Are You a Stock or a Bond?

What is the largest component of your total wealth? Your brokerage account? Your retirement account? For many people, the biggest part of their wealth lies in their ability to earn income in the future.

Human capital is the present value of your future labor income. Some people's jobs are like a bond. A tenured professor can reasonably rely on a fairly steady stream of income over time. Other jobs are more speculative, like stocks. Working at a high tech start-up may lead to a large pay-off, but the business could just as easily go bust.

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Capitalism Gone Wild – Wall Street's Mortgage Mess

Government regulation is often viewed as a costly impediment to business.  Companies are best able to determine the most efficient allocation of their resources.  The genius of this system has led to the United States' growth over the last two centuries.

The problem arises when certain business practices harm the public at large.  When the writer Upton Sinclair exposed the horrors of meat packing plants in "The Jungle" in the early 1900s, regulating the industry seemed a reasonable response—we all want wholesome food produced in sanitary conditions. 

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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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