Corporate insider buying and selling is used by many as a market signal. The theory is that insiders know better than anyone else what will happen to their particular companies in the future. When they are buying heavy versus selling heavy, that is supposed to be a bullish signal. Just the opposite when selling exceeds buying.
In another slap in the face to the NBER declaration that the recession ended a year ago is the following:
“Insider Selling Outpaces Buying By Over 290-To-1 In Past Week” (Zero Hedge)
According to Bloomberg, for the week ended September 17, corporate insiders bought $1.4MM in shares in a whopping 7 different companies. This was just marginally offset by sales of $441MM in 98 different companies, a ratio of 290 to 1 of stock notional sold to bought. But wait: this is GREAT NEWS: last week the ratio was 650 to 1! So this is a huge improvement and certainly yet another reason for today’s rally, even though last week total notional sold was $332 million, or just under 25% lower, and sellers came in well lower at “just” 72. But who needs details when you have the Fed… Certain not retail, which has now pulled money out of domestic stock funds for 19 straight weeks. So for those wondering just who is orchestrating today’s move higher, please let us know if you find out.
My previous question regarding the NBER pronouncement was whether you were going to believe the NBER or your own eyes.
A variant of that question is now the following: Who do you think knows more about what is happening and going to happen in the economy — corporate insiders or the NBER?
It is truly an ominous sign. It may however be related to having enough money to support a lifestyle, since corporate bonuses are now a no-no. I wonder what these corporate executives are investing in as they move their money out of their own companies. If they are moving their wealth offshore, then that would be a terrible sign indeed. I’ve heard that the sale of Canadian government bonds to foreigners is way up.