Friday, May 18, 2007

The Moon's a Balloon--And About to Pop

The seemingly inexorable rise in the U.S. stock indices is one of Nature's most perplexing mysteries.
How does the economy weaken? Let me count the ways... housing is tanking, consumer spending is tanking, even the manipulated/phony consumer price index is rising at nearly 5% a year, gasoline is getting more expensive by the day, job "growth" is utterly bogus--but so what, the market keeps rising anyway.

Ever wonder why? Well, here's your answer: so insiders can dump all their shares at the top to unsuspecting buyers who unwittingly believed the phony hype about how leveraged buyouts and the magic elixir of liquidity would support higher stock prices for the foreseeable future. Oh, and the Fed will be lowering interest rates real soon, too . . .

For a view of reality as opposed to fantasy, look at the number of shares being bought by insiders (if you're an insider, and you know the stock will be rising, you buy before the public catches on) and insider sales (insiders are selling because why? They know the price will be skyrocketing soon? Hahahahaha.)

My good buddy "Huevos" over at "Changos Teahouse of the Almighty" provided this summary of insider buying and selling. This metric is closely watched, because it is obvious that insiders know the prospects of their company and industry better than mere "investors"; thus if they're selling, it does not bode well for future stock market gains. In Wall Street lingo, this is called "distribution." When insiders are buying, it's called "accumulation." This is clearly distribution, on a stupendous scale.

This data makes you ask: if things are so great, why are insiders selling vast quantities of their shares and buying virtually nothing? Even in good times, insiders sell more than they buy, as stock options and grants give them "free shares" to sell. But the ratio of sells to buys is 1-to-1 or 2-to-1 in good times, not 100-to-1 or 200-to-1.

Frankly, I think the "buys" in media (32,000 shares, industry-wide), Utilities (106,000 shares, industry-wide), Industrials (496,000 shares, industry-wide), transportation (250,000 shares industry-wide) and technology (1.3 million shares, industry-wide) were mistakes. An insider meant to click "sell" but accidentally clicked "buy"--a mistake that was quickly corrected.

The source is Thompson Financial and the Wall Street Journal market data group.

Insider Purchases Insider Sales

basic industries
337k 84 million
business services 76.5K 66 million

consumer durables
3.9 million 19 million
consumer non-durables 2.6 million 64 million
energy 5.2 million 126 million
finance 10.4 million 210 million
healthcare 4.8 million 177 million
industrials 496k 164 million
media 31k 32 million
technology 1.3 million 247 million
transportation 250k 55 million
utilities 106k 34 million

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.

Our Privacy Policy:

Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Adsense and Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative)
If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.

Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted
on my site.

  © Blogger templates Newspaper III by 2008

Back to TOP