Massive insider selling by ceo's

[PROACTIVATING]

Massive Insider Selloffs

Look it up. The numbers are huge.

Has anyone else been keeping track of the rate and volume of insider selling by the directors, CEO's, Presidents and Vice Presidents of so many major US corporations?

The numbers in volume and dollars is staggering. These guys are not just getting out some spending money for a vacation. This is serious money and these guys are selling at a 30 to 1 ratio of sellers to buyers while Joe Sixpack is buying like crazy so he doesnt miss out on this rally ?.

I find it very curious. I have a lot of clients (I take care of their yachts) who are the CEO's of major companies and they all warn me to be very cautious of the stock market right now. The emperor has no clothes.

My gut feeling before I became aware of this huge selloff deal was that there did not seem to be too much substance to the rally. There is a lot of employee and benefit slashing that all contribute to a more attractive bottom line, but in terms of atually producing stuff not too much of that going on, and just more and more noise about moving more manufacturing offshore to slash costs even further.

I wonder if anyone else is seeing this?

 

[Orchidflower]

I've been waiting for the pullback...here it comes maybe? Whoopie! My time to buy!!!
Articles on this in the WSJournal if you take it the past few days. FYI
Lots of talk about this on Squawk Box this a.m., too.

 

[PROACTIVATING]

Yeah theres been so much noise about this rally and I'm sure folks with a lot of time to play in the market have been able to pull a couple of bucks out. but I see storm clouds gathering. My buiness is very dependent on the whims of the market, as it affects my customers bigtime. When we're losing thousands, my customers are losing millions and it definitely affects how much they spend on their yachts.

I have been so hoping this rally was for real, and things were going to open up, but watching this sell off is pretty disconcerting.

I didn't see the WSJ articles. I don't get to read it too often, but if you can reference the articles I like to read them. Thanks

 

[Leonidas]

Lots of prognosticating going on that the markets are due for a pullback, some say it could be a hard hit. I've heard some of those very same fortune tellers say "but I've been wrong for weeks and I'm not going to fight the tape", and "but I don't think it's that bad (referring specifically to insider selling) and I intend to keep DCA'ing into the market".

I can see OP's point about being nervous - fixing rich guy's yachts during tough economic times with more than the usual amount of uncertainty about the future. If your weekly paycheck depends on a rich guy feeling especially rich enough to spend his money on ultra-expensive toys, I'm guessing that this is not a happy time.

One has to wonder about the long-term health of the toys-for-rich-boys industries. Everyone seems to be enjoying their new found frugality, and corporations have been making "statements" by cutting back on expensive goodies. There was an interesting article recently that re-interviewed a group of CEO's who had been previously ranked on their golf games. Many of them claimed that they had not been playing and were too busy keeping their eye on the business rather than playing frivolous games. Such things are anecdotal, but when they make this big of a show out of it, you have to think there is something to the trend. Probably not too many CEO's around today who want to be profiled as a high roller with a photo of them at the helm of their multi-million dollar yacht, the SS Rich Bastard.

Yachting, playing golf, Maseratis, and such aren't going to go away, the rich will eventually regain confidence and a feel comfortable about spending their money, it just might be a while before that happens.

 

[Texas Proud]

I have not looked at it... but I wonder how much is them cashing in their options they got 8, 9 or 10 years ago....

Remember, a lot of these guys get a lot of their income on these options.. and if they were holding them for a long term, the drop in the market meant a lot were not worth anything for the last couple of years..... so now the market is up... they are in the black... and they have to sell now or else they lose out...

My thinking... if someone did not guess the market going down in late 2007, then I am not going to listen to them about a drop in 2009...


As a side note... my boss DID take his money out in Aug 2007 and IS predicting a drop after this market continues rallying for a few more months... he thinks the market will be like Japan and not come back for a long time...

 

[FIREd]

I can think of several reasons why insiders are selling heavily:

1) Bonuses and other benefits have been shrinking and highly compensated employees might need to sell company stock to compensate for lower incomes.
2) Many insiders who have a great portion of their wealth in company stock got burned last year. They are not going to make that mistake again. So they are taking advantage of this rally to divest away from company stock.
3) Some insiders probably received stock option grants in late 2008 / early 2008 (instead of bonuses perhaps). Those options are up tremendously and they are locking in their profits.

 

[PROACTIVATING]

In reasearching this a little bit more, it appears that the trend started way back in March and April and has just been building momentum since then.
There were not many profits to take back then. In my little corner of the universe we find that there are tons of large yachts on the market now,and my neighbor who is a pilot for Net Jets says that the same is true of used aircraft. Everything is selling for pennies on the dollar.

