal policies that they started to ask about italian fiscal policy this year. is this credible in the medium term. the answer is it's not credible. >> a very good question. the day that starts to happen, bill, how quickly will we know? what is the tipping point when the cleanest dirty shirt in the bond pile isn't that clean? >> i'm with niall there. it ultimately will happen to the extent the fed has to at some point raise interest rates in order to support a declining dollar. i don't see that in the next few years but it can happen. to the extent the fed is limited in terms of buying through quantitative easing, treasuries are at risk. a downgrade here, a downgrade there. all of a sudden the cleanest

dirty shirt is a little dirtier. that's something two, three, four years down the road. the u.s. is certainly not the cleanest shirt in all this mess. >> so diane we've maybe got a little bit of a window in that two or three years to try to get the things that matter to americans to make them feel more prosperous going. we've seen a relatively unproductive stock market. a tepid but okay housing market. we've seen a little bit of a move to the upside on jobs. what's the thing you're looking for to tell you we're going in the right direction here in the u.s.? >> unfortunately i wish i could say it was just the economy, because the economy we're getting to that point where really there is only so low you can go, pent up demand, auto market up as well, lending in that market which is important. i do agree deleveraging is still a problem. frankly the political unern adding to weak economy. 6 to 8%, it would be noise. these issues can make a difference. i don't want to be a doomsdayer

here. i agree colleagues, two or three years down the road, if we don't make tough decision, even if we're not out of this entirely. that's not -- it's completely avoidable. it's an iceberg we can avoid but we don't have leadership to do so. >> i wish the three of you were involved in coming up with solutions, future might look brighter. diane pleasure to see you. thank you for greenwood friendship and advice. diane swonk chief economist with mesirow, niall author and professor of harvard university. we are talking about the survival of civilizations niall. thank you for that. bill gross, you have been very helpful to us as well. bill gross the founder and co-chief investment officer of pemco. happy new year to all of you. >> you, too. more than a million americans out of work. what needs to be done in the new year to get them back to work and solve the unemployment crisis for good in the country.

that's next on "your $$$$$."

hey, welcome back to "your $$$$$." lots of things go on in the economy. a few things make you feel more prosperous, the value of your home, your retirement investments going up and the fact you have a job. jobs are the most important leg of the economy. let's take a look at the jobs situation in 2011. how did it look? i would say choppy, to say the least. looks like we got off to a good start and got set back in may and june. then we started to pick things up. that's a hard map to make a trend out of. the bottom line, of those legs of the economy that make you feel prosperous, jobs are not looking as bad as they were six months ago when someone was talking about a double dip recession. we all want to know whether the job market in the united states is likely to improve in 2012. stephen moore editorial writer, chrystia freeland and christine

romans, my co-author. chrystia, let's start with you. job growth was somewhat uninspired and inconsistent in 2011 but it's been a little bit steadier. are we likely to see more job growth in 2012? what are your thoughts? >> look, i do think that the trend although slow and unsatisfying is positive. it's now going into 2012. three years since the real depth of the economic contraction in two. we've learned subsequently that was a huge contraction. the economy really ground to a halt. it is healing. i think the november numbers are encouraging. what's interesting about that chart you showed us ali, it also shows the economy is so fragile external shocks can knock it off course. you see the impact of the japanese tsunami slowing things down in the spring. in the summer both the debt ceiling debate and also real

anxiety about europe causing problems. so i would say could be a better year but american politicians must avoid, which they are good at and everyone must hope the europeans keep it together. >> a big distinction between newly unemployed and long-term unemployment. >> we talked about this a lot. in you're newly unemployed, it's a little easier to get a job. it will be a little easier in 2012 than 2011. if you've been out of work six months or longer, the situation is basically the same for you. now you're talking about retraining, refocusing, moving, doing something very drastic to try to get back in the labor market and you run the risk of not being able to get back in the labor market. it's not monolithic when jobs come back. they are coming back so slowly it's not benefiting everyone. it's benefiting people newly unemployed they are having an easier time. when i talk to ceos, al issuing,

especially in insurance, commercial real estate, some other parts of the economy, trucking, for example, i know stephen moore has been talking to trucking people. they say we're ready to hire. we are stretched so thin. we are ready to hire. we just need one little bit of demand to tip us over the edge. hopefully that will be 2012. >> i have to say, steve, if unemployment hangs around 9% like it did for sometime, president obama is going to be worried about his own job. >> no question about it. i think chrystia said the operative work on the u.s. economy right now on the economy and it's fragile. it is fragile. when you look at the jobs picture over the last three years, we lost about 8 million jobs in that horrible recession of 2008, 2009. we've only recovered about 2 million of them. this has been by far the most anemic recovery. hopefully under a normal kind of recovery pattern, we'd see big job growth next year. that would be the normal course of events. the worry i have, we were in the

