Corporate Insiders Jump Ship

Corporate insiders are selling 22 times more stock than they are buying. From Fox Business:

 

“What we’re seeing now is a dramatic reversal in that sentiment,” says David Coleman, editor of Vickers Weekly Insider Report, whose firm tracks buying and selling of all publicly traded companies. “The trend has reversed from what had been historically high levels of buying relative to selling.” […]

TrimTabs Investment Research reports that insiders at public companies have sold $2.6 billion worth of shares so far in June. That’s 22 times more than the $120 million in stock they have bought. […] TrimTabs’s 60-day total of insider buying has fallen to the lowest level since December 2004.”

 

What do corporate insiders see coming?

 

Delusional-42614754718

 

From Bloomberg:

 

“Last week’s news of the weakest hiring since December 2013 rounded off a quarter in which retail sales and capital goods orders all pointed to a first quarter flop. That leaves JPMorgan Chase & Co. estimating growth was just 0.6%.”

 

Zero point six percent is optimistic. Our friend and economist Richard Duncan puts the first-quarter growth figure at 0.1%. He says the US economy may already be in recession.

 

Insider buy-sell ratioSPX only insider buy/sell ratio – as can be seen, insiders like to buy big corrections. They are singularly disinclined to buy right now.

 

A Delusional Market

We’ll wait to find out. But it’s not as though we have to hold our breath. A stock market sell-off and a recession are coming. They always do. Not every day at the beach is going to be sunny and bright. Even in California, it’s got to rain sometime.

Market corrections are even more certain. People make mistakes. They pay too much. They buy the wrong things. Profits go down. Businesses go broke. Stuff happens. What kind of world would it be otherwise?

 

BrokeBrokerCartoon-thumb-510x337

Imagine if bad restaurants never went out of business … worthless smart phone app makers never went bust … every girl was homecoming queen … and every war was won – by both sides.

Cartoon by: Walt Handelsman

 

We’ll leave it to you to think about that in the dark of night. For our money, we’ll assume that things will not always work out as planned. We will bet, too, that a stock market that is worth more relative to GDP than at any point in history bar the dot-com bubble is suitable only to delusional stockbrokers.

 

Buffett-IndicatorMarket cap to GDP – prior to major bull markets, it tends to be in the low 30s – normal bull market peaks tended to be recorded in the 80s. Since the late 1990s, insanity has been the order of the day. Most of us don’t realize it, because we have become inured to it. But it is still insane – click to enlarge.

 

Charts by: Gurufocus, Advisorperspectives

 

The above article appeared at the Diary of a Rogue Economist originally written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 

 

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