CNN CNN


 

Return to Transcripts main page

YOUR MONEY

Economic Outlook for 2011; 15 Million Americans Still Unemployed; Will New Tax Package Help As Much As Obama Says?

Aired January 1, 2011 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ALI VELSHI, CO-HOST: 2011 kicks off with a new direction for Washington. Positive signs in the economy and the same tough question we have been asking for over a year. Where are the jobs?

Welcome to YOUR MONEY. I'm Ali Velshi.

Pretty strong signs of economic recovery in 2010, the stock markets soared. Markets gaining 10 percent, ending on two-year highs. Retailers reported strong sales and consumers are feeling better as the year drew to close they are even saving more money.

And yet, Christine Romans, you do this every day, you talk about everything in the business world every morning. You know this better than anyone. We continue to need this recovery to be more robust, to pick up steam.

So, Christine, as we get into 2011where are we in this economy and more importantly here are we headed?

CHRISTINE ROMANS, CO-HOST: I will give you another bright spot for next year, Ali, as well, the share of Americans paychecks that they are paying for their financial obligations, like their mortgage, their credit card, their debts, their main financial expenditures that share is going down. It is much lower than it has been in any time in recent memory. That is giving people more financial flexibility right now.

But the two things we care about, our house and our job. There are still big question marks over both of those areas. That is what we feel the most and that is what is going to hold us back from a consumer perspective until we can find out that gets fixed.

VELSHI: Unfortunately, the one thing that has been doing so well are your investments. But we know so many Americans didn't invest in the stock market and then as that economic crisis came in so many more bailed out of the market and have all their money in cash just when that market has been recovering.

Diane Swonk is the chief economist with Mesirow Financial.

Diane, does the way that 2010 ended politically and economically make you more optimistic for the year ahead?

DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Optimism is a relative concept. Because of course we have lowered the hurdle so low. I am more optimistic on a relative basis. We did end the year on a little bit stronger note after a very weak patch in the spring and the summer. We did see the Congress come through with extending tax cuts at all levels and a little extra there for the middle class, the payroll tax cut.

That is a big tax cut, an extra $100 billion, $120 billion in stimulus. I don't think all of it will be spent, some of it will be used as Christine referred earlier to service, that debt that is still outstanding and bring down those debt service ratios. And also some of it will be saved but the part of it that is spent will go back in the economy.

We also are beginning to see small businesses hire again. So we do have like a convergence of events suggesting we are regaining momentum and we are at least entering the year a little higher then we were a few months ago.

VELSHI: That is the Holy Grail that we see small businesses start to hire again. They have always been the engine of job growth, new jobs in this country.

Peter Morici, is an economist, he is a professor at the University of Maryland School of Business.

I read the notes you send out almost daily. It is almost universally depressing. Take a look at this Pew Poll, Peter. It shows that in 1937 in the midst of the great depression, unemployment, look at that unemployment that yellow number was 17 percent and 50 percent of Americans were optimistic about the future.

Today, the unemployment rate half that, 9.8 percent and 35 percent of Americans, only 35 percent of Americans are optimistic about the future. In terms of where you, Peter Morici, see this economy headed, are Americans right to be so pessimistic about the future?

PROF. PETER MORICI, UNIVERSITY OF MARYLAND SCHOOL OF BUSINESS: I think they are wrong to be so pessimistic. The economy is showing a little bit more bounce. I do expect that we are going to start to add more jobs in 2011. We are not going to add them at the pace to appreciably pull down unemployment because the economy has to grow at 4 or 5 percent to accomplish that, but we are finally going to get into the three's.

So I'm optimistic that with this additional tax cut we are going to have some more bounce, the stock market will do better and that things will look a little brighter.

Going beyond that we are going to have to find a way to grow without these big government deficits. That is a problem in this administration for 2012.

VELSHI: Peter, I can always tell from the color of your bow tie how you are going to feel about the economy. You have the green, yellow, blue and red bow tie. You do say that we are going to get into the threes. It is remarkable the difference between growing at 2 percent and growing at 3 percent and how much that could help us in the end. But whatever the New Year holds one thing we know for sure, our income tax rates won't be going up. Some people will pay less in taxes because our payroll tax will be going down, Christine. The part that you pay for Social Security going down from 6.2 percent of your pay check to 4.2 percent of your paycheck. Break down how much money people can expect to get from this payroll tax holiday -- Christine.

ROMANS: And they have the right to know what kind of stimulus it will be for the economy because some people will be using that smartly to pay down their debt and their high interest credit card bills.

