>> and you see a divergence between the overall economy and the employment -- >> i do. >> -- economy. talk to us about that. >> well, you know, the -- it's really on the tradable side, maria. so on the tradable side we have growth in multinational companies, you know, have big emerging markets to fuel their growth. but as an employment engine it's not working because while we get employment growth in part of the tradable sector, in consulting, computer design, managing multinational enterprises, other parts are sort of moving offshore. so as a net contributor to employment it doesn't really -- hasn't done anything for a couple decades. and i don't think until we do something that pattern will change. so if the tradable side loses its employment-generating capability, which is the thing we relied on before, then we're stuck until we restart the engine on the tradable side. and i think that's going to be hard to do.

not impossible. americans are ingenious people. >> yeah, all of this has people asking new questions about where america fits in. >> right. >> to the whole global story. you've got the emerging markets seeing real growth, continuing to see vibrancy. >> right. >> europe is in a mess because of the greek crisis and the debt crisis throughout the euro zone, which i want to ask you about in a moment. >> yep. >> and then america is stuck in this slow mode capacity. what's your take on this? where is -- where does america fit in in the new normal? >> in the new -- i think in the longer term, once we overcome some of these challenges, we fit in in the following way. we will be a highly innovative, very successful economy that isn't dominant anymore. you know, that we are not one of the future economic giants of the global economy. but we'll be a highly successful, competitive player. and i think our challenges are to get there from here over the

next decade. and the thing that worries me about the global economy is there are so many elements of fragility in major parts of it, just as you described, and so if one of them goes to heck or goes badly, it will adversely affect the others. i mean, europe will bring us down, for sure. >> so we should be worried, then, that the events in greece and in europe will impact the west, will impact the u.s. >> absolutely. europe's already experiencing slower growth. they're our major trading partner still. notwithstanding all the talk about china. so if they go down, you know, it will adversely impair our potential growth, which is already struggling. >> and in the book, your new book, "the next convergence," you talk about worldwide income inequality shrinking. about the u.s. may eventually be taken over as the world's number one economy. how and when will that happen? people are looking at china and saying, okay, 1.5 billion people versus 300 million in the u.s., the numbers obviously tell the story. >> yes. >> what's your timing on that?

>> so in terms of passing us, i would guess china in the next 10 to 15 years. basically, they're the second largest economy, and at 6-plus, we're about 13 to 14 trillion. so if they double one more time and a bit more, they'll be about the same size as the american economy. >> so should people be worried about that? >> no, i don't think so. not necessarily. this is a big economy. it will be a richer economy. it's a huge opportunity for highly competitive firms. it will be an employment generator for us to some extent. >> if we're able to sell to those people. >> if we're able to sell. exactly. >> that's really a critical piece of it. >> yeah, it is. that's the issue. >> michael, great to have you on the program. >> it was fun to be here. >> best of luck on the book, it's a great book. "the next convergence" is in bookstores. up next on "the wall street journal report," investor's guide to the new normal. what the debate of the death of it means for your money and how to protect your financial future. later, is the oracle of omaha a girlie girl when it

comes to investing? warren buffett may just be in touch with his feminine side. as we take a break take a look at how the stock market ended the week. back in a moment. ♪ [ engine revving ] [ male announcer ] 125 years ago... we invented the automobile. ♪ and 80,000 patents later, we're still reinventing it. ♪ it's no coincidence that the oldest car company has the youngest and freshest line in the luxury class. mercedes-benz. see your authorized mercedes-benz dealer for exceptional offers on the c-class. ♪

well, you don't need to be a boy scout to want to be prepared. especially when it comes to your financial well-being. with the federal budget deficit adding up to trillions of dollars, what's the right road ahead for investors? with some advice on investing in this new normal, blackrock strategist russ koesterich joins us. he's the author of "the $10 trillion gamble." russ, it is good to have you on the program. >> thanks for having me, maria. >> so this year we're having, you know, so many unprecedented conversations. the conversation in washington about the debt ceiling, that it needs to be raised, and the idea that, you though, we're looking at a european debt upset as

well. what are the most important items in all of this for the average investor to understand? >> i think there are a couple things. first of all, what are the economic implications of having these large deficits and these large debts? how does it affect the real economy? and generally, there are three ways it really affects people, one of which is you mostly see slower growth when you're running large deficits and have large debt. second of all, it tends to push up interest rates. now, that has not happened so far in the united states because the private part of the economy has been very weak. but by and large, if these deficits continue, eventually rates are likely to rise and perhaps significantly. the third part is a bit up in the air and really depends on how the government chooses to tackle the deficit, but you do have the potential for higher inflation. and this is really a game changer for investors because inflation is the one factor that really does impact how assets perform. >> so how do you protect your purchasing power in all of this? because clearly that will eat away at your purchasing power and force you to decline -- drop your standard of living. >> this is exactly the right question to ask because in the

