Another point in favour of stocks is the fact that the corporate sector in North America is so well funded. Better cash management practices, higher profit margins, lower interest rates and supportive economic conditions have allowed companies to build up cash levels throughout the last few economic cycles. The chart below shows the cash holdings of the corporate sector in the U.S. as a percentage of Gross Domestic Product (GDP-the total value of all goods and services produced) in any year. While companies have been reticent to spend this ‘windfall’ of cash, it should give a greater degree of comfort to investors to know that companies have enough cash to finance their growth, buy back their own stock, increase dividends or expand businesses and make acquisitions.Corporate Sector Loaded with Cash

Global investors continue to sell Canada on the belief that the economy will fall under the pressure of record consumer debt levels, a depressed market for commodities and reduced trade with China. However, the data does not appear to be supporting this bearish view. Recent data releases show housing starts rising to an annualized rate of over 200,000, well ahead of market expectations. The employment report was equally bullish, showing of gain of over 95,000 jobs (versus the 15,000 estimate), including 76,700 full-time jobs. This would be the equivalent of almost one million job gains in U.S. economy. Hard to put that in perspective considering that a monthly gain of over 200,000 monthly jobs in the U.S. would be considered an exceptionally strong report. Building permits and industrial production were also higher than expected. Not bad for an ‘under-performing economy!’.

What may be more interesting is how different the Canadian and U.S. stock markets have been recently with regard to Inside trading activity. In Canada, there are more than two stocks with key insider buying for every one with selling. Of course, the Canadian market has woefully underperformed its U.S. counterpart this year, making it fertile ground for bargain hunters. But another key reason insider buying is so much more pronounced here is that insiders are aggressively snapping up materials stocks – especially beaten down gold miners. U.S. insiders have been selling into the recent stock market rally that has seen progressively higher records being reached in the S&P 500 and Dow Jones Industrial Average. According to INK Research, which monitors stock transactions by executives and directors within their own businesses, there are more than four stocks with key insider selling in the U.S. for every one with buying.

It’s a very different story on our side of the border where insiders have been active buyers of stocks, particularly in the resource sector. INK’s Gold Indicator – which tracks insider transactions on all Canadian-listed gold stocks and is heavily influenced by junior miners – remains above 800 per cent, meaning there are more than eight stocks with key insider buying for every one with selling. The positive reading from the insiders contrasts with the view of the American Association of Individual Investors (AAII; shown in chart below) which shows more investors underweight the commodity group at any time since the market’s low back in early 2009. These investors have not been a good buyer of the commodity stocks though, showing their highest level of ownership in the last 5 years in early 2011, just as commodity prices were peaking. Insider buying and public selling have generally been pretty good lead indicators that prices are likely to move higher.Commodity Holdings back to 2009 Levels

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