Here is the example. If you make $40,000 a year, you are going to have $800 more in your pocket at the end of the year. You are not going to get it all at once folks, but you are going to get it little by little. And so, some people are already making their new year's resolutions, as I say you should, to figure out how to put that money to good use.

Eighty thousand dollars, if that is how much you make, $1,600 is what you get extra or what the government will take less, depending on how you look at it and $100,000, $2,200 more. A lot of people say wow it is free government money. Other people say no, no, it is your money in the first place. But look how you spend that money is important for how the economy recovers and how your own personal balance sheet recovers.

VELSHI: You know we all talk, Christine, you and I, we look at markets. We look at stocks and we look at economic growth. But the concept, the word growth, the economy growing more than it did the year before, or growing making bigger than the year before. At the same time inflation not growing as much is the thing we all look for. Is that paradigm just wrong? Have we just lost sight of the fact that maybe we can do as well as we did without doing better? Because we are going to be a generation or our kids are going to be a generation that maybe don't do as well as their parents.

ROMANS: When you look at Generation X, Ali, when we were graduating from college it was into a period when 24 million jobs were created I think over ten years, huge, explosive growth. And so there were all these opportunities for people. Now you have generation y graduating to a period of more than 8 million jobs lost. And many economists and I'm not the economist to the foursome here, but many economists saying that we will see disappointing growth in the economy for the next few years at least and that is going to limit some of the prospects for people. Is this the new normal or is it temporary that is what I don't know?

VELSHI: That is going to be a very big question that we are going to address in 2011. All of you stick around.

President Obama claims the tax bill could potentially create millions of new jobs? Millions, is that true? I'll try to get you an answer in the next block. Stay with us.

(COMMERCIAL BREAK) VELSHI: More than 15 million Americans are currently unemployed. Now President Obama says help is on the way in the form of his new tax package.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Right now what all of us care about is growing the American economy and creating jobs for the American people. Taken as a whole, that's what this package of tax relief is going to do.

(END VIDEO CLIP)

VELSHI: Tig Gilliam is the CEO of Adecco, a major recruiting and hiring firm.

Tig, thanks for joining us.

Tell me what in your opinion this law actually means for businesses will it encourage hiring? Because we have been hearing from businesses that the shifting sands under them that have prevented them from making hiring decisions. I'm not sure that is true, I think businesses haven't been hiring because they have not seen the demand pick up. In retail where we have seen the demand pick up we have seen hiring.

TIG GILLIAM, CEO, ADECCO: Great to see you, Ali. I think there is one important part of this legislation that will definitely help employers and that is the confirmation of the tax situation. So now those small and medium businesses that are past through companies have some confidence and understanding what the tax situation is going to be and can now make their decision.

And of course the big thing for the economy in the bill is the fact that we have this payroll tax holiday of 2 percent which could stimulate that 70 percent of our GDP that is driven by consumer spending which is very important in the economic recovery.

VELSHI: When you say pass through companies, you meant those small businesses where the income and the profit gets passed through to the owners personal taxes so they will see no increase in their taxes.

GILLIAM: Exactly.

VELSHI: You told us in the past that temporary jobs, in fact much of the business that you are involved in, come back before permanent ones do. Will the long-term unemployed get more traction searching for a temporary job in this environment before a permanent job?

GILLIAM: Sure. We have now seen more than 400,000 jobs created in the temporary segment since the recession recovery began. That is half the jobs we lost since the beginning of 2007. So clearly there are companies, small, medium and large that have needs for talent. They have incremental needs, and they are hiring and they are hiring on a temporary contract and flexible basis so far. That is across 145,000 of Adecco group clients. So it is not just big companies it is also small companies. And what that means for job seekers right now, that many of their best opportunities are from temporary and project based assignments, where they get an opportunity to work with a company and really demonstrate the value they can bring to that company long term.

VELSHI: Tig give me something for my viewers to get their teeth into whether it is sectors or geography. What areas hold the most promise right now either for temporary or permanent hiring?

GILLIAM: That is a great question, Ali. You know, first I think we hear a lot of the positive news in the recovery of the economy. The reality is that is showing up in the job market. If you look at the number of job openings today in the private sector, they are up 40 percent over a year ago. There are three million job openings out there today.

Now those opportunities are clustered in professional and business services. And so that is things like IT and finance and accounting, they are in health care and education. Those are really the categories, engineering, where the greatest opportunity for new jobs is being created. In fact, there's 4.2 percent vacancy today in those professional and business service openings. That is a great skill set to be working on from an education point of view for job opportunities in the next 12 to 18 months.