long term it's not the no, ma'amal return, itnominal reture real return. what's the return on investment after you take into account inflation. generally bonds are the worst asset class when inflation is rising. equities get hit immediately but the advantage of equities is companies can raise their prices so over the long term equities actually hold up reasonably well. the asset class that does the best when inflation's rising is commodities. hard assets, gold, silver, energy. because these assets are priced in dollars, as the value of the dollar goes down their value goes up. >> and we've already seen that. that sort of trade has taken place. what about the news this week? the federal reserve downgrading its assessment of economic growth. they didn't raise interest rates. they said that rates would stay low for an extended period. tell me about protecting your assets in a time that we are expecting higher interest rates at some point and approaching an individual's debt versus the cash balance sheet. >> i think there are a couple things to think about. the first and probably most

basic, i don't think you're going to see rates rise anytime soon. the economy is too weak. there's not a lot of private demand for capital but as we get into 2012, 2013 the economy normalizes rates are likely to go up. what do you do? one thing simple to do right now, lock in your borrowing costs. you're an individual, you've got an adjustable rate mortgage. that's going to go up as interest rates start to rise. right now rates are very low. you can lock those in by converting from an adjustable to a fixed rate mortgage. in terms of your portfolio the lessons are fairly simple. one, minimize your bond exposure, and second of all, think about those segments of the equity market that do well in a rising rate environment. historically, that's meant energy stocks, health care stocks, and technology stocks. >> what about housing? it has not participated in the economic recovery. prices keep coming down. do you think prices keep going down and how does that play into all of this? >> unfortunately, i think we're looking at a long period where housing's going to sort of bounce along the bottom. so in nominal terms i think housing prices are probably

flattening out. if you think about them in inflation-adjusted terms housing can go down a bit more. and this is very typical of what you see when a credit bubble bursts. this is a very different type of recession. it wasn't caused by the fed hiking rates, it was caused by a burst in the credit bubble and in that environment typically housing goes down or stagnant for five to ten years. so i think the lesson for investors is don't assume your home is going to appreciate that much over the next three to five years. >> that's really a good point. and what was your take on the activity that we saw this week? you know, the dow on thursday down 240 points. and then we see that greece had an austerity plan for the next five years and the market comes back but also choppy on friday. we've got this deficit talk in wash. how does that play out over the next couple of weeks? and does the market feel shaky to you? >> the market is shaky. we've been expecting a higher volatility summer. there are a lot of things going on. you've got the ongoing issue with greece. you've got the issue of the u.s. debt ceiling. but to my mind the biggest problem right now is we had this unexpected slowing of the

economy. the markets were expecting about 3% to 4% growth a few months ago. now it looks like we're in an environment where in the u.s. we're lucky to grow 2%, 2 1/2%. that has a hit to corporate earnings. and this is something investors are starting to come to grips with. the good news is that i think a lot of the bad news is already reflected in the price of stocks. >> because the market has been down for several weeks. >> the market's already down 5% or more from its peak and it wasn't that expensive to start. so i think this will help cushion the down side going forward but investors should expect more volatility. >> russ, thank you so much for your insights. we appreciate it. russ koesterich joining us. up next on "the wall street journal report" do women make better investors than men? how a woman's point of view makes for better returns and mo

wall street is traditionally known as something of a boys' club, but america's most famous investor struck it rich by acting like a girl. my next guest is the motley fool's louann lofton, author of "warren buflt investors like a girl and why you should too." louann, good to have you on the program. welcome. >> thanks for having me. >> so do women make better investors? >> i think they do. i think the studies show that. women tend to have a longer-term outlook. they tend to trade less. one study showed that men traded their accounts 45% more than women did. >> it's really interest. behavioral economists have highlighted a lot of the ways that men and women approach money and risk differently. so what made you equate general

