friend, we have some beautiful acquaintances coming up. and they may have you seeing red. "the wall street journal report" begins right now. this is america's number one financial program, the "wall street journal report." now maria bartiromo. >> all that coming up, but first here is sue herera with some of the stories in the headlines this week. sue? >> thanks, maria.

here is a look at what is making news as we head into a new week on wall street. the markets rang out a roller coaster 2010 with the major indices seeing double-digit percentage gains for the second year in a row. and we'll be heading back to business in 2011, having hit post-financial crisis highs. the dow finishing up about 11%, with nearly half of that gain coming in december alone. the s&p 500 even stronger, rising nearly 13%. and the tech-heavy nasdaq winning the prize, up about 17%. the week itself was quiet with the markets mixed. many traders were gone for the week, and volume was extremely low. encouraging news on the jobs front. initial jobless claims, people filing for unemployment benefits for the first time fell to their lowest levels in more than two years. but analysts say there is some holiday hiring in that number, so it might not be quite as good as it looks. housing continues on the

skids. the s&p schiller case home index which measures the actual prices of homes sold fell 1% in october, more than what economists had expected. housing prices are now about 30% below their july 2006 peak. and the warm kodachrome colors are fading to black. the last plant that processes the once iconic film shut its doors this week. the machine that processed that film to be sold for scrap. and now back to maria for the rest of the show. >> sue, thank you so much. well, a new year is underway. how bumpy or smooth is the road ahead in 2011? joining me is undersecretary of state for economic business and agricultural affairs, former vice chairman of goldman sachs international. and "the new york times's" andrew ross soccer ken, author of "too big to fail." thank you for spending the time. looking ahead at the markets, the economy, the jobs picture, which i know you have been spending a lot of time thinking about, what are you looking at in 2011? >> i'm looking really in my job at the global economy and the opportunities for american

companies there. i think one of the big success stories for american companies this year is that they have begun to make in some cases continue to make large strides in penetrating the emerging markets of the world -- china, india, russia, brazil, and elsewhere. and i think the critical point next year is for these companies to be able to take even greater advantage of growth in the global economy, because that's where a lot of the growth is going to come from in job creation and profitability. >> it's a very good way to put it, bob. andrew, you made headlines in japan not long ago, predicting the u.s. is in for a lost decade. tell us than. >> i'm worried. i hate to be bearish, but i'm worried. i think there is a lot more confidence post-election. but i think it could be a bit of a head fake. you speak to a lot of the folks in the hedge fund world. some people think it's a little overvalued. we're out a little over our skis after the extension of the bush tax cuts, people felt better. but i think we're going to be having a conversation about taxes and uncertainty all over again in a year simply because

this has been a temporary measure. and ultimately, to get our economy back to where we need to be, we're talking we need to be doing $400,000 jobs a month, 500,000 jobs a month. is that realistic? how do we get there? i think it's an innovation story. innovation takes a long time and it's very hard to legislate. >> i agree with you, andrew. when you're speaking to people who are actually managing businesses on the ground, they're still very concerned. they're concerned about higher health care expense, concerned about the possibility of higher taxes even though the tax cut extension did help sentiment a bit. but what interest solutions, bob? >> i think that andrew's word that i would pick up on is innovation and strengthening the competitive capabilities of the united states. i think what we do internationally is going to depend increasingly not just on working to penetrate foreign markets, but on strengthening our educational system, strengthening our infrastructure, which needs a lot of work, and other countries are modernizing. we're not doing it as rapidly as we should. dealing with our energy problems, and generally keeping up a high level of research and