VELSHI: And you know Tig unfortunately, that hasn't changed. I mean the good news is that is where the jobs are. But that hasn't changed in the last couple of years in terms of those are still the areas whether it is finance or accounting or education or health care or engineering or energy. So if you've waited this long to retrain, you know what make the decision to do it now. Some of them require six months of training, some of them are on the job training, and some of them are four years or more of training. But the bottom line is there are some promising things.

Tig always a pleasure to see you. Thanks for being with us to help us kick off 2011.

Take a look at the employment situation over the past few years. Go back to when this recession started at the end of 2007, December, 2007. See that little green blip that is where the recession started. But look at that we lost all sorts of jobs in 2008, by the end of 2008 beginning 2009 around 700,000 jobs a month it was consistent. At the end of 2009 it looked like we were coming out of the woods, toward the end of 2009. See that green blip we got some jobs.

And then in 2010, keep in mind a lot of those are census jobs, a lot of those are stimulus based government jobs. Look at when all that money ran out in 2010, again we started losing jobs. But toward the end of 2010 we started gaining jobs. We won't get the December number until the unemployment report comes out in a week from now. But it is looking not consistent, but better.

Diane, Diane Swonk joins us again. When you factor together the months where we saw job losses and the months where we saw job gains, the net, the number of jobs we created minus all of those we lost for the first 11 months of 2010, 951,000 jobs added. It is not enough. Are we going to see some kind of a boom, some kind of an uptick in jobs created because of the tax bill because of the trends that Tig just talked about that we so badly needed in 2011?

SWONK: Well we are going to see an uptick, but not a boom. Now again that relative hurdle, you know we lowered that hurdle so low it is easy to clear. I think we will easily create more than two million jobs in 2011 which is more than double the pace of 2010 on that as you just illustrated and that is good news.

But it still only makes a small dent in the millions of jobs, the more than 7 million that are still down from the peak of the previous recovery. So we are still regaining ground lost. When you are regaining ground lost you feel better but you don't feel as good as you did before you lost the ground in the first place. And that is what we are still dealing with is digging ourselves out of the hole.

VELSHI: We'll take a double. Christine, the private sector, this is a big distinction, jobs that are created by government, which we don't want a whole lot of in the type of economy we have versus private sector jobs created. Private sector has seen 11 straight months of job growth. Is that trend going to continue in 2011? More private sector jobs than government jobs?

ROMANS: Probably. But the question is how much of an uptick to quote Diane will it be? And we just don't know yet and will it be enough to keep the unemployment rate at least steady. We want to see demand from businesses. Ali, we want to see businesses starting to spend money and hire people because they have demand coming in the door not because of government spending and the other things that we have been doing, the emergency measures we had to prop up the economy. And that is a big question.

I think the trend for next year, Ali, for 2011, the trend will be there will be an easier time for people newly unemployed to find a job, not an easy time but an easier time for people just laid off to find a job and a huge bunch of people who have been out of work for six months or longer who feel left behind. And a big policy and economic question of what you do about people now that it is chronic unemployment and not an emergency situation anymore.

SWONK: You know, Ali.

VELSHI: Go ahead.

SWONK: I was just going to add to what Christine said. Because what your guest said earlier about the kind of jobs that are being generated it is hard to take the two million workers that have lost jobs in the construction industry and move them into engineering. That is where the real difficultly is in the mismatch of the jobs that we are creating versus the jobs that were lost.

VELSHI: And that is such a big issue. Christine and I talked about this for so long. We don't have a national retraining policy, but the reality is we have a whole lot of unemployed people and we don't have as many jobs as unemployed people. But we certainly have a lot of unfulfilled job. That might be the central question in 2011.

Peter, pessimistic economist with an optimistic tie. I will get you in; you will kick off the next block for us. The three of you all stick around. You all have some ideas to solve our jobs crisis. We are going to find out keys to solving the rest of our problems next.

(COMMERCIAL BREAK)

VELSHI: Time to talk solutions. Specifically what will put unemployed Americans back to work? Peter Morici, let's start with you; the president says this tax bill is going to create lots of jobs. And by the way it doesn't do much to fix the deficit which I know is a big issue of yours. So let's hope it creates jobs and creates a back doorway of fixing the deficit by having lots of people who can pay taxes and use those taxes to lower the deficit. Will it do what he says it is going to do? Will it create jobs?

MORICI: It will create jobs and will probably lower the unemployment rate a bit. But if we are really going to drag the unemployment rate down we are going to have to grow at 4 or 5 percent a year which we are capable of doing. To accomplish that we will have to do something about our trade deficit with China. Because all of those booming retail sales we are seeing so much of it goes out of the country, for Chinese television sets and so forth and they don't turn around and buy our exports.

