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From: B-Haile (eritrea.lave@comhem.se)
Date: Mon Dec 27 2010 - 23:28:37 EST
The ups and downs
Three charts to start your week
David Milstead
>From Monday's Globe and Mail
Published Monday, Dec. 27, 2010 12:13PM EST
Insider selling in the U.S., Eritrea's growth, and the year in commodities
THE INSIDE STORY
If corporate insiders know best about their businesses' prospects, this may not be the time to be betting on U.S. equities.
As executives and board members step up their selling, the ratio of U.S. insider stock sales to purchases topped 7 to 1 in early December, before sliding back to 5.74 a week ago, according to the Vickers Weekly Insider, a newsletter from Argus Research Co. The eight-week moving average for the ratio topped 5 to 1, the highest level since 2007. Over the past four decades, the high end of the range has been 2.5 to 1.
To Mark Hulbert of the Hulbert Financial Digest, a roundup of investment newsletters, this means corporate insiders "evidently believe that the stock market's rally will soon run out of steam."
Mr. Hulbert acknowledges that selling patterns have changed, quoting academic research that estimates that the new normal ratio is now closer to 6 or 6.5 to 1. Still, the early December ratio exceeds that figure, Mr. Hulbert notes.
A mitigating factor: The early-December rush to the exits coincided with the uncertainty leading up to the U.S. tax deal. Insiders may have sold because they feared higher tax rates in 2011. Yet David Coleman, writing in the Vickers newsletter, notes that the extension of the cuts was known a week ago as inside sales continued at their 5.74 to 1 rate.
"We continue to stress caution based on the sentiment of insiders; they are, after all, leading the companies in which investors are buying shares," Mr. Coleman said.
ERITREA, GROWTH GIANT
Leadership among the world's fastest-growing countries will change in 2011, while some familiar names from this year's European debt crisis will see their economies shrink.
Such is the prediction of the Economist Intelligence Unit, a research group affiliated with The Economist magazine.
The group believes world GDP growth will slow to 2.5 per cent, compared with 3.5 per cent in 2010, as stimulus measures are withdrawn in the world's biggest economies. "The developed world will remain preoccupied with sluggish growth, high employment and rising debt burdens."
At the same time, "emerging markets will continue, to a large extent, to shrug off the 2008-09 economic crisis." The Economist predicts Eritrea, which is set to begin production at its first operational gold mine, will overtake Qatar as the world's fastest-growing economy. Ghana is the only other nation forecast to produce a double-digit GDP gain.
At the other end of the spectrum, Greece, Portugal and Ireland - the basket cases of the euro zone - are three of five countries the Economist believes will experience contracting economies. The group says the world's worst-performing economies will be concentrated in western Europe, which will be home to 12 of the world's 20 slowest growers.
The group also predicts the U.S. economy will expand 1.4 per cent, narrowly avoiding the Bottom 20 list. Canada, with its 2.0 per cent forecast growth, didn't get ranked in either the worldwide top 20 or bottom 20.
No sugar here
It was a great year for commodities. And a satisfactory year for Canadian commodities.
Why the difference? It speaks to the gap between the Thomson Reuters/Jefferies CRB Index, the broad-based measure of commodity prices popularly known as the CRB, and the Bank of Canada's commodity price index, which it calls the BCPI.
The Bank of Canada selected 24 commodities that are actually produced in Canada and sold in world markets for its index. The actual Canadian output of the commodities is used in the weighting. Energy is roughly one-third of the index (oil 21 per cent, natural gas 11 per cent) and forestry is another third.
The CRB has no such geographic production constraints on the weights of its 19 commodities, with only crude oil representing more than 6 per cent of the basket. It includes sugar, coffee, cocoa and orange juice, many of which had an excellent year, but none of which are huge Canadian crops.
The difference in approaches has produced significantly different 2010 results. The CRB is up nearly 16 per cent as we head to the year's close, while the BCPI was down for the year heading into early December and only recently turned positive, up 4 per cent for 2010.
One of the primary Canadian culprits is natural gas, which has nearly double the representation in the BCPI that it has in the CRB. Natural gas prices have been in the dumps in 2010, thanks to oversupply.
http://www.theglobeandmail.com/globe-investor/three-charts-to-start-your-week/article1850308/
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