Vigilant Investor

Party may soon end for global financial sector

Slowing economic growth, increasing consumer debt and soft real estate markets could mean the party is over for the global financial services sector after stellar returns in 2006, a new report said on Thursday.

FT: US productivity growth lowest for decade

The US economy last year recorded its lowest rate of labour productivity growth in more than a decade, with growth in output per hour worked falling behind the EU and Japan. The fall casts further doubt on the ability of the Federal Reserve to cut interest rates as the US economy slows.

Research to be published on Tuesday by the Conference Board, the international business organisation, shows that US labour productivity in the whole economy grew by 1.4 per cent in 2006 as slower economic growth was combined with a rapid rise in employment.

Gail Fosler, the chief economist of the Conference Board, told the Financial Times that the fall in productivity growth was unlikely to be cyclical and the result of weaker gains in services’ industries, raising “concerns about the long-lasting productivity impact of information and communications technology”.

Davos Economists Say Derivatives Demand Creates Risk

Surging demand for derivatives is making financial markets more vulnerable to any slowdown in the global economy, said economists and executives at the World Economic Forum.

“You can easily get liquidity from the market every second for anything,” said Bank of China Vice President Zhu Min at a panel discussion on the global economy in Davos, Switzerland. “We really don’t know what the risks are.”

U.S. 2006 home sales drop biggest in 17 years

Sales of previously owned U.S. homes slipped 0.8 percent in December and took their biggest tumble in 17 years for all of 2006, leaving in doubt whether the worst of a housing slump has passed. The National Association of Realtors on Thursday said December sales ran at a 6.22-million-unit annual rate, lower than the 6.25 million that Wall Street analysts had forecast.

And, from the meddlesome government edicts department (certain special interests with strong lobbying influence hurried through the recent ethanol law. :

Hog farmers brace for high feed costs

A soaring demand for corn used to produce ethanol has hog farmers bracing for higher feed prices that threaten to put some producers out of business.

The price of corn is expected to climb to $4 a bushel, a level not seen in the last decade. The soaring price was the subject of a seminar Thursday at the Iowa Pork Congress, a two-day annual gathering for Midwest hog farmers.

Neil Dierks, chief executive officer of National Pork Producers Council in Des Moines, said the situation is so dire that some producers will opt to quit the business.

Aside from the dislocations produced in agriculture, Ethanol requires more input energy than it produces. It is currently economically unfeasible absent government edicts.

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