You know we have spoken with the Chinese endlessly about their undervalued currency. They won't move on it. The president himself has said there are measures we can take, it is time for those measures, either we can intervene in currency markets ourselves or we can directly tax the conversion of dollars to basically simulate the effects of a Chinese revaluation until they stop intervening.

But in addition to that, in addition to customers, small businesses need better access to capital. Our regional banks are still in trouble. And our resolution trust like we had in the savings and loan crisis to help clean up the above would be very, very useful.

VELSHI: Isn't that what we tried to do, isn't that what we were thinking of doing when we started TARP and it turned into something else entirely?

MORICI: That is right.

VELSHI: Diane let me ask, at this point we have a number of economic problems, but most people think that many of them will be on the road to being solved if we lower unemployment and we get more people hired. So what is the best thing that we can do in 2011 specifically to create more jobs in this country?

SWONK: You know it is not exactly a job creator, but over the longer haul it is the only insurance policy we have to sustain the recovery and keep things going. That is to finally deal with the structural deficit, to deal with the long-term problems we have with the deficit and to rein that in.

And I think that is something that you know we saw this noise, people screaming about these cynical problems of unemployment insurance. We need to fundamentally fix our tax code and deal with elephant in the room of entitlement spending. Decide what our priorities are and be grownup and I think we need to it in the first six months of 2011 to have any kind of confidence to keep interest rates down in the U.S. or bring those long term interest rates down over the longer haul in the U.S.'s ability to service debt. I think that is really critical. It is something that I don't see a lot of going on. Gridlock is not the way going forward. We do not need gridlock at this stage of the game. We need people who are grownups who can make decisions.

ROMANS: I agree so much with her. I can I just say that one of my concerns is the subpar economic growth and stubbornly high jobless rates means that the grown-ups are too afraid for their own re- election to actually tackle some of the big long-term issues.

MORICI: It is going to be very, very difficult to bring the deficit down before you get jobs growth really accelerating.

VELSHI: Let me ask you guys this. On that topic, we had a commission; the president had a blue ribbon panel of people who said this is what you have to do to bring down the deficits, to bring down the debt. Even that the goals were not thought of as all that lofty. And once again the deficit commission is starting to look like the 9/11 commission. It was all pretty and good and we already in the first piece of legislation to follow it, we have ignored what they said we should do.

MORICI: Essentially these commissions don't accomplish a great deal other than to surface ideas. The ideas they surfaced were not that profound. Raising the retirement age to 68 by 2050 is hardly profound. It has to go to 70.

ROMANS: We know what has to be done but nobody is doing it.

SWONK: That is the issue. We do have lead time and we are talking about long-term phase in. I mean 40 years is a little ridiculous, 20- year-olds can't save for 40 years we do have an opportunity here to phase things in at a time that it is not going to be really painful today or even next year. Let's make the decisions now because if we don't, it will be really, really painful.

VELSHI: I hope folks take that advice.

Peter, pleasure to have you on the show. Thanks so much. You know I'm just joking with you. I love the stuff you put out. It is smart and our viewers deserve to hear it. Diane thanks to you as well. You have both been good friends to our show and we will continue that relationship through the course of this year as we try to get smarter and we try and create some jobs. Peter Morici and Diane Swonk.

Christine, you stick around. The new Congress will be sworn in on Wednesday and they do have their work cut out for them. The biggest issues they have to face and if they can get along with the White House. We'll talk about that next.

(COMMERCIAL BREAK)

VELSHI: Anyone thinking that 2010 ends with a clear mandate for what Washington should do in 2011, think again. The midterms brought sweeping victories for Congressional Republicans led by the Tea Party. Yet, as the year ends, voters remain divided on what direction they want to see this country move in. Fifty-five percent say President Obama's policies would move the country in the right direction, 48 percent say Democratic leaders have the right policies, just 44 percent favor Republican leaders.

Candy Crowley is CNN's chief political correspondent and she anchors "STATE OF THE UNION" every Sunday at 9:00 am Eastern.

Candy, as Republicans take over the House in 2011, do Democrats need to accept this past election as a mandate or should Republicans be concerned about over estimating the amount of public support there is for their own policies?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Let me just dodge this and say really it is both. I mean the fact of the matter is that I think what this polling shows is first of all what we know from the polling in November at the polls and that is that there is a middle that tends to swing back and forth depending on how they feel about the way things are going. It is very clear I think from the polls and the exit polls and polling now that we are seeing that people wanted to put the brakes on what many thought was kind of an overreach by the Obama administration. But they don't want to reverse it.

