Soon we bid adieu to 2011, with its earthquakes, nuclear-plant disasters, economic turmoil, political upheaval and all that. In the dark of winter and the silent calm of the post-Christmas lull, it's hard not to sit back, pour the last of the eggnog and indulge our imagination over what the new year will bring.

The metaphysically minded, particularly those using the Mayan long count calendar, wonder if 2012 will be the year the world ends and the creepy god of war, conflict and the afterlife returns. Or will it just be the year the fourth b'ak'tun ends and a new era begins? That isn't really a big deal at all -- more like going from 1999 to 2000, but without the Y2K bug and the soundtrack from Prince.

For investors and others with a less-cosmic perspective, the more relevant question is this: Will 2012 bring us relief from our fiscal travails, a bump in job creation, peace and prosperity?

Unfortunately -- whether you're waiting for the arrival of ancient gods or simply a new boom in the global economy and world markets -- 2012 doesn't look good.

Two weeks ago, in "Why all signs point to chaos," I talked about how fiscal austerity at home and overseas would continue to fan the flames of protest, revolution and unrest. Higher taxes, fewer benefits and overburdened populations are a recipe for an unraveling of both the eurozone and whatever filaments of cordiality still bind Democrats and Republicans together here. Last week, in "Investing for a year of chaos," I warned that the death of the debt supercycle will keep economic volatility high and pin the performance of the stock market to the undulations of the business cycle.

Image: Anthony Mirhaydari

Anthony Mirhaydari

This is a dark outlook, I know, and we're not fated to this future. But the political discord in Washington renders any proactive policies dead on arrival until after the November election, and Europe's mess isn't any closer to cleanup. So a real turnaround isn't likely before 2013.

In the meantime, the threat of a new recession is real and rising at the same time earnings are coming under pressure. Europe's economy is already likely contracting. Asia's isn't far behind.

This week, I want to take a look at three critical pivot points to watch for as we enter the new year. Think of it as a field manual for what's shaping up to be a very difficult 12 months for investors.

The eurozone crisis

As for Europe's debt crisis, there are signs that last week's much-ballyhooed bank liquidity injection by the European Central Bank will have a smaller impact than those with the rosy glasses want to believe.

For one, the ECB is cutting back on its direct purchase program. On Friday, the ECB completed the euro equivalent of just $25 million in purchases versus $4.5 billion previously, the lowest amount since the bond buying program was restarted. Ostensibly, this was being done to see if the $275 billion (net of other support facilities) it has just doled out in low-cost loans to more than 500 eurozone banks would find its way into the European sovereign debt market and stabilize borrowing costs.

Well, it didn't. The 10-year Italian bond yield pushed back above 7% late last week for the first time since November, marking a big rise in borrowing costs.

In fact, there is evidence that a large number of banks simply put the vast majority of the cheap cash offered by the ECB right back in the ECB's deposit facility. In other words, the banks are busy rebuilding their balance sheets, so they're not interested in lending it to eurozone countries of dubious health. Nor are they interested in lending it to other banks (also dubious) or to consumers or businesses.

Instead, they are paying the ECB to borrow the money, and paying the ECB again for the safety of its deposit facility, all for the benefit of maintaining access to ready cash. This is the behavior you see during a financial crisis, and not the kind of confidence from lenders that's conducive to an economic expansion.

Credit analysts at Standard & Poor's aren't impressed with the whole affair, either. The team there noted that the ECB's cash injection (a three-year, long-term refinancing operation) will not end its downgrade threat for the eurozone banks. The analysts added that 2012 will be a "tough year" with the first quarter a "major test" for Italy as it comes to market with a number of new debt issues.

All of this increases the risk that the markets will continue to pressure the eurozone, in its current form, to break up, something the team at Capital Economics in London expects. It expects Greece to leave in 2012, with at least one other exit from the eurozone in 2013. The risk of a bigger breakup cannot be discounted, either.

Stocks mentioned in this article include Oracle (ORCL, news), Red Hat (RHT, news), General Mills (GIS, news), Best Buy (BBY, news) and Walgreen (WAG, news).

We'll find out soon enough: Standard & Poor's announced that it will complete its credit review of 15 eurozone members and the eurozone bailout fund in January, in light of the disappointing Dec. 9 summit in which Germany pushed for stricter enforcement of European Union austerity rules instead of a comprehensive solution to the crisis. The analysts noted last month that there is a 50-50 chance of en masse credit downgrades, the sort of move that ignited the August stock market wipeout after S&P cut America's AAA credit rating.

Why? Political bungling, a failure to address the structural issues at the heart of Europe's woes and the vulnerability of Europe's "core" countries -- trade-surplus nations including Germany, Austria, the Netherlands and Finland -- all point to a eurozone recession because of their reliance on exports.

