Uncertainty: Corporate Insider Trading Has "Disappeared. Almost Overnight."

Posted by Wealth Wire - Thursday, September 22nd, 2011

What’s next for the stock market? In the grand scheme of things, it really doesn’t matter to those of us who have taken our assets off the table and have chosen instead to “get physical.” But there are still millions of Americans who are depending on stocks for their livelihoods and retirements. So, for those who are wondering what the sentiment is on Wall Street, consider Why the insiders have quit buying stocks:

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.

What’s up?

The executives and their customers are back at their desks after the summer vacations. They’ve had a chance to look at the forward order books.

Or maybe they’re just worried about the big picture.

Greece. China. The U.S. economy. The budget. Any number of things could cause the stock market to throw a wheel.

Biderman blames uncertainty. “It looks to me that insiders are uncertain as to what’s happening,” he says.

There’s that word again, and one we’ve oft repeated in our commentaries. Uncertainty.

The stock markets have no doubt been on a wild ride, especially for the last three months, but the winds of sentiment across the nation, and not just in corporate insider circles, may very well have shifted to the point that stocks may buckle and correct, potentially even crash, in the near term.

Insiders and business owners are uncertain. So, too, are financial analysts and media pundits. The average American is certainly confused, irritated and concerned with what the next wave of crisis may bring. And now, key government leaders, are using it as a talking point:

“There is no question that the private sector in America right now sees all of this uncertainty coming out of Washington: new rules, new regulations and no idea what the tax rates are going to be at the end of next year.”

“I was with a group of employers in my own district yesterday who are very concerned about investing more in their business at a time of great uncertainty and I think government needs to help bring some certainty.”

House Speaker John Boehner (R)
September 21, 2011

Uncertainty is what is keeping insiders out of the market, because as business leaders they have absolutely no clue what the government and their central banking cohorts will do next. More taxes? More printing? More regulations? No one knows, and compounding the problems is that the businesses landscape in the U.S. and Europe literally changes daily – sometimes from one hour to the next.

And now that this talking point has gone mainstream it will become embedded in the social consciousness, so much so that it may trigger the next wave of the crisis, which will undoubtedly include severely panicked investors, in the very near future.

It is this uncertainty that leads to fear, and if insiders and large financial institutions, as well as the investors who following them get scared, you can say good bye to that 401k, IRA and pension fund, because this stock market will drop like a defunct NASA satellite – and we’ll have no idea where it’s going to land.

*Post Courtesy of Mac Slavo at SHTFPlan.com.

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