I think that is where they have to find the sweet spot. Both the Democrats and kind of moving toward maybe less spending, talking more about the deficit and yet paying more attention to jobs, jobs, jobs, a lot of people thought they got off track, frankly. So, I mean I think there is a message for everyone in this and that is that the public still isn't satisfied and still can swing any way they want once they get a look at what happens. So I think the onus is on both these parties to get something done.

VELSHI: And much of the dissatisfaction obviously just comes from the economic condition. I think if we had unemployment at 5 percent people would think everybody is a lot better than they think they are right now. Ed Henry, CNN's senior White House correspondent, very few people have it as good as he does right now, he is in Hawaii.

Ed just 12 percent of those people polled said the new tax law would leave their family in worst shape, 65 percent said they would feel about the same. That makes a lot of sense. Because this was mainly an extension of existing tax cuts so a lot of people aren't going to see a big difference, 23 percent say they will be better off as a result of it. That makes sense because some people are getting a reduction on what they pay on payroll taxes.

So more people will see more money in their pockets. But Ed, these are the kind of numbers probably that helped President Obama, that emboldened him in taking on his own party to get a tax deal passed even though it meant extending tax cuts for the wealthy, which was very, very annoying to some Democrats.

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Oh absolutely. He took some hits for that. But the bottom line is beyond just that one poll number is the bad that could have come for this president if he did not get a tax deal. Because you are right, maybe not an overwhelming majority of Americans thought oh this is going to make things better if he keeps rates the same. But if there was no deal and the tax rates went up for all Americans on January 1, guess what?

The president, the Democratic Party would have taken a big hit especially because you have got Republican incoming speaker John Boehner would have immediately with in days changed those tax rates, had a vote that would have basically overturned all of that. It would have looked like Democrats raised taxes, Republicans wanted to cut taxes.

VELSHI: Right.

HENRY: So this was a big victory for the president. And to follow up what Candy was saying, I think there is some of the half -- glass half full for this president from the lame duck session. He did get that tax deal; he did get the repealing don't ask, don't tell. I think that suggested if he makes some adjustments in 2011, he may be able to work with this Republican led house and a shrunken Democratic majority in the Senate. On the half empty side though, part of the reason why he did well in the lame duck is he had some leverage. Lawmakers wanted to go home for the holidays so they kind of moved past some of this stuff even if they are not completely happy.

Number two, he still had a Democratic House that helped him push through for example on don't ask, don't tell. He still had Nancy Pelosi as speaker. In a few days that is not the case.

VELSHI: All right. Ed, Jeanne Sahadi is a senior writer at CNNMONEY.com. When it comes to taxes and the deficit she is the smartest person we know. And Jeanne has now spoken to the smartest people she knows and asked what is in store for tax reform and get reduction in 2011 because we do know that that is on a lot of Americans minds. Jeanne, what are you hearing?

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: I'm hearing that we are going to hear a lot of discussion about both of them. Not necessarily as much in terms of results. The Republicans for instance have promised to cut spending to 2008 levels. I heard that from eight budget experts that I talk to normally.

The majority opinion is that they won't really reach 2008 levels. They haven't been specific about how they are going to get there. They don't think the president would sign into effect so many deep cuts especially as the economy is recovering. They are very sort of positive on tax reform. They don't expect it will be active in 2011 and chances are greater it would be enacted after 2013, but there is a lot of bipartisan support to have the debate. As you know, President Obama's Debt Commission put out a plan and they had tax reform as a big piece of it. The president himself has said he is going to focus on that in the next two years. VELSHI: Despite all the conversations about all the other things that people call government waste and that may well be, they are about a drop in the bucket compared to those ones that you just talked about. Candy thanks so much. Ed, sorry to get you out of bed in Hawaii. But we hope you enjoy the rest of your vacation there.

HENRY: I can't hear you that well because the surf is really loud out here.

VELSHI: We will let you get back to the surf. Jeanne, always a pleasure to see you and get the benefit of your knowledge. Have a great 2011 to all of you.

Well everyone wants to know what the value of your house is going to be in 2011. Will it go up? Will it go down? We will try to answer that question for you up next.

