This bear market is “nowhere near over”

US corporate insiders bought more shares than the sold for the first time in 13 years in January, which suggests they believe the worst is over. It's hard to share their confidence.

The roller-coaster ride continues. Last week the S&P 500 posted its biggest weekly gain in almost five years (4.9%) and the FTSE 100 hit a two-week high. But this wasn't enough to prevent the MSCI global index losing 7.7% in January, its worst start to a year since MSCI began collecting data in the 1970s. And this Tuesday saw hefty slides on more bad news in the US and Europe.

Further news of a potential rescue of ailing bond insurers, whose failure would "represent another lurch downwards in the credit crunch", as The Economist puts it, has buoyed confidence of late. As we noted last week, if they fail or lose their AAA-credit ratings, then those investors who are only allowed to hold top-rated debt will be forced to sell, while the value of billions of dollars of derivative contracts that investment banks have agreed with the insurers would be hit, forcing more writedowns. Time is running out for the insurers. Ratings agency Moody's will complete a review of the extent of subprime losses in the sector by late February, so further downgrades are on the cards.

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