Spotlight: Consuelo Mack
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Is there a risk that all of this new "liquidity" that's making its way into the financial markets might, in the future, trigger rising inflation at a time of economic contraction, causing stagflation?

Financial fallout

• Cause of stock market crash • Real estate bubble • Great Depression reprise? • World markets • Shadow banking system • Bear market lessons • Risk of stagflation • Fixing retirement accounts • Domestic vs. foreign stocks • Investing in gold

Yes, we are definitely risking that. But it's my feeling that we have to get our priorities straight. Right now the priority is just to provide the needed liquidity so that businesses have the capital they need to make their payrolls. This has literally got to be the first priority.

We are also in a deflationary environment and certain important assets like stocks, bonds and housing are in need of stabilization. The price for that will be inflation down the road, but we're about two to three years away from that. The private economy and the supply of money in the private economy is shrinking, whereas the public money supply from the Fed is expanding. So this might not in fact be a situation that is as inflationary as some fear it to be.

What advice do you have for small investors who have seen their IRAs, 401(k)s, 403(b)s, Roth IRAs and taxable investment portfolios so terribly pummeled?

People shouldn't be freaked out. Yes, we are in a bear market, and you should be aware of that and invest accordingly, remembering always that stock investments are a long-term investment. Dollar-cost averaging is definitely the best way to invest money right now, and you should not forget about the tremendous power of compounding over time.

All of the guests on my show have reiterated that when a place like Macy's has a shoe sale, you want to be a buyer at that time. This current market situation is like that Macy's shoe sale: It's the stock-sale of a generation. So keep doing your dividend reinvestment programs, keep on dollar-cost-averaging, and keep investing in increments. Two to three years from now, you'll be glad that you did or wished you had.

Is the U.S. the best place in which to invest the bulk of your nest egg, or should people be more open to placing a bigger percentage of money in foreign and emerging markets?

I still believe the U.S. is the best place in which to invest your money, but it's no longer the only place. I firmly believe in broad diversification overseas. Emerging markets are probably where the fastest growth is right now and selectively they are in much better shape because they have already gone through a contraction back in the 1980s and the 1990s. In a global economy, I believe that you should at least have the market weight representation in your portfolio and having something like 40 percent of your portfolio invested in foreign stocks and bonds.