(COMMERCIAL BREAK)

VELSHI: U.S. homes have lost an estimated $1.7 trillion in value last year according to online real estate market place Zilo.com. That brings the total value lost since the market peaked; the housing market peaked in 2006 to $9 trillion with a "t." To put that in perspective that is the cost of 12 Iraq wars. Where do we go from here? Mark Zandi is the chief economist at Moody's Analytics. Mark, I mean you can parse housing numbers a lot of ways, in fact if you look at the price of a median price of a single family home in the U.S. is actually up from this time in 2010. But stalled by uncertainty about the economy and by unemployment. So what do you see happening to housing over the course of the next year?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Well I think we have more price declines to go. Not a lot just to give you contexts, prices have fallen 30 percent from their peak just about five years ago. I expect another 5 percent decline between now and the fall of 2011. The problem of course is that we still have millions of loans that are in the foreclosure process. The bulk of which will go to a foreclosure or a short sale. Those homes are sold as a discount. We will see some further price weakness. Particularly in those areas of the country where you have a lot of foreclosure problems.

VELSHI: Well you make a good point. Let's take a look at a map of the country, let's take a look at the major centers where we have seen price gains and drops. You can see there, you can gains starting from the top to the places where you have seen the biggest losses, San Diego is at the top, and Miami is at the bottom. But there are places in the country where you are seeing some gain. At this point, Mark, is the question for you if you are a buyer or a seller, more of a local question than it is more of one having to do with the national economy?

ZANDI: Sure. Absolutely. It really does depend on where you live. Even if you are in Miami which has a lot of foreclosure problems there are communities that are doing reasonably well. So as they say housing is very local. It does depend on where you live. VELSHI: Let's take a look at this graphic. You also mentioned foreclosures; 3.4 million homes have been foreclosed on since 2006. Close to a million of those this year alone, this is the driving force, what did you say Mark? Behind continued price declines. This is the biggest problem we've got.

ZANDI: It is the biggest problem. We do have approximately 4 million mortgage loans sitting in the foreclosure process or are seriously delinquent and likely to go to foreclosure. As those homes hit the marketplace they are sold at a discount and that drives down pricing. If you go to the parts of the country where foreclosures are not a significant issue, for example, Texas, then house prices are much better. They are doing very well. As the job market improves that provides support to housing. By this time next year in 2012 I think we will see some measurable price gains in most parts of the country.

VELSHI: OK, everybody seems to think maybe as a result of the economy generally improving maybe as a result of this tax deal that we are going to see some move in unemployment rates and hopefully next year we are talking about a one or two percentage points lower. That means more people can buy homes that means more people's credit will improve and it means more people at risk of losing their homes will be able to keep them. So that is one part of the puzzle.

The other one is mortgage rates. Remarkably low, historically low. I'm of the view that if you are looking to buy a house you may want to worry less about whether that house is going to be 5 or 10 percent cheaper next year because your mortgage rates are not likely to be substantially lower than they are next year.

ZANDI: Yes, excellent point. And it really does spin on your horizon. I mean we are talking about price declines in the coming year. But most people live in their homes five, seven, ten years. So you need to think about this in a longer term perspective and to your point, fixed mortgage rates they have risen a bit over the last couple three months. But even now at 5 percent they are near historic lows. So you combine very low mortgage rates with very low house prices and a better job market that is the fodder for a much better housing market. We have another six, 12 months to go but then we will be in much better shape.

VELSHI: So if the only advice one takes from this conversation, is that look at your local situation. It might be the perfect time for you to be buying a house. It might not be depending on where you are. Mark always a pleasure to see you. Have a great year in 2011.

ZANDI: Thanks so much.

VELSHI: 2010 shaped up to be a good year for stocks. Is that rally likely to continue? We are going to tell you specifically what to look for in 2011.

(COMMERCIAL BREAK)

VELSHI: How many times do I have to tell you, if you are not carrying expensive debt, really look at your investment portfolio, 2009 was a great year for stocks. The economy is still struggling but even 2010 shaped up to be a good year for investors, with low inflation, low interest rates. 2011 could be off to a good start. Are you going to listen this year? Ryan Mack is the president of Optimum Capital Management, Doug Flynn, is a certified financial planner with Flynn, Zito Capital Management.

Doug, let's start with you. What is on your radar for 2011? There is Christine by the way, Christine always with us. Doug, what is on your radar for 2011? Let's start with the big picture, give me winners and losers.

DOUG FLYNN, CERTIFIED FINANCIAL PLANNER, FLYNN, ZITO CAPITAL MANAGEMENT: Happy New Year.

VELSHI: Same to you.

FLYNN: Thank you. Realistically what you have to look at is the word reflation. And that is the Fed saying we want to stay away from deflation. We want to actually inflate everything. And so what happens there is you going to have pressure on the U.S. dollar. The big theme I think if you center your investment policy around the following, in addition to stocks, bonds and commodities, focus in on currencies. That is really where you want to look.