economy of 1970s you have periods of false prosperity where the economy would lift up and fall and lift up and fall. that seems to be the pattern right now. i don't think you'll see a real resolution. you're not going to see those employers really go out and hire, i think, until the election is held in november 2012. i really think people are in a holding pattern right now. >> chrystia, what's the best solution? what is the fix? we know the blame. we know we're why we are where we are largely. we know a lot of people share responsibility for this. what's the logical fix? it doesn't seem to be the thing we're talking about. >> i think there are short-term fixes and long-term fixes. on the short-term i tend to -- you're going to hear a scream lean to a keynesian approach right now. i think the economy could use a jump-start. >> he hasn't scream.

>> getting ready to scream. >> a primal scream. >> at least the thing that does bring me in the short-term, something that has a huge impact on the jobs numbers is the government firing people. at a time when unemployment is such a concern it seems important for important government workers like school teachers can be laid off. hang on just a second. a quick long-term point. okay, stephen? in the longer term it's more complicated, a nobel prize winning economist wrote a brilliant piece published in "vanity fair" arguing we're in a period of economic transition i guess analogous from urban to rural economy which resulted in the great depression. it was very painful and deformity i think that's what's happening now. i don't think there are short-term fixes. i think it's a generational change. >> stephen. >> let me say something about this fiscal stimulus issue. one prediction i can make with pretty solid assurance, we're going to have another trillion

dollar deficit in 2012. whether we have that increase in fiscal stimulus chrystia is talking about or not. if you add up the totals here, that's $5 trillion of debt in four years. that's a lot of debt. when we talk about the economy racing ahead, which we all hope happens, one of the things to think about is interest rates. you talked about this in a previous segment, interest rates as as low as they have been in 40, 50 years. if you start to see those creep up again that has negative effects on ability to -- mortgages, increase in deficit numbers. that's the other "x factor" i'm worried about. i'll make a prediction for you. a year from now interest rates are higher than they are today. that's not a bold prediction because they are as low as they can go. >> but the last year has been counter-intuitive, we could have made that prediction a year ago and been wrong today. that's why we'll keep talking about it. thank you to all of you. you've been great friends to the

show. chrystia, great to see you and stephen moore. we hope you have a great year and lots to talk about in 2012. a lot of carryovers in 2012. you might have heard a big presidential race. that's continuing. a huge decision from the supreme court on health care. the epic ongoing battle between will cain and pete dominick which is likely to spill into the new year. you'll hear from them next on "your $$$$$." you never take an upgrade for granted. and you rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i deserve this. [ male announcer ] you do, business pro. you do. go national. go like a pro.

[ male announcer ] you do, business pro. you do. everyone believes in keeping their promises once a year. but we believe in helping people take steps to keep them every single day. that's why every day we help people across the country get into their first homes.

prepare for a comfortable retirement and protect the people and things that matter most. at genworth we believe every day is the right day to take a step toward tomorrow. you can put a force field on him and be invisible! [ child 2 ] i call first player. no. i already called it. [ dad ] nobody's playing anything until after we get our homework done. thank you. hello? test drive's not over yet. [ male announcer ] it's practically yours. [ louder ] hello? but we still need your signature. right now during sign then drive, it's never been easier to get the all-new passat, the 2012 motor trend car of the year, for practically just your signature. that's the power of german engineering. visit vwdealer.com.

a lot of questions about 2012. right now the biggest one is which gop candidate will run against president obama and who will be getting ready to take the oath of office this time next year, a few weeks after this time next year. pete dominick host of standup, will cain a cnn contributor. good to see you guys. you've been here telling us what's going on all year. tell us what you think, who wins the gop and who wins the

presidency. >> mitt romney wins the nomination. the gingrich bubble has denatured. will it deflate fast number, there's a hint of inevitability around mitt romney not because he's great but his competitors are poor. >> what do you think? >> i think it will be mitt romney. people in iowa and other states will not vote for who they want to win but who they think can win. i think voters really hate -- republican, conservative, tea party voters hate president obama so much, recent poll 52% of iowa voters not sure if he was born here. all that crazy is still out here. they are doing to vote for in the end not who they want but who they think can beat president obama. republican establishment is not lying newt gingrich getting near the white house. >> if romney wins, president obama, it's competitive. if romney wins, who do you think will win that battle. i'm asking a question almost a year away. >> it's a jump ball, a 50/50