feminine qualities with warren buffett, the third richest man in the world? >> well, the science on this really started coming out about -- in the last ten years. and i started looking at study after study. this is back in the summer of 2007. and i'd been following buffett for a really long time. and when i looked at how women invested compared to how men invested and women got better results than men did, it just became clear to me. i thought this all sounded very familiar. taking this patient, calm approach, you know, thinking long term. this all sounded to me a lot like the oracle of omaha. >> you know, let's parse through some of the things that you're saying because one aspect of buffett's temperament, as you mentioned moments ago and as you wrote in the book, is this long-term thinking mentality. how did that serve him well? this -- in the last few years? particularly in the fall of 2008, when the market seemed like it was about to fall off a

cliff. >> yeah. we all remember that. that was such a scary time for investors. and buffett, one of his most famous savings is always be greedy when others are fearful and fearful when others are greedy. and that serves him very well. it served all investors well during that time, during that fall of 2008, if they were able to control their emoegsz p i mean, that's what we're really talking about here, is the ability to control your emotions, to not do things to get other people in trouble. and we looked at a guy like buffett, when the market was tanking, that fall he was out buying stocks. and i was out buying stocks as well. it was a really scary time. but that was the right thing to, do is to have that long-term point of view, not let yourself get caught up in all the mania and hysteria. and it's an interesting study i cite in the book from vanguard which showed that analyzing the i.r.a. accounts of almost 3 million people there, and it showed that men actually tended to panic and sell at the bottom of the market in 2008 whereas women held on. >> you know, it's interesting because some people might say, oh, women are more emotional

than men generally speaking, of course. it's a generalization. but men trade 45% more than women. single men trade 67% more than single women. so how do the genders compare when it comes to those emotions? >> you know, maria, it all comes down to overconfidence. i know it is controversial to say that men are the more emotional sex when it comes to investing. but i think the research is clear it backs that up. it's the feeling men think they know more than they do when it comes to investing. it makes them think of investing as a game or a gamble. it makes them trade on hot stock tips. it makes them invest in things they don't understand, take on too much risk. and women, we don't tend to be as confident when it comes to investing. now, it can sound like a bad thing but it can actually work in our favor because that does make us think long-term, do more research, combine that with our risk-averse nature and you're setting yourself up for a very feminine temperament but that leads to long-term investing success.

>> absolutely. you're doing that much more homework. meanwhile, the wild ride investors have been on the last few years has had a pretty severe impact on the retail investor. what's the state of the female individual investor today? >> well, i think just overall i don't think there have ever been enough women investing in the market and i think that probably holds true again today. women -- it's really important for us to take charge of this. we all know the statistics, that women work -- during our working lives we make less than men, we tend to live longer, so we're faced with making do for a longer period of time with less money. one study i saw the other day said by the time a woman turns 64 the amount of money she will have lost out on attributable to the pay gap alone is $430,000. which is just a staggering number. the pay gap actually gets worse the older that you are. so it just compounds itself. so what women need to do is become empowered, realize that they have this natural temperament to be great long-term investors, and really start investing, you know, take those actions.

i think that's critically important. and as we talk about in the book, the results are clear. you'll make more money. that goes for retail investors and professional investors. >> i like it. you go, girl. great to have you on the program, louann. thanks. >> thank you, maria. >> we'll see you soon. louann lofton, thanks very much for being with us. up next on "the wall street journal report," a look at the news this upcoming week that will have an impact on your money. and where the world's wealthies. what countries top the list when it comes to a population with cash in hand. [ male announcer ] walls can talk.

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for more on our show and our guests check out the website. wsjr.cnbc.com. i hope you'll follow me on twitter. look for @mariabartiromo. now a look at the stories coming up in the week ahead that may move the markets and impact your money this week. on monday we get the latest figures on americans' personal income and spending. tuesday the s&p case-shiller home price index is out. it tracks fluctuation in housing markets across the country. also out is the reading on consumer confidence on the 28th. friday is the first day of july. total june auto and truck sales will be released on friday. finally, good news if you're among the world's wealthiest. it seems there's more to go around. the 15th annual world wealth report was released this week by merrill lynch and cap gemini. the number of high net worth individuals, those with assets of more than $1 million, is up. 10.9 million people around the world controlling more than $42 trillion. the largest concentration is in the united states. representing 28% of the global

high net worth population. but the asian region has seen the biggest growth in both population and total wealth. adding up to 3.3 million individuals with total assets of $10.8 trillion. this is the first time asia has surpassed europe in both of those numbers. the continent has 3.1 million millionaires with $10.2 trillion in wealth. that'll do it for us for today. thanks so much for joining us. my guests next week, i hope you'll join us, former federal reserve chairman alan greenspan. each week keep it right here where wall street meets main street. have a great week, everybody, and i'll see you again next week.

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