development. we're in a much more competitive world there is more competition and more products from more countries than ever before. and the united states has to do a number of things internally to innovate and to strengthen our competitiveness, otherwise these other countries are going to become even more powerful in the global economy, and we won't be able to take full advantage of it unless we are more competitive and continue to be the most innovative country in the world. >> from an investment standpoint, andrew, that's where the money is moving, right? you see money moving into international markets. even the hedge fund guys you're talking about are looking at commodities. >> and everyone is going internationally. and i think going back to this innovation point, though, i was with the president of ford north america a couple of weeks ago, and i very ignorantly asked him about electric cars and hybrid cars. and i said where do you make your batteries? he says in south korea. i then ignorantly said where is your r&d center? who comes up with the intellectual property for the

pat batteries. we're not competing against other folks outside of our country who are innovating. and that's going to be the push-pull. >> andrew makes a great point. you have the russians trying to create a silicon valley outside of moscow. you've got china now producing solar panels. you know, the innovation is happening outside the united states. but how do we keep it here? >> well, that's really one of the great challenges we have. first of all you have to strengthen the educational system. if you don't have a world class educational system now, we won't have a world class economy 20 years from now. the infrastructure. look at what these countries are doing to strengthen their infrastructure. it's enormous. china, india is beginning to do it. other countries are. they're developing clean energy projects. china has these wind farms and solar pharmacy. we have to really get serious about the fact that if we want to remain the number one economy, if we want to create good jobs for american workers and profitability, we've got to focus a lot more on this. and r&d is critical to that. and doing it in the united

states is very important, because the more manufacturing shifts abroad, the greater the tendency there is for r&d also to go with it. so strengthening the ability of the manufacturing sector in this country to be competitive and strengthening r&d is very important. and the last point i make is we have to make a major effort to protect intellectual property. we're finding many countries, china and many others are engaged in piracy of intellectual property and forcing the transfer of intellectual property. if we lose the edge because other countries get this through these types of measures, then i think we're in a weaker position down the road to create jobs and profits. >> and you've been working on this at the state department? >> it's a major project of mine, strengthening our capability and enforcing our intellectual property rights around the world and avoiding piracy or forced transfer that we face almost everywhere. >> let me go back to what you said about the president, andrew, and the tax cut extension. how centrist do you think the president's politics will be in

the new year? >> i think they're definitely moving towards the center, and i think that probably is a good thing when it comes to confidence in the markets. it covers a lot of mergers and acquisitions. there were a lot of deals, actually pent-up deals that were supposed to get done by the end of this year that are probably going to get done in the new year. i think there will be some of that, and i think that the president will play a huge role in that. but again, when you talk about certainty, uncertainty, the business community is always talking about what can we do to get certainty. and i worry when it comes to taxes and everything else, even though there may be a centrist approach, there is an election two years down the road all over again. >> you know when you look at the chinese, the chinese are thinking 100 years. they're thinking we're going to be the leadership in 40 years. long-term. we're thinking about the next election. >> well, one of the things we have to do is think longer term. these countries have what is known in the trade as industrial policy. they have a long-term planning process for developing their industries, a five-year plan. we've got to begin to think about and invest in our future

to a much greater degree. we're in the competitive race of our lifetimes. the president talked about a sputnik moment. but there are sputniks coming from all over. and we cannot take our leading role in the global economy over the medium term for granted without a lot more focus and a lot more investment in our future, which is education, infrastructure, energy, and r&d in the most innovative kinds of problems. >> and i imagine one of the issues that will come up this year is immigration reform. we've been educating lots of people for many, many years that come here and then export that education with them. there is going to be talk in washington about how we can make that work. >> i do think it's very important to attract and retain the best and the brightest from around the world. if we don't do that, then they go applaud and do the research and development in other countries and start businesses. >> right. >> the history of the united states is that we thrive on people coming in and bringing their talents and innovativeness to our economy.

