Ever
noticed how a few smart entrepreneurs always manage to sell out in a
boom before the bust? In the stock market this is even more apparent and
surprise, surprise, insider selling always reaches a climax just before
the crash.
The adjusted 25-year high insider index is flashing red right now.
It’s a leading indicator, and usually signals imminent danger.
Mark Hulbert of Hulbert Financial Digest concludes: ‘There have been
two prior occasions when the adjusted insider ratio got almost as
bearish as it is today — early 2007 and early 2011.
Danger signal
‘The first came a half a year before the beginning of the worst bear
market since the 1930s. While the market didn’t fall as much following
the second of these two instances, the May-October decline in 2011 did
satisfy — based on intraday levels of the S&P 500 index — the
semi-official definition of a bear market as a 20 per cent drop.’
After all, who knows more about a company and its business than the
people running it? Or at least they ought to. Profits today reflect
orders taken many months ago, and executives know from their order books
when things are starting to go awry.
This is perfectly legal. Executives are only guilty of a wrongful
insider transaction under US law if they act on information that should
first have been disclosed to the public, such as an earnings
announcement or takeover deal.
Insider selling is currently highest in capital goods, technology,
consumer durables (such as automobiles, construction and appliances) and
consumer non-durables (food and beverages, clothing and tobacco). It’s
lowest in energy, industrials and financials, though you have to wonder
how the banks would hold up if stocks really took a dive.
Profit forecasts
It would be very interesting to read a covert survey of how insiders
currently view the profits’ outlook for their own companies. That’s
probably the main reason for them selling out.
Stocks, investors should recall are valued in terms of multiples of
their future profits. If the company profits are heading down, so are
their share values. Profit multiples that are applied to reach
valuations also looked stretched by comparison to stock market history.
Selling out when your company is trading at peak profits and
overvalued by the market always makes good business sense. For how long
will it be before that opportunity comes again, if it ever does?
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See more at:
http://newswatch.us/insider-selling-reaches-25-year-high-as-smart-money-dumps-stocks-before-the-coming-crash/#sthash.gsPKEW02.dpuf
Ever noticed how a few smart entrepreneurs always manage to sell out in a boom before the bust? In the stock market this is even more apparent and surprise, surprise, insider selling always reaches a climax just before the crash.
The adjusted 25-year high insider index is flashing red right now. It’s a leading indicator, and usually signals imminent danger.
Mark Hulbert of Hulbert Financial Digest concludes: ‘There have been two prior occasions when the adjusted insider ratio got almost as bearish as it is today — early 2007 and early 2011.
Danger signal
‘The first came a half a year before the beginning of the worst bear market since the 1930s. While the market didn’t fall as much following the second of these two instances, the May-October decline in 2011 did satisfy — based on intraday levels of the S&P 500 index — the semi-official definition of a bear market as a 20 per cent drop.’
After all, who knows more about a company and its business than the people running it? Or at least they ought to. Profits today reflect orders taken many months ago, and executives know from their order books when things are starting to go awry.
This is perfectly legal. Executives are only guilty of a wrongful insider transaction under US law if they act on information that should first have been disclosed to the public, such as an earnings announcement or takeover deal.
Insider selling is currently highest in capital goods, technology, consumer durables (such as automobiles, construction and appliances) and consumer non-durables (food and beverages, clothing and tobacco). It’s lowest in energy, industrials and financials, though you have to wonder how the banks would hold up if stocks really took a dive.
Profit forecasts
It would be very interesting to read a covert survey of how insiders currently view the profits’ outlook for their own companies. That’s probably the main reason for them selling out.
Stocks, investors should recall are valued in terms of multiples of their future profits. If the company profits are heading down, so are their share values. Profit multiples that are applied to reach valuations also looked stretched by comparison to stock market history.
Selling out when your company is trading at peak profits and overvalued by the market always makes good business sense. For how long will it be before that opportunity comes again, if it ever does?
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With
the Crimea referendum passed and Russia ready to annex the region, the
United States and the European Union have threatened sanctions. The full
extent of these sanctions is not yet known, and announcements are
pending for the end of March. If these measures are concrete, they will
of course be followed inevitably by economic warfare, including a
reduction of natural gas exports to the EU and the eventually full dump
of the U.S. dollar by Russia and China. As I have discussed in recent
articles, 