Land values never grow, Don’t sleep on the Yield Curve: Open Questions links, July 18 week

Welcome to my weekly recap of articles I’ve read on open questions in finance, markets, and investing.

Shiller on anemic long-term growth in land value LINK

Already, rules are being changed in many cities, including New York, allowing the little apartments to be built and to accommodate many more people per acre of city land. These factors could lead to near-zero future demands on valuable urban land.

When you add all this together, the slow long-term pace of farmland and home price increases is not surprising. Nor would it be shocking if this trend continued for the next century, despite price surges over the last few years.

Baum: Beware! A flattening yield curve still means something  LINK

Over the last 30 years, through several business cycles, I’ve observed a predictable response to yield-curve inversions: “This time is different! It doesn’t mean what it normally means!” The reasons offered may vary from the low level of interest rates at which the curve inverts, to the “savings glut,” to a reduction in the term premium, or the extra yield lenders demand as compensation for holding a long-term bond. But the instinctive response to dismiss an inverted curve is always the same.

The most recent excuse for the flattening of the U.S. yield curve is that its shape has been distorted by the Federal Reserve’s purchases of long-term Treasury and mortgage securities as part of its quantitative easing programs. Because central bank demand for sovereign debt is price-insensitive, the message can’t possibly be the same as in previous instances, the deniers claim.

A good theory, perhaps, but one that isn’t supported by the facts.

Krugman’s take: stock highs reflect a higher premium for income, fewer investment opportunities  LINK

In other words, while record stock prices do put the lie to claims that the Obama administration has been anti-business, they’re not evidence of a healthy economy. If anything, they’re a sign of an economy with too few opportunities for productive investment and too much monopoly power.

Claim that bank lending growth weighs against recession odds LINK

If you look at the financials of four of the largest American banks, Wells Fargo, JPMorgan Chase,Citigroup, and Bank of America, they all show higher lending today than three months ago.

#OpenQuestions #thenwhat


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