>> for sure. >> we have to continue to do that. >> bob, great conversation. andrew, great conversation. appreciate it. happy holidays, gentlemen. >> thank you. >> see you soon. up next on the "wall street journal report," if your new years resolution is to get your portfolio in shape, we have tips that will be sure to pay dividends. and we've got the latest hard assets coloring the world of today's wealthiest investors. as we take a look, we'll look at how the stock market ended the week. [ female announcer ] most women in america

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investing and president and ceo of wbi investments. great to have you on the program. >> thanks, maria. >> thank you very much for joining me. what is dividend investing. why is it so important to investors? >> dividend investing really focusing on dividend investing is to capture the income, the cash flow that is being paid pretty much reliably every quarter by companies to make their stock more attractive to investors. >> so you're getting a regular stream of income? >> yes. >> should i be reinvesting that money or take the income and go save it? >> well, either way. whether you're in the income phase and you need to take the income. one of the things we've learned over the last ten years, especially as we've been in financial crisis, is many of the great companies that people routinely invested in for 20, 30, 40 years, that wasn't a good strategy. just not to look at the underlying fundamentals of the company. so i think it is important to make sure you're investing in viable companies and you look at

them at least once a year to make sure you want to continue to plow your cash flow right back into that same company. >> so what is the best way to invest in dividend pairyers the? should i be doing it directly or mutual funds, etfs have exchange-traded funds also. do lots of dividend payers? what is the best way. >> all of those things are greta. it really depends on what you would like. but if you can pick individual stocks, you have the personality and the drive to be able to do the analysis, that's great. for those people that aren't really looking under the hood before they buy, they should use a mutual fund or an etf. >> okay. and how much of the portfolio should be in dividend-related companies? >> well, for us as a money manager, we think all of it. but most people don't put all their money in dividend-paying stocks. a really fundamental difference

between a dividend-paying stock and a gross stock that doesn't pay a dividend. gross stocks' only return opportunity is if prices are rising for the share price with a dividend, whether price is going up or down, you get to collect that dividend, that cash flow and either spend it or reinvest it, which is a huge advantage and why it's becoming much more popular. >> yeah, you've got the potential for two income streams, obviously. the stock moving and the dividend. amazing to me that that people have actually put more money in treasuries at such record low interest rates that they're getting and they're not necessarily putting that money in dividend payers, which obviously we are talking about much more competitive rates, right? if you're investing for income, is this the right place to be as opposed to bonds? >> well, i think it's really important for people to understand that the, you know, piling in that everybody has done into bonds, especially the treasury, because there has been tremendous fear about failure, because of what we have just

been through with the second worst financial crisis in history, that was good for a while. it's -- any time that there is a crowded trade or a bubble in pricing that tends to unwind badly, for the first time in the last 50 years, the ten-year treasury is yielding less than the dow jones industrial average. whenever we see as an investment manager something that is really overpriced compared to something that is reasonably priced, we're going to buy the reasonably priced or the cheap thing, because to win at investing, you have to buy low and sell high. >> very basic, basic advice there. what are the risks and the downside to dividend investing? >> dividend-paying stocks and the reason why people don't use them more exclusively is because stocks are volatile. and you have to focus, really, on the two benefits. we think that investors should focus on buying great stocks that are good values today that have high dividend yields and focus more on their cash flow

than on the price movement. they get paid to wait patiently for the price of the stock to appreciate. >> my thanks to don schreiber. coming up next on "the wall street journal report," notice anything sparkly on my neck? can you say 42 carats and 72 carats? yes, coming up next, we'll tell you about this gorgeous sparkly piece. we're going diamond shopping. stay with us on "the wall street journal report."

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at auction houses around the world, rare colored diamonds have seen staggering sales this year. what is dazzling about this hard asset? lisa kline joins me right now. she is executive vice president for la vaya. nice to see you. gorgeous jewels you brought. let's talk about colored diamonds. what is going on? >> it is really a classic case of supply and demand. over the past two years as one of the largest manufacturers of diamond suppliers in the world we've seen the supply decreasing while the value has steadily been increasing. >> amazing. the color you've got. you've got red, blue, green, yellow, all sorts of colors, and they're diamonds. so tell us about these stones. these are the red diamonds. >> these are the red diamonds. it's the largest red diamond collection in the world.