Brings currencies into everything you are looking at. The weakening U.S. dollar. You know the dollar was very volatile this year, but from the beginning to the end right now, it really didn't move that much. So you are going to have a continuing weakness of that dollar and there are opportunities in there. It is not going to be a great year, but there will be opportunities if you center around that theme and that is what we see for '11.

VELSHI: And you are saying, because I have U.S. dollar in the losers. You are talking about other currencies. Currencies that will do well against the U.S. Dollar?

FLYNN: Yes. If you focus in on commodities and areas that do well in that area, everybody wants to center around stocks. If you are focusing on individual stocks, you want to focus in on materials, industrials, technology and energy those are related to that. But also anything that you do with commodities, gold and oil, you center around, here is the U.S. dollar going to weaken and how would I benefit by investing with that? That is the additional tilt you want to take advantage of in '11, that we find opportunity in.

VELSHI: All right. Ryan, let's talk about bonds. In Doug's winners column are high yield bonds, bonds of companies that may have some high risk associated with them and as a result pay a higher interest. Which is quite common place these days. What should the average investor, my viewer be looking at in terms of what role bonds play in their portfolio?

RYAN MACK, Well I think that in 2011 dough is the new black. And it is going to be the new common thing. I think we have to look back at these basic principals. I mean we had a bull market. We had a bear market; I think this is going to be a moose market. As opposed to trying to look at, OK, what should we do or what should we not do.

Let's just look at basic principles, what should my asset allocation be? How long am I going to have till my retirement? Yes bonds are great, but that doesn't mean that you shouldn't put 70 percent of your portfolio in bonds if you are 25 years old.

Again we should look back at basic principals, if you are in that commuilation stage or just starting out you still have a higher percentage of stocks as opposed to bonds. The simple fact that you still have a lot of time, we don't want to have any knee jerk reactions according to what the market did or didn't do. We probably are going to go sideways. But now is the best time to do some good dollar cost averaging. If you have less than ten to 15 years till retirement you might want a higher percent of allocations in bonds. However you shouldn't let the market dictate what your asset allocation. Talk to a good unbiased view of what the asset allocation should be. And from that point go to afincalc.com.

VELSHI: Doug helped me write my book. You have just got a new book out Ryan, "It Takes a Village" which I was involved in and Christine has a new book out, "Smart is the new Rich." Guess what, Christine, in all of our books we have one thing that we say in common. That is, don't have this conversation about stocks and mutual funds if you're carrying high-interest credit card debt. If you're carrying debt, your priority has to be to get that down. Because if the market returned 10 percent in 2011 but you've credit cards that you are paying 18 percent on which is the better win? Paying your credit card debt.

ROMANS: If Ryan says Joe is the new black, I would say Ali smart is the new rich to plug it again. Because smart is the new rich next year. If you're trying to plow into stocks a year after they have been going up and you have double digit, 19 percent interest, 20 percent interest rates on your credit cards and you're getting 10 percent in the stock market that really is a dumb move. So the first thing you have to do is look at that high-interest credit card debt and make a dedication to yourself to get that down.

Next we were just talking about this in the break; this is so incredibly important, are you maxing out your 401(k)? Are you going to get the benefit of anything that is happening in the market if you are not maxing out your 401 (k). We were talking about that on that payroll tax holiday, $800 extra in your pay check if you make $40,000 a year, what are you going to do with it? You got a little more financial flexibility. Maybe you should be maxing out the 401(k) and you get the company match. And as Doug pointed out, then there's also the tax benefit of using pretax dollars.

So all of these are the smart moves that you should be making in 2011 because we need to be, don't you guys think we need to be playing offense after kind of just hunkering down for so long? Because companies are starting to make money. People who are rich are starting to make money. The rest of us are still scared for the next shoe to drop.

VELSHI: All right. And that is actually a great point to leave this. We are going to pick this up in the next block. Christine, Ryan, Doug, stay right there. Those companies that are making all that money that Christine just talked about; will Wall Street's gains be good news for Main Street in 2011? How do you make good news for you? I'll tell you in a minute.

But first, from a coffee stand to a full-blown restaurant. One woman overcame obstacles to achieve small business success. Here is Stephanie Elam.

(BEGIN VIDEO CLIP)

STEPHANIE ELAM, CNN CORRESPONDENT (voice over): I met budding barista (ph) Lucy Valena in July 2009. She was determined to take her mobile espresso catering company from the cart to her very own corner coffee shop.

LUCY VALENA, VOLTAGE COFFEE: I'm just going to keep working at it. I'm not letting up. I'm not letting up, Boston. I don't care!