Make no mistake about it, these insiders are also very smart people who make their living by keeping an ear to the ground. They follow trends and make it a point to know whats going on in the world of finance and business, and positioning themselves in the right place at the right time. Many of these folks started their huge businesses from scratch. They are real smart dudes, not nec just "rich folk" with yachts.

 

[Texas Proud]

Make no mistake about it, these insiders are also very smart people who make their living by keeping an ear to the ground. They follow trends and make it a point to know whats going on in the world of finance and business, and positioning themselves in the right place at the right time. Many of these folks started their huge businesses from scratch. They are real smart dudes, not nec just "rich folk" with yachts.

Not to be pounding you on what you are saying.... but I disagree with this.. MOST of the people missed all the signs that we were going into this last recession... including all the 'smart' people you are talking about... because IF they were so smart, why do they still have stock to sell?

My point being that a lot of the rich people got rich from a business they know... but know very little about the stock market... they just parrot what they hear from others.. How many CEOs of major companies have been ousted because they did not manage their company correctly? How many banks, investment banks, insurance companies etc. have gone under? All of them were being run by a CEO... all of the CEOs are like the ones you are talking about...

 

[FinallyRetired]

My gut feeling before I became aware of this huge selloff deal was that there did not seem to be too much substance to the rally. There is a lot of employee and benefit slashing that all contribute to a more attractive bottom line, but in terms of atually producing stuff not too much of that going on, and just more and more noise about moving more manufacturing offshore to slash costs even further.

Not to mention the govt bailouts. The financial firms are borrowing at nearly zero interest, selling bad loans to the govt, and making a profit, so their stock goes up. I don't blame those who hopped on for this artificial ride, wish I had, nor do I blame the insiders who are jumping ship. But I don't see how in the world this is a sustainable level. Sooner or later the free ride will be over. I just think the market is too dangerous to be heavily invested, at least for retirees or those close to it. I'll wait for a few more cycles to see what washes out.

 

[Leonidas]

Never underestimate the draw of the herd mentality. With few exceptions none of them saw the recession coming nor did much to be ready for it. I think the herd just changed directions but they're all still running together.

You have to listen to them, because they're your customers. How they feel about spending money goes to your bottom line. The rest of us can afford to be skeptical.

 

[clifp]

Interesting speculation. Anybody have some links to some data?

 

[Orchidflower]

I'll watch the WSJ tomorrow (the rest went out to the garbage already..sorry), and post any information on it I find for you.
You can also find good articles probably on this on marketwatch.com on the net.

 

[MichaelB]

In August, corporate insiders -- officers and directors of public companies -- sold nearly 31 times as much stock as they bought. From last September through this past March, in the depths of the bear market, that ratio was just 2 to 1, according to TrimTabs Investment Research of Sausalito, Calif. The long-term average is about 7 to 1.

From Jason Zweig WSJ column of 8/29 Why Investors Need to Slow Down - WSJ.com

 

[Brat]

My son & wife are in the yacht repair business. Yacht sales are dead but the repair business is stable to strong. Neglect your boat, it sinks.

 

[PROACTIVATING]

Thanks for the Zweig piece from the WSJ. This man has an apparent sound and rational vision from a couple of different perspectives. I have watched an awful lot of friends have their near term retirement FIRE plans dashed, some critically, from overweighted stock situations.

I'm always curious about folk's risk tolerance...Amend that to read afford to fall for the FI types who have worked and saved for so long. It would appear that I've become much more risk averse after just completing 35 years in a very high liablilty business that I am in the process of leaving (and selling)... and I can't wait to ratchet my risk down and take a breather.

thanks for the thoughtful comments from everyone who responded. Just recently joined...and still sorting through my dryer sheets and its been a rewarding experience.

 

[MichaelB]

From today's FT

‘Insider selling’ soars in August

By Michael Mackenzie in New York
Published: September 1 2009 19:25 | Last updated: September 1 2009 19:25

Sales of US shares held by company officials surged in August, rising to their highest level since May 2008.
This so-called insider selling came as the S&P 500 set a series of fresh highs for the year last month, lifting the benchmark index more than 50 per cent from its low in March.

Trim Tabs, a research firm, says that based on filings with the Securities and Exchange Commission, insiders sold $6.3bn ($330m daily) of their employers’ shares in August.
“Corporate insiders do not share Wall Street’s wild bullishness,” said Trim Tabs.
Meanwhile, Trim Tabs’ ratio of insider selling to buying rose to a record 30.7 times in August based on their records, as insiders only bought $210m of shares in the companies they work for last month.

FT.com / Markets - ‘Insider selling’ soars in August