our collection has 13 red diamonds ranging from half carat to just over one carat. and we have been collecting these stones just over eight years. >> how do they become -- they're redstone, to begin with? >> so redstones, what is fascinating about them is actually we're not exactly sure what causes them to be red. it's said that it might have to do with some sort of structural anomaly within the rough stone, but nothing has ever been proven. >> so what is the price, for example, this ring right now? >> well, the collection collectively is priced upwards of $15.million. >> okay. what other stones have you brought us? you've got red diamonds and other colors here. >> yeah, we wanted to bring a sampling of what it is that we do so special at la vive. we bought a nice selection of almost ever color. yellow diamond necklace. >> that is gorgeous. this is how many carats? >> 42 carats intense yellow diamonds. which means it has a really

strong color saturation of yellow within the stone. >> and then how many diamonds are around the necklace? >> 75 diamonds totalling 72 carats of white diamonds. >> what's the price of that necklace? >> just about $4 million. >> $4 million for that necklace. and again, same situation with yellow as red in terms of we're not really sure what gives that it tone? >> yellow actually nitrogen is what gives the yellow diamonds their yellow tone. >> okay. and what about this here? >> well, this is a magnificent brooch. and that is a two carat vivid blueish-green diamond surrounded by 16 carats of vivid pink diamonds. >> gorgeous. i know you mine what, one-third of the world's diamonds? tell us about the supply of diamonds. we've looked at the diamond story before on this program, and it seems that prices for diamonds keep going up. >> they do, they do. and with good reason. especially with the rarest of

the rare in color diamonds, and the purest of white diamonds. we see it has one of the largest diamond manufacturers. each and every year we're feming fewer. >> so supply is decreasing. this right here is a green diamond. >> a two carat intense green. >> tell us about those. >> a 303 intense blue flawless diamond. and obviously as you have seen with the auctions and blue diamonds are becoming also one of those color stones that are just becoming increasingly, increasingly more rare. and the two carat intense green is surrounded by ten carats of white diamonds. and just about two carats of pink diamonds. >> is the best place to purchase right at the store or at auction? i mean, what is the better proposition? >> well, since we are one of the very few brands that go directly from the mine to the finger as

we like to say, so there is no middle man. >> you don't usually see that under one roof. >> no. >> where you've got the mining as well as the cutting and polishing and all the way to the retail. >> exactly. we're 100% vertically integrated, which is incredibly rare in this city. >> like the jewels. >> exactly. >> thank you so much for joining us. we appreciate it. >> thank you. >> lisa kline la viave. up next, "the wall street journal report" will take a look at news this week that will impact your money. for more on the program and our guests, check out our website, wsjr.cnbc.com. you can also find a link to my blog, investoragenda@cnbc.com. stay with us. we'll be right back. and i went online to find a way. ♪ what really excited me about chantix -- it's a non-nicotine pill. i didn't want nicotine to give up nicotine. while you're taking the medication, for the first week, you can go ahead and smoke.

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now a look at the stories coming up in the week ahead that may move the markets and impact your money this week. monday the institute for supply and management releases the latest activity for activity in the supply and manufacturer. total ought sales for the month of december. and on friday the first employment report of the new year. we'll find out how many jobs the economy lost or gained in the last month. finally today, what do chocolate, water, coffee, and cars have in common? aside from being necessities for many people, their prices are likely to go up in the new year. according to the website dealnews.com. chocolate because of high demand and difficult growing conditions, cars because the economy is improving. coffee will perk up because the

world's supply is contracting. and water will be dripping higher as cash-strapped municipalities search for more revenue. there is some good news in all of this. high-tech items such as blu-ray dvd players and hds are likely to cost less in new year. thank you for joining us. next week i'm in las vegas for the annual consumer electronics show. we'll check out the latest gadgets that you may be looking for next year. each week keep it right here where wall street meets main street. have a great week, everybody. happy new year, and i'll see you next weekend.