Posted on 10/26/2010 6:41:16 PM PDT by MeneMeneTekelUpharsin
The overwhelming volume of sell transactions relative to buy transactions by company insiders over the last six months in key leading sectors of the market is the worst Alan Newman, editor of the Crosscurrents newsletter, has ever seen since he began tracking the data. The strategist looked at insider trading activity amongst the top ten companies that make up the Nasdaq such as Apple [AAPL 308.05 -0.79 (-0.26%) ], Google [GOOG 618.60 2.10 (+0.34%) ] and Amazon [AMZN 169.95 0.95 (+0.56%) ].
Then he analyzed the biggest members of the Retail HOLDRs ETF like Gap [GPS 19.68 0.32 (+1.65%) ], Target [TGT 53.14 -0.62 (-1.15%) ] and Costco [COST 63.68 -0.43 (-0.67%) ], as well as the top insiders in the semiconductor industry at companies such as Altera [ALTR 30.33 0.09 (+0.3%) ], Broadcom [BRCM 37.22 -0.29 (-0.77%) ] and Sandisk [SNDK 37.19 -0.22 (-0.59%) ].
The largest companies in three of the most important leading sectors of the market have seen their executives classified as insiders sell more than 120 million shares of stock over the last six months. Top executives at these very same companies bought just 38,000 shares over that same time period, making for an eye-popping sell to buy ratio of 3,177 to one. The grand total for the three sectors are “as awful as we have ever seen since we began doing this exercise years ago,” said Newman, who was ahead on such trends as the dangers of high-frequency trading and ETFs before the ‘Flash Crash’. “Clearly, insiders are seeing great value only in cash. Their actions speak volumes for the veracity for the current rally.”
But the overall market doesn’t seem to care. The S&P 500 is up 16 percent since its 2010 low hit on July 2nd on the back of strong earnings driven by cost-cutting and the hopes for even more quantitative easing from the Federal Reserve. The insider data “is good reason for considerable caution once the price action fades,” said Simon Baker, CEO of Baker Asset Management. Still “insiders normally buy early and sell early too. Longer term -- 12 months out -- it is more of a red flag.”
Newman isn’t alone in warning about insider selling. The latest report from Vickers Weekly Insider, a publication that makes investments based upon these transactions, shows that total insider sell transactions relative to purchases on the New York Stock Exchange are running at a ratio of more than four to one over the last eight weeks. The normal reading, because of options selling and other factors, is about 2 sales for every buy, according to Vickers. To be sure, many investors feel the heavy insider selling is just an anomaly based on other reasons.
“These are folks that have had to dip into their stocks for the first time in years, as their salaries have been cut and their bonuses, outside Wall Street, have been significantly curtailed,” said J.J. Kinahan, chief derivatives strategist for TD Ameritrade. “ This may speak more to a cash flow problem, then a market belief.” Still Newman, who is also a favorite commentator of Barron’s columnist Alan Abelson, sees the insider selling as just the latest reason, along with the mortgage foreclosure mess and fully invested mutual fund managers with no fresh powder to put to work, to be cautious on the market. “At the risk of sounding like a broken record, we expect a significant correction,” said the newsletter editor.
I’m sure there are rules that are legal allowing employees to pull out investments after leaving them in a certain time.
Probably a year or two.
I think two because this year they still top out at 15% instead of next year at near 50%.
That right there could be the reason for all the sales.
Just wondering...are u now fully invested?.....and if so..for how long have u been?
No. Honest truth was about 80% up until Sept of ‘08 when it was clear Obama would win. Got out then and stayed out until Doug Cass said all clear in March ‘09. Went back in slowly since then. And gradually added back for 18 months. About 80% again now.
If the Bush tax cuts are allowed to expire, then I consider it a prudent move to lock in profits and take cap gains this year. Insiders or not. I’ve sold plenty this year. Next year will be a dead zone if those increases go into effect.
I've been thinking like you're thinking. I like that thinking.
But, I don't want to be one of the last people thinking like we've been thinking. :)
I think there is a general pessimistic feeling from businessmen, but don’t forget something very important:
Capital gains taxes are going up considerably in 2011. Time is short to save a bundle on their tax bill. No doubt it is a contributing factor.
Capital gains tax goes up next year. Insiders are taking their profits now.
Or at least that’s how I see it.
What’s surprising to me is that market still keeps going up. I don’t understand that at all.
(most folks I know are and have been pretty much out for awhile now....Probally 'cause of our age)
May God Have Mercy on us.
The government is buying securities.
If i thought I’d have a chance to retire staying completely out and putting my kids through college and paying off my house I would. Still have at least 15 yrs to work.
God will have as much mercy as we have had on those millions of dead babies.
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