In fact, those countries could be even more vulnerable than troubled net eurozone importers like Portugal, Greece and Spain and suffer a larger contraction of gross domestic product in 2012 as a result. This vulnerability was on display in 2009 when GDP in four of these core countries weakened more than Spain's did. What's worse is that in 2009, fiscal stimulus helped support the situation; now it's all about austerity, with Germany set to close its budget deficit by nearly 4% of GDP between 2010 and 2013.

Not good.

Either way, Europe will soon test the markets' resolve. It will start in January when, according to UBS analysts, the eurozone will float 82 billion euros in new debt -- about $107 billion -- on the way to 234 billion for the first quarter, and 740 billion for the year. Bond investors are likely to balk, pushing up borrowing costs for the likes of Italy and igniting the next stage of the crisis.

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Earnings disappointments ahead

We'll also soon see the start of earnings season, with Alcoa getting things started on Jan. 9. Earnings season will also be another source of disappointment, according to Morgan Stanley analyst Mike Wilson, who notes that 2012 will be the "payback year" for many of the positive tail winds the global economy has enjoyed over the past three years. Those tail winds -- things like fiscal stimulus (the recent payroll tax extension isn't new, just maintaining what we already had), a weaker dollar, positive labor productivity (boosting profits) and accelerated capital spending -- are fading.

Image: S&P 500 Quarterly Results Prior to Alcoa © Factset, Thompson Reuters, Morgan Stanley

No wonder, then, that a number of companies have come out with negative earnings results, preannouncements or guidance, including Oracle (ORCL, news), Red Hat (RHT, news), General Mills (GIS, news), Best Buy (BBY, news), Walgreen (WAG, news), Tiffany (TIF, news), (AMZN, news)and Darden Restaurants (DRI, news).

To put it simply, reality is unleashing a pincer movement on the Pollyannaish stock market bulls. Both the macroeconomic and company-level situations are deteriorating rapidly, despite Wall Street's cute end-of-year, let's-boost-my-bonus rebound.

I know that's not a warm and fuzzy message to carry into the new year. But I've got to call it like I see it.

Political posturing

And finally, we've got to talk about the elephant in the room, or maybe it's a donkey: the upcoming presidential election and the politics of the 11 months leading up to it.

The last-minute, two-month agreement to extend unemployment benefits and the payroll tax cut in Washington pretty much summed up the fortunes of bipartisanship in Washington in 2011. The most acute consequence of this was the failure of the congressional supercommittee (birthed out of August's big battle over the debt ceiling) to find at least $1.2 trillion in revenue and budget cuts over the next 10 years.

Now, $1.2 trillion in automatic spending cuts are about to hit, focused mainly on the Pentagon.

Here's the thing: According to Fitch analysts, the failure of the supercommittee to do its work on structural drivers of the deficit -- mainly health care spending -- increases the amount of austerity and pain needed to right the ship of state later. Specifically, they believe even under an optimistic economic scenario, the failure of the supercommittee will necessitate an additional $3.5 trillion in budget cuts just to stabilize the federal debt -- which, at more than $15.1 trillion, has just crossed an oft-cited threshold, reaching 100% of GDP.

If, as I expect, 2012 is a difficult year for the economy it's hard to see how a new administration and a new Congress could rally around a credible plan to boost short-term growth and tackle the deficit even in early 2013.

Further credit downgrades are likely. Fitch placed the country on negative credit watch late last month on "declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the 'AAA' sovereign rating will be forthcoming."

And even before we get that far, we face a minefield of unresolved issues in 2012, including the expiration of the Bush tax cuts (worth $4.6 trillion over 10 years), the expiration of payroll tax cuts and extended unemployment benefits, and the very likely possibility that the new, raised debt limit ($2.1 trillion added since August, for a total of $16.4 trillion) is hit late next year.

That sets the stage for another contentious battle over the borrowing limit like the one seen last summer, and such a fight could very well shut down the government just before the polls open in November.

Batten down your portfolio

For investors, my advice remains the same: It's time for skepticism, caution and defensiveness as we fall deeper into what looks to be a bear market that started in May.

How much downside risk is there? Merrill Lynch/Bank of America equity strategists calculate that since 1929, earnings fall by an average of 29% in a bear market, while large-cap stocks lose 41%. With the Standard & Poor's 500 Index ($INX) already down 7.6% from its springtime high, we could be looking at an additional 30%-plus decline before all is said and done.

It could be worse: Consider what happened to the ancient Mesoamericans, wiped out by European guns, germs and steel. Assuming 2012 isn't the end of the world, we have only government debt to worry about.

Stocks mentioned in this article include Walgreen (WAG, news), Tiffany (TIF, news), (AMZN, news) and Darden Restaurants (DRI, news).

At the time of publication, Anthony Mirhaydari did not own or control shares of any company mentioned in this column.

Be sure to check out Anthony's new money management service, Mirhaydari Capital Management, and his investment newsletter, the Edge. A free, two-week trial subscription to the newsletter has been extended to MSN Money readers. Click here to sign up. Mirhaydari can be contacted at and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.