ELAM: And now welcome to Voltage Coffee and Art in Cambridge's candle square section. To make her dream a reality, she used her catering funds and worked at a second job at another coffee shop. Then Valena found a venture capital firm, Launch Capital which gave her a $150,000 loan. By networking with her bizz-savvy clients, Valena got help writing a business plan, finding a contractor and building her clientele.

VALENA: What's so cool about this place and how it became a brick and mortar location from a catering service is that I already had a name for myself before I even opened the door. Voltage Coffee already meant something to people before we even opened.

JIM KOCH, FOUNDER, SAMUAL ADAMS: Hey, Lucy. This is it the first time I've been here. Congratulations.

ELAM: Sam Adams' founder Jim Koch is seeing how his help paid off.

KOCH: Welcome to small business. It is only an 84 hour week.

ELAM: Koch awarded Valena $400,000 to start her catering cart through the Sam Adams Brewing the American Dream Program, which helps small food and beverage businesses get funding. He says he understand' Valena's brewing passion.

KOCH: Lucy is the quintessential turnaround. When I first met her, she was pushing a little cart around, catering, and making little cups of coffee with a beautiful little flourish. She had a great idea. She had passion. And with just a little bit of a loan, she was able to make that dream this beautiful coffee shop.

ELAM: Now with one successful shop she's hoping this is just the beginning. So basically you are still not done with Boston, even though you now have your store front.

VALENA: No, no, no. This is just the beginning.

ELAM: Stephanie Elam, CNN, Cambridge, Massachusetts. (END VIDEO CLIP)

(COMMERCIAL BREAK)

VELSHI: The four people on your screen have all been telling you for the last couple of years to make smart investments but probably the biggest pushback I get from people is this frustration that Wall Street's gains -- when I say Wall Street, I mean Corporate America's gains have not turned into good news for Main Street. Is that disconnect going to continue in 2011?

Christine.

ROMANS: It might. I'm really worried about two Americans here. I'm worried about people who have money who are figuring out how to move forward with their money again, people who are in those stem industries, who are finding bidding wars for their talent, kids who are graduating with those degrees who are doing quite well and then millions of other people who find themselves in an economy that's more 1990 than 2011 and they're left behind.

So I'm worried that the economy is not going to grow strongly enough for Main Street to share everything of Wall Street, which is why we all have to make really smart choices about our money.

VELSHI: Ryan.

MACK: Well, I mean, I get it 2004 to 2007 Wall Street flourished while real wages never did anything. Then again, individual at home are getting more frustrated because they basically bailed out the excessive betting on Wall Street. I mean I get the frustration. But frustration never put food on my table. What we have to start understanding is that in 2011and moving forward, as frustrated as we are toward the banks or even the government what they're doing or not doing, it is only you that makes the decisions in your household. It's the personal decisions that you make with your finances that the government doesn't control that, the banks don't control that, you have to control that.

VELSHI: And that by the way is a theme of your book, it is a theme of Christine's book, too. That stop worrying about what you think is going on around you. Start worrying about what you can control. I know you share that view, Doug, but you want people to be very specific about how they control their financial futures.

FLYNN: Sure. It always gets back down to, had you lived below your means during a period of time when you had some extra money, it set you up with a little bit of a cushion should there be a time when you need that. That's why you have that.

Unfortunately a lot of people were overextended and went too far and got themselves into trouble. But the point is, most people don't have the wherewithal to get out there and start a new business and take advantage of that opportunity. And if you can't do that that realistically is what the market does for you. It's one of the cheapest and easiest ways to tack on to somebody that is trying to make profits.

VELSHI: Right.

FLYNN: You've got to do it. I laugh. The two halves, when you're filling up the tank and you are complaining that it's almost $4 a gallon. That's a terrible thing when you are doing it but then if you own the shares of the stock of the company that you're pumping the oil into, the gas into, you're saying all right well I'm getting it back on the other side. So those are things you have to take advantage of.

VELSHI: That's useful to think about. When you're mad about corporate profits and how much companies are earning, think about the fact that you might if you were smart be on the receiving end of that. Good advice to end the year on and to start the New Year.

With thanks to all of you and thank you to all of you for joining the conversation this week on YOUR MONEY. I'm here every Saturday 1:00 p.m. Eastern and 3:00 p.m. Eastern on Sunday. Also, catch Christine on "Your Bottom Line," Saturday mornings at 9:30 am Eastern. Between the two of us we got you covered for your financial needs. Stay connected 24/7 on twitter at AliVelshi and at ChristineRomans.