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Housing, Unemployment, and Causality

The relationship between the troubled housing market and the high level of unemployment seems pretty straightforward. With so many people out of work, the demand for housing remains weak and prices stay depressed.

What is less obvious is the impact that a poor housing market has on unemployment. The United States has always had a mobile workforce. As jobs became available in different parts of the country, workers tended to migrate there. But with so many people owning houses that are worth less than their underlying mortgage, such flexibility has been curtailed.

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What are the French Complaining About Now?

As surely as the seasons change, the French find a reason to take to the streets in protest.  This time they are up in arms over the proposed increase in the retirement age for full pension benefits from 60 to 62.  In the United States, the retirement age is now between 65 and 66, depending on your date of birth; it increases to age 67 if you were born in 1960 or thereafter.

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Are Stocks Attractive Now? Part II

People love sales.  Finding a bargain at a store can bring on feelings of utter bliss.  The lower the price, the better. 

When stock prices go down, however, people get scared.  A stock market decline brings fear.  It confirms all the bad news that is floating around.  People are more apt to want to buy stocks when prices rise.  An appreciating stock market brings on a feeling that all is right with the world and the good times will continue.  

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Are Stocks Attractive Now? Part I

The answer depends on whether you focus on the world economy or corporate profits.  Those seeking a definitive conclusion may be disappointed.  Nevertheless, reviewing the factors that the experts are debating is helpful.

The global economy has moved away from the brink of a depression.  Yet there remain a number of outstanding issues: the uncertain effectiveness of the policy decisions made by major economies; the impact of the European debt crisis; the willingness of banks to start lending again; and, the burden of high unemployment in the developed world. 

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The Case for Debt

The surging deficit in the United States has led to much consternation and fear. We are rightfully concerned. But not all debt is bad. It is a matter of size and context.

The type of debt that deserves a bad name is, as Bill Gross of PIMCO so eloquently puts it, "the perversion of American-style capitalism over the past 30 years -- a belief that wealth was a function of printing, lending, and of course borrowing money in order to make more money." In essence, we continued to borrow from future generations in an effort to improve our current standard of living. The problem arises, according to Gross, when liabilities become so large that the interest burden and probability of repayment overwhelm both borrower and lender alike.

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