bet. there are firsts for everything. barack obama is the first black president of the united states. he would then become the first president in the modern era with an approval rating below 49 in the election. there have been five incumbents and they lost. lower than carter, any presidents. with bad economy, high unemployment rate, the first incumbent to get re-election in that environment. >> we forget we used to focus on unemployment numbers. if they come up just a little more, a little better, even though we talk bowed what kind of jobs those are, that will help president obama and put him over the top. >> that's one economic indicators going in the right direction. many aren't. let's talk about occupy. a busy week. do you think occupy wall street is going to have a meaningful influence on the general election in 2012, pete? >> absolutely. you see mic checks where they interrupt with newt gingrich and all the candidates, also president obama, his fund-raising speeches. it's a leaderless movement

still. i think that's a problem frankly. i absolutely think they are going to come out strong. it's going to change, develop over the next year as thing change, as things may or may not get more dire. it's going to be a huge factor. look for it to be a factor against president obama. >> it's funny, will, they are not doing what the tea party do. i know the folks on occupy hate the comparison they are not rallying behind candidates running like elizabeth warren in massachusetts that might share some of the things they want to advance. can they be a force without becoming an electoral force. >> i think they are. i think they influenced the election. we saw president obama come out in a speech a few weeks ago and invoke teddy roosevelt, his campaign speech may evolve around equality. how you are doing compared to someone else is important. if that's his campaign message, he floated that balloon out there, you can credit occupy wall street for making it.

>> occupy is trying to strike at the root, campaign finance, inequality and corporate interest. campaign finance, that's a lot of what occupy is about. both parties take part in that. >> all sorts of people moved into this movement to try and co-opt it and make it their on but not candidates. most candidates have distancesed themselves. should there be a candidate. >> it's true american left, a democratic party more resem bebl their values, it will be to move the democratic party to the left, embrace concepts such as income equality. if the president of the united states does this, that suggests they are having a successful movement. >> buddy romer, could possibly be the candidate because of what he says about campaign finance, no one is saying that, too far on other issues, supportive of he occupy movement. i don't think they want the candidate. it's the system occupy is upset with, not the candidates, the party, it's the system, the route. moving on future of health care could lie with the supreme

court. will the court rule against the obama health care plan and should they? we will hash it out next on "your $$$$$." [ male announcer ] what if we told you that cadillac borrowed technology from ferrari to develop its suspension system? or what if we told you that ferrari borrowed technology from cadillac to develop its suspension system? magnetic ride control -- pioneered by cadillac, perfected in the 556-horsepower cts-v. we don't just make luxury cars. we make cadillacs.

also on the agenda for 2012 the supreme court will tackle what could be its biggest case in a decade, health care reform by president obama. whether or not the central mandate section that requires all americans to buy health insurance is constitutional. we're not going to get into a constitutional debate here. i'm going to ask pete and will what they think is likely to happen. pete. >> well, as will said on television, and still on this talking point many times, who is the most important vote in the 2012 election, justice kennedy, the guy in the middle. i think it's possible talking to dolly of slate.com, so good on these issues, it's possible it goes 7-2. we've seen low courts with very conservative judges say this is

constitutional. but without getting into arguments, it does matter. this is a case that literally could predict the presidential election for the first time, except for 2000 when the court picked the president. >> i know you don't want to get into a constitutional argue. this question is massive, huge. defining the limits of the federal government's power. should and will. should it be ruled unconstitutional, if i were a judge it's clear to me it is unconstitutional. this revolves around commerce clause. congress has the power to regulate trade among the states. that's grown and stretched, expanded over the years. one thing it hasn't done allowed congress to regulate your inactivity. that's a massive leap. regulate inactivity you will violate the law by existing in this country. if that's true we need limiting principles. can the government force people to join weight watchers. legitimate question they will be debating. >> thinks they should. >> it will take place in the supreme court chambers.

will it be ruled unconstitutional. i want to walk back on my anthony kennedy prediction. justice thomas is the only guaranteed no vote. justice scalia and others have viewed the commerce clause with broad powers over the last decade. it's not clear it will be ruled unconstitutional. >> might be the most controversial -- >> you can't ask will cain without justice cain telling you. he's very passionate about this issue as a lot of people are. then you have the immigration case, which is also going to be taken on. two big supreme court cases, the budget battle. >> although i will tell you, part of when i'm wondering about for my viewer what is the outcome of the matter of what has to happen in 2012. >> if it's ruled unconstitutional it hurts president obama. if it's ruled constitutional, it hurts, if it's mitt romney, a lot. >> if it's unconstitutional it's not dead. republicans will take it up in the legislature and try to have obama care repealed. they will not leave it up to the courts to do away with this law on their own. >> they have to have the white house or else they fail.

