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Archive for the ‘Insider Transactions’ Category

Something ominous is happening on Wall Street, but nobody has noticed.

The insiders have vanished.

Chief executives. Board members.

The head honchos. The people who know.

Just a few weeks ago, they were out in force, buying up shares in their own companies with both hands.

No longer. They’ve disappeared. Almost overnight.

“They’ve stopped buying,” says Charles Biderman, the chief executive of stock market research firm TrimTabs, which tracks the data. “Insiders aren’t buying this rally.”

Insider stock purchases, which surged above $100 million a day in the market slump last month, have now collapsed to just $13 million a day.

Meanwhile the ratio of insider sales to purchases has skyrocketed. Today insiders are dumping $7 in stock for each $1 that (other) insiders are buying. That’s a worrying ratio. Six weeks ago the amounts of purchases and sales were about equal.

It’s the kind of news that should give investors pause.

What insiders do with their own money is one of the stock market’s best barometers.

After all, who better than company executives know their own order books? Who knows the conditions in their industry better?

You find insiders typically buying heavily at the market lows — they did in 1987, in 1998, and they did during the financial crisis in 2008-9.

(You also typically find them cashing out big-time at the peak).

Read the rest at Market Watch

 
The Wisdom of Crowds: Americans Refusing To Buy Into the Rally

By Charles Hugh Smith

The U.S. stock market has been rallying for over a year, yet “retail” investors are selling, not buying. Is this “the wisdom of crowds” in action?

A funny thing happened on the way to the greatest stock market rally since the 1930s–the “retail” (individual) investor is selling stock mutual funds, not buying. As I noted yesterday, According to BusinessWeek/Bloomberg, U.S. investors dumped $369 billion into bond mutual funds since March of 2009, while according to Reuters, they extracted $26 billion from equity/stock funds. In other words, the great unwashed public isn’t buying into the “return of a new Bull Market” and “the recession is over, we have a V-shaped recovery” stories being relentlessly flogged by “tout TV,” the MSM and inside-the-Beltway hacks and factotums.

Perhaps they are taking note of reality on the ground, and refusing to accept the pearls of wisdom being forced on them by their “betters”?

Analysts and other “experts” are confounded that the public is recalcitrantly refusing to buy into their usual “pump and dump” schemes. In the normal course of events, “experts” pump stocks as the greatest investment opportunity of a generation and that making money in the market is like stealing candy from a baby, etc.

Then, as the “retail” investor/speculator buys into the hype, the insiders sell (distribute) their shares, leaving the “retail” marks holding the bag as the insiders go short and profit from the collapse of stock valuations.

This worked extremely well for the “smart money” in 1998-2002 and again in 2003-2007.

Individuals are shunning stocks like the Devil himself (more than an analogy) while placing their money in “safe” bonds (safe until interest rates rise–see yesterday’s entry) and money market funds, which are holding about $3 trillion in cash.

The “experts” and apparatchiks are drolling over that $3 trillion; they keep hoping the retail investors will finally break down and transfer those trillions into the stock market, and thence into the accounts of the “smart money.”

Remarkably, individual investors seem to have learned the old lesson, of “once burned, twice shy” rather well. Having lost $11 trillion since the global financial meltdown began in earnest in late 2008, “the little guy” no longer believes the stock market is a fair and open market, nor that it is a “wise investment” to “buy and hold” as their “betters” keep insisting.

This raises the interesting possibility that the “crowd” has more insight and wisdom than the “experts” and shills. The notion that groups have a collective wisdom which exceeds that of “experts” was explored in two recent books: The Wisdom of Crowds and Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business .

“Crowdsourcing” is now a hot buzzword, but in essence any transparent market is form of crowdsourcing. But as we all know, the transparency of the stock market is only a useful illusion–useful to those pulling the strings behind the screen.

The crowd is no longer buying the “the stock market is a transparent, open market” propaganda, which is partly why they’re pulling money out of equity mutual funds.

In other words, the crowd is speaking by staying away in droves.

There is abundant evidence that the “smart money” has melted the market higher by buying and selling to themselves in various forms of high-frequency trading and manipulation of the futures contracts. None of this raises an eyebrow on “the Street” or in Washington; the “smart money” players are benefitting, and the only fly in the ointment is the retail investors’ annoying refusal to jump on board the “Bull market rally” so insiders can sell to them before pulling the plug.

It seems clear that the crowd of individual investors is telling the “smart money” that they can take this rally and shove it. The “experts” continue to cluck and tsk-tsk that the “dumb” individual who is sitting on cash instead of being fully invested in the wonderful stock market is foolishly mssing out on a rally which “has plenty of legs” and “is only moving higher as corporate profits recover” and all the other enticing siren-songs they have long mastered.

Maybe the “smart money” experts are right, and the market will only keep rising essentially forever, as it did from 1982 to 2007. But then maybe the “crowd” has sniffed a rat and is refusing to play the 3-card monte game offered by the “experts.”

Interestingly, corporate insiders are selling at a furious pace. Doesn’t that give the lie to the “smart money” assertions that corporate profits are set to skyrocket and the stock market is the one place you want to be if you want to rake in stupendouly easy gains?

We’ll see who is wiser, the crowd or the “smart money.”

Carnage Continues: PHK (Who Smells Smoke?)

Posted by Karl Denninger

The “rumor on the street” at the time of the dump in PHK a few days ago was claimed to be a “fat-fingered” trade.

Uh huh.

Let me guess.  We’ve had three fat-fingered days in a row, right?  The first one which was an honest mistake, and now two days of follow-up which were also honest fat-finger mistakes?

Pretty impressive to lose all of the gains since October – in three days.

Of course this isn’t being discussed on CNBS, nor the real reason for it, nor is anyone calling out those who disseminated the “claim” that this was a “fat-finger” mistake originally.

Yeah.

This is high-yield debt by the way.  A PIMCO fund on top of it.  Closed end, and yes, it does trade at a rather insane premium to NAV, but closed-end funds have a habit of doing that.

But gee, here we are in the New Year, the selling continues at ridiculous volumes compared to the historical average, and in a market where the DOW is up 160 points this issue is down another 5% today.

Who’s whistling past the grave here?  If there’s a problem with the constituents in this fund then one has to ask if this is an “isolated incident” or whether it implies some really ugly things around the corner in the credit markets.

If you remember we had “little signals” like this back in 2007 – just before everything went totally to hell.  Anyone remember this?

That’s from 2007.  There were a few “signals” in this fund during that year…. and of course we all know what came next.

If this is fund-specific then why is it showing up in DPO too – erasing all the gains back to JULY?

Uh huh.  A 25% decline in less than 5 days eh?

I’ll go out on a limb here a bit: The “fat finger” claim IS A LIE and there’s something nasty brewing here that, as is the usual practice, has been leaked to certain “privileged” players in the market.

You’re welcome to believe this won’t infest and reflect into the broader marketplace.  I believe, as has been the pattern over the last several years, one ignores signals like this at considerable peril.

You, the ordinary trader and investor, will never be “cut in” on the deal and given the opportunity to get out before the curtains are on fire and people start succumbing to the smoke, and those who both leaked whatever inside information there is and who traded on it will not go to prison for doing so.

Nor will the “mainstream media” investigate this and report on it.  Not on CNBC, not on Bloomberg, not in the Wall Street Journal, NOWHERE.

Your only defense is to look for signals like this and get damn defensive when you see them – right or wrong – because someone who has more information than you do certain as the sun rising in the eastern sky is doing exactly that.

Uhhhhh… Ok, Keep Buying Fools

Posted by Karl Denninger

 Following up on the earlier ticker….  (above)