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Suze Orman: Keep Your Seat Belt Fastened in 2012

Back in 2008, I wrote the following for my book, Suze Orman's 2009 Action Plan:

"My sense is that we could be in for a long, slow period of recovery and it will be 2014 or 2015 before we feel more hopeful. Between now and then, we could see parts of our economy get better faster than others, and certainly some regions will start their housing rebound before others...But in terms of when we will see a lasting and consistent return to growth, well, I wouldn't be surprised if that takes a few years or more."

I stick by those words today. And I still think we won't see much improvement in 2012. In fact, I've said over and over and over that, in my opinion, 2012 will not be an easy financial year.

I think 2012 will be a tough year economically across much of the globe, but the U.S. economy, while perhaps not thriving, will look good compared to Europe, China and Japan. U.S. stocks, meanwhile, will perform better than the underlying economy would warrant. That doesn’t mean the market will go up necessarily, but I predict it will perform more strongly than the overall economy. Also, since the 10-year treasury is yielding less than the S&P 500, money will flow from bonds to stocks, further stabilizing the market.

But in the end, predictions are one thing and reality is another. If I'm wrong on these — and I just want to preface my predictions by saying that I hope I am — that will mean we've found footing, stability and growth. With that, I give you my predictions for 2012.

1. Gold goes to $2,000 in 2012

I think the eurowill go down and people will start to pile into gold. It's where people obviously are feeling safe. I think it's good as long as it stays over $1,600. It's building a solid base.

2. The housing market stays depressed

The real estate market is all over the map. Obviously there are markets such as Florida, Arizona and Nevada that could continue down for a year two...or three. But some states that have large cities are starting a slow upward movement, such as New York. We still are looking at 2013 or 2014 at least till we stabilize everywhere, but that just means it has stopped going down in the most vulnerable states. Even if housing stabilized in the next couple of years, you're looking at 2023 before we even get back to viable real estate markets throughout the country.

3. Recession or stagflation

There's a 60 percent chance of 2012 recession. If no recession , stagflation will set in.It's either bad or worse when it comes to the economy in 2012, and most of that will be based on what happens in Europe.

4. The great 29-year bull market in bonds ends

It's as simple as this: When you have interest rates this low, eventually inflation starts to come back. And the way you tame inflation is by increasing interest rates. And when interest rates go up, bonds prices go down.

5. Inflation as measured by CPI tops 4.1 percent

For the reasons I just said, you're going to see CPI top 4.1 percent. If inflation should start to rear its head and even go up just a little bit, you should make sure you're protected — and this is where you should start buying TIPS, Treasury-Inflation Protected Securities.

6. The Good Stuff

As you may know, I think about the macro economic picture and I break it down to asset classes. For 2012, I like large value (dividends). Treasury-Inflation Protected Securities will be a homerun if debt gets out of control.

My sleeper asset class is small growth — the last three market rallies we had this year were all led by small growth. That said, nothing will be certain in 2012, so unless you’re prepared to stomach wild market swings, it might be best to stay in cash. I have always said it is better to do nothing than something you do not understand, and the truth is I’m not sure anyone understands this economy or this market. Still, there are things you can do to protect yourself and your money. You can start by staying in touch with what is actually happening in the economy and with your money than what has been predicted will happen.

Suze Orman is a two-time Emmy Award-winning television host, New York Times mega bestselling author, magazine and online columnist, writer/producer, and one of the top motivational speakers in the world today. Orman is undeniably America’s most recognized expert on personal finance. You can subscribe to her newsletter, The Money Navigator, at http://www.suzeorman.com/moneynavigator/