obviously president obama -- look for it. we're looking ahead to next year. my x factor i want to predict this. americans elect, they are on 12 states ballots there's going to be probably on all 50 states that say americans elect -- who that's going to be? i don't know. that is the "x factor" nobody is talking about. >> big people -- could have have huge role. you have niall ferguson on earlier. could see a third party, whether or not that's ron paul, michael bloomberg, who knows. >> it's going to be an exciting year. hope you spend time with us in 2012. >> as long as people wear red sweaters. >> it's christmas eve. merry christmas. >> halloween. he thinks he got a red sweater. it's orange. >> christmas, happy holidays, happy hanukkah, merry christmas. >> tune your tv sets.

nothing says christmas like orange. >> also my halloween sweater. >> good to see you guys. happy new year. 2012 was a rough year to figure out investments. it is about to be a new year. we're going to help you figure out the right 2012 approach to "your $$$$$." next on "your $$$$$." you want to save money on rv insurance? no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance.

this was the gulf's best tourism season in years. all because so many people came to louisiana... they came to see us in florida... make that alabama... make that mississippi. the best part of the gulf is wherever you choose... and now is a great time to discover it. this year millions of people did. we set all kinds of records. next year we're out to do even better. so come on down to louisiana... florida... alabama... mississippi. we can't wait to see you. brought to you by bp and all of us who call the gulf home.

i took some steep risks in my teens. i'd never ride without one now. and since my doctor prescribed lipitor, i won't go without it for my high cholesterol and my risk of heart attack. why kid myself? diet and exercise weren't lowering my cholesterol enough. now i'm eating healthier, exercising more, taking lipitor. numbers don't lie. my cholesterol's stayed down. lipitor is fda approved to reduce the risk of heart attack and stroke in patients who have heart disease or risk factors for heart disease. it's backed by over 19 years of research. [ female announcer ] lipitor is not for everyone, including people with liver problems and women who are nursing, pregnant or may become pregnant. you need simple blood tests to check for liver problems. tell your doctor if you are taking other medications, or if you have any muscle pain or weakness. this may be a sign of a rare but serious side effect. [ man ] still love that wind in my face! talk to your doctor. don't kid yourself about the risk of heart attack and stroke. if lipitor's been working for you, stay with it.

lipitor may be available for as little as $4 a month with the lipitor co-pay card. terms and conditions apply. learn more at lipitorforyou.com. so many of you have your 401 (k)s, iras enforced in the stock market, mutual fund or exchange trade. take a look at what the s&p 500, a chart looked like over the past year. uninspiring says my next guest. you don't invest in the market so it ends up roughly where you started at the end of the year. that costs you money. managing director of zephyr management, a good friend of our show. jim, good to see you. as we put 2011 behind us, we look at 2012. our viewers can't afford to make investments the same ways, better than losing money as we've done in recent years.

what do you think happens with the s&p 500, the broad stock index of the united states in 2012? >> it should be somewhat better than this year, although it's not going to be a home run by any means. the good news is that the united states is growing better than expected, all of the metrics for the next several months have been better than most people thought given the head winds we had. >> sure. not necessarily everywhere but in the united states. >> so you want to participate in that. on the other hand europe the news is getting progressively worst. at the east they are going to have a long grinding austerity period of no growth or gradual recession. at worst they could have a financial accident. then you go over to the emerging markets, they have tremendous secular growth but experiencing a cyclical slowdown. a lot of moving parts, different pieces. my hope is that 2012 will be a better year than 2011 but it will still be a year of modest returns. >> remember in these emerging markets in many cases their own

populations growing achieving getting into the middle class and buying things. they depend on selling a lot of things to the united states and europe. a slowdown there will affect them. you recommend investors getting involved in a large cap fund of global multinational. major companies that sell things all over the world. what do you recommend? >> i'm recommending an s&p 500 ishares fund. what you want to do is participate in the recovery long-term, participate in long-term market growth and some protection from problems in you're. the best way to do that is big conservative stocks, ishares fund. >> based in the united states. >> but global. >> coca-cola, major general electric type company. >> these are company where the majority of earnings growth secularly in emerging markets benefiting from short-term cyclical uptick in the united states. >> very good. you're probably getting these calls. i'm hearing from people who say i like to rebalance at the end

