If our economic fundamentals are sound and our largest corporations are set to prosper in coming months and year, then why are company insiders selling their stock holdings like hot cakes?
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 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 â€œas awful as we have ever seen since we began doing this exercise years ago,â€ said Newman, who was ahead on such trends as the dangers of high-frequency trading and ETFs before the â€˜Flash Crashâ€™. â€œClearly, insiders are seeing great value only in cash. Their actions speak volumes for the veracity for the current rally.â€
Remember, that the sellers of these securities are directors and insiders at our major corporations. If the recession is over, and boom times are on the come back, why are they selling 3,177 shares of stock for every share purchased?
Maybe they’ve seen the ‘real’ corporate numbers and economic estimates, or they’ve heard something in their high-level meetings that has them all spooked.
Or, perhaps they know that the Titanic has, in fact, struck an iceberg. Taking a lesson from history, while the band plays on, they’ve decided to jump ship.
Whatever the case may be, the top echelons of corporate management are, literally, not buying it.