As the year 2011 draws to a close, I wanted to briefly reflect on the past year and share some thoughts going into 2012.

Twenty-eleven was an eventful year for investors, as we witnessed everything from the Arab Spring uprisings, to a tumultuous summer of debt ceiling debates and credit downgrades, to the continuation of the euro crisis and deterioration of several European countries' finances.  All of these significant, large-scale crises/events should serve to remind us that black swan-style events are more common, and even less predictable, than we may allow ourselves to think, as we seek and crave stability for our financial portfolios.  At the risk of sounding clichéd, we must expect the unexpected.

Twenty-twelve will be no less eventful, considering that the following lies ahead:

1) Presidential election (remember what happened in the 2 months prior to the last one?)

2) Increasing waves of foreclosures in the housing market as Option ARM and Alt-A mortgage rates reset to higher levels

3) Unsettled financial outlook for more European countries that have yet to come into the spotlight (i.e., Spain, France)

4) Congress' continued ineffectiveness at reducing the national debt, cutting spending, or even just passing a budget

5) Possibility of further downgrades to the US credit rating (largely due to item #4 above)

I hesitated to even list these things, as it may come across as forecasting, and we know that doing so is too often a fool's errand -- but I put the list there to simply remind you of the very tip of the iceberg that we can even BEGIN to try to anticipate, all the while knowing that none of these things is guaranteed to come to pass (except #1 and probably #4) and could easily be replaced by other bad news.

While I don't tend to make New Year's resolutions, I do have every intention of maturing and refining my black swan protection protocols for 2012.  I think the stakes for having them in place will be higher than ever, and I'd like to create opportunities to generate some profits as market turbulence occurs.  (Notably, 2011 was the fourth-highest year for 100-point swings [plus or minus] in the market, behind 2000, 2002, and 2008.  I see no reason why 2012 won't compete with these other years.)  I'll be focusing a bit more here on the blog on options strategies and combinations that I plan to experiment with or at least consider in 2012.

Along those lines, I encourage you as the individual investor to commit to a regular schedule or routine of reviewing and closely scrutinizing your portfolios amidst the uncertainty that we're facing.  Set aside some time as frequently as monthly, for example, to check the kinds of holdings you have and what their exposures are to which kinds of risks.  Compare this to what you see and hear in the news regarding government inaction and recklessness, global/market instability, geopolitical pressures, and so forth, and make the best attempt to align yourself defensively towards these risks, while looking for opportunities to benefit where possible and generate profits.  Of course, if you utilize a financial advisor, communicate these objectives and concerns to him or her and ensure they are being addressed.  (While none of what I write is intended as investment advice, I consider the above a common sense approach to investing that any of us could stand to employ.)

Lastly, I want to issue a simple "thank you" to all of the readers and contributors to this site, as I greatly appreciate your interest and passion for this subject.  I wish all of you a safe and prosperous 2012.

Seventy years ago on this day, Japanese armed forces attacked the US naval base at Pearl Harbor, effectively marking the beginning of the United States' direct involvement in World War II.  While we take today to remember this historic and tragic event, I would now submit to you that our country will soon face another Pearl harbor-style event, but this time of the financial sort.

Put another way, we are up against the ever-increasing possibility that our country will suffer a crippling blow financially, with an impact not unlike the Pearl Harbor events of 1941.  The biggest difference may lie in the fact that our country recovered from the Pearl Harbor attack and emerged stronger, something I do not expect will happen now given the dire state of our nation's finances.

A quick summary/reminder of what we're up against:

1) A national debt that now exceeds $15 trillion.  We are paying approximately 3-4% interest on this every year, equating to interest payments of no less than $450 billion.  Servicing this debt will increasingly weigh upon our economy, and force future generations to work harder for less as we struggle to pay the interest alone, nevermind the actual principal.

2) Routine budget deficits totaling over $1 trillion a year, adding to the aforementioned debt.  Our government has promised us way more than they can deliver, and this is evidenced by the fact that every year our budget contains more spending than what we are taking in as a nation.  This is called "living beyond our means."  It's destructive, adds to the national debt, and must stop immediately.  Cessation of deficit spending means we will get less from our government for the same price for a while, but we need to accept that privation and stop selfishly pushing it onto our children and grandchildren.

3) Potential for further credit downgrades, increasing the cost of our borrowing needs.  S&P recently knocked the US credit rating down a notch, resulting in market turmoil, but curiously had no effect on our cost of borrowing.  That won't last forever -- as future downgrades are made, which we know they will be given our government's inaction on this crisis, it will eventually catch up to us and the interest we pay on our debt will go up. This means more of our country's wealth will be needed to make those interest payments, rather than being used for more productive means.

4) Economic productivity that hinges on consumer spending, to the tune of over 70%.  This is unsustainable, simply put.  When almost three-quarters of a nations' economic production is tied to consumers spending their income or going deeper into debt, a day of reckoning lies ahead.  We need to get back to producing exportable goods (read: manufacturing) and making the country more business-friendly, as opposed to forcing those businesses to move their operations overseas.  The obvious question here is, what happens when Americans are so strapped they can't spend anymore?  You guessed it -- the economy goes in the tank.

5) Dwindling job market that practically guarantees lower productivity from a GDP standpoint, declining tax receipts, and a lower standard of living for the American people.  The persistent 8-9% unemployment (and 16+% underemployment) rate says it all -- jobs have left the country and they aren't coming back anytime soon.  This reality has a severe ripple effect, since unemployed people pay less (or no) taxes, spend less money, add less (or nothing) to the nation's economic productivity, which leads to economic slowdown, which leads to more job losses, and so on...you get the picture.

If you listened to my November 27 podcast, you'll recall me saying that our political leadership will not address this financial crisis until it becomes a full-blown catastrophe, as they will then have the political cover to get away with any law or policy they wish to see instituted.  The September 11, 2001 attacks provide the best evidence of this impotent style of leadership, as Congress only passed the PATRIOT Act (albeit a draconian, liberty-killing law in and of itself) AFTER the Twin Towers and Pentagon had been struck, and Flight 93 had been downed -- not before.

Thus, you as an individual investor have to factor into your financial planning the fact that the government will allow this situation to reach catastrophic proportions before acting.  Creating some degree of defensiveness against everything from high inflation, dollar weakness/collapse, and a plummeting stock market would be a minimum level of prudence for today's investor.