of the year. but in addition to rebalancing to where you should have been, should i be taking a more conservative look at my portfolio and staying away from heavy investment in the u.s. and europe? >> well, it's a time to emphasize quality. i would be selling lowe quality companies, lowe quality lighten small cap stocks in the united states. i would lighten up on commodities because they require high growth in the world. and in europe there are certain value plays but you have to understand the odds are stacked against you when the economy is shrinking as europe is likely to sling. >> even if you have a value play, even if you have a stock that's undervalued the overall economy and what it's doing in europe may have more of an impact. >> right. you're better off capturing anything good that's happening in europe you'll capture through large cap united states companies with a global franchise in europe. there's no way to change the fact that they are going have a long period of headwinds even

significantly larger than those in the united states. so you've got to be careful >> you're stale believer for the average investor who does something else for a living and investing is what you do for retirement. you buy shares on an ongoing basis and your price will even up. >> we have tremendous volatility. a lot of individual investors left the market. there's a lot of computer trading. there's much higher volatility than usual. the onlyway to escape is to rebalance monthly or quarterly and dollar cost average and that's particularly true in the emerging markets where there are more volatile. >> which is opposite of backing up the truck or dumping. >> don't get caught in emotion. don't get too bullish or bearish. >> and if people who are watching this have questions about this, jim is a great friend of ours. tweet us with your questions @alivelshi.

jim, always a pleasure to see you. have yourself a happy new year. >> to you also. for making smart decision bgs your money to the dumbest business moves of 2011 we'll tell you the worst of the worse when we come right back.

we simply can't move in 2012 without revisiting some of the dumbest moments for won the. i brought in rex harris and christine romans. the dumbest moment the year in business was the debt ceiling debacle. >> it was the dumbest moment in 100 years. >> they are dumb a lot of the time. dumb this year. really bad year for congress across the board. >> dodge ad big bullet. for all of the fears of whatnot raising that debt ceiling in time would do we probably suffered the fewest consequences other than being listed as a

dumb moment of 2011. >> clearly the dumbest. when we went to gene and said we're doing dumbest moments she said which one. remember the budget showdown in april. then debt ceiling. then what about the super committee. what about what's going on right now the payroll tax. she was beside herself. >> there were 25 different dumb moments of congress. you put them upd the debt ceiling debate. >> that ranks up there. netflix double oops. netflix had loyal customers and the stock was flying high until the company raised price by 60%. this unfold with lightning speed. it seemed dumb. this wasn't one they didn't look in hindsight. >> they did it because they were afraid of being obsolete. they made themselves by not being relevant. >> the ceo said for the long term maybe it's the right play. it's one of the most stunning

declines i've ever seen in business. their subscribers loved them. the stock was soaring. in an instant it all went away. >> they didn't get a lot of those customers back. they apologized but didn't change the thing that affected most people. >> exactly. >> bp's massive oil spill in 2010 after three long months they finally plugged that leak but the bad decisions kept flowing right into 2011. transocean the company that owned the rig that exploded the rig paid out big bonuses on its safety record from 2010. >> i went back and read the proxy statement and it actually says the best safety performance in the company's history. i mean it was stunning. and people were angry when that came out. >> the best safety performance of the company's history worst public relations performance. >> to we learn lessons from

these things? we've been talking all show about congress and its work in 2012. there's not a whole lot of people holding out a lot of faith that congress will get its act together and make better decisions. they have some serious decisions to make. >> they do. they have to get it right. the time is now. i don't know how much longer financial markets, investors, consumers, how much longer we'll get congress to figure it out. >> from a aaa credit rating downgrade that we've worried about for years that finally came with a warning that it's congress and political will that's a real problem here. nothing has changed since then. nothing has changed. at the end. year they are arguing about,000 pay for $200 billion in the extension of the payroll tax holiday. no talk about structural problems in the economy. how to fix trillion of dollars in debt. they can't even agree on a two month extension in payroll tax holiday and how to pay for it. i'm just saying this kind of ineffective governing just

shines a big bright spotlight on the decision that was made. >> having extensive conversations about process. it becomes about not doing a two month extension because it's kicking the can versus doing a one year extension in which case most americans are waiting for solutions to the big structural problems. rather than talking about unemployment benefits what are we doing about jobs. >> next year will be the fight of bush tax cuts. we'll be arguing the same dumb stuff. >> same dumb expensive stuff. >> let's hope something changes. thanks to both of you. you can get great stuff on cnn money.com. and christine romans is on tv with me every morning 6:00 to 9:00. she's on your bottom line saturday mornings. you can catch us here. thank you for joining the conversation every week on your money every saturday and sunday at 1:00 p.m. check out our new book "how to speak