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Wall Street Stocks: This Is A Sucker's Rally

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Better Believe It Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-16-09 02:24 PM
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Wall Street Stocks: This Is A Sucker's Rally


Despite a near 50% rally in the stock market and better than expected earnings across the board, were continuing to see unprecedented levels of insider selling and record low levels of insider buying. The buyers in recent weeks have accumulated just over $26MM in stock ($16.5MM of which was one buyer). Meanwhile, the sells amount to over $300MM. Thats a staggering 1:30 ratio if you back out the one larger buy.....insiders havent been substantial buyers since late last year and in early March of 2009 both periods just prior to major market rallies.

Although the level of insider selling is certainly alarming its important to note that the very low levels of buying are particularly alarming. Insiders sell stock for many reasons, but they generally only buy stock for one reason: they believe the stock is going up. Despite the fact the media is reporting an end to the recession, a bottom in housing and a trough in earnings we are seeing a vote of zero confidence from the people who know these companies better than anyone else. Could this be a sign that the underlying economy is still in fact very weak as we continue to see in the trucking data, weekly rails data and weekly same store sales?

and update:

For the latest two week period ending yesterday, insiders purchased just $4.6MM in stock while selling an astounding $471MM in stock. That is a $217MM jump over last weeks reading of $254MM. The trend in insider selling has been negative for quite some time, but even more alarming is the total lack of insider buying. Insiders sell for a number of varying reasons, but it remains confounding that the equity markets can be so convinced of an economic rebound while insiders give a resounding vote of no confidence in their own companies via purchases of their own shares. Perhaps the lack of organic growth via revenue growth has insiders less than convinced of the economic rebound.
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HiFructosePronSyrup Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-16-09 02:25 PM
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1. No doubt a lagging fall in unemployment will be a sucker's fall in unemployment.
Better believe it.

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TexasObserver Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-16-09 02:30 PM
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2. The Truth? They'd rather see America fail than Obama succeed.
I've been thinking about some of the things I hear business/GOP types say about the future, and they seem more concerned about seeing Obama fail than about the prospects of the economy continuing its upturn.

It reminds me of the days when black quarterbacks were just breaking the ranks of the NFL, and no matter what they did, someone was saying they couldn't do it, and someone was rationalizing why they wouldn't "get it done."

There is deep seated racism in this country, and those who populate Wall Street are racist and classist. They may want to do well in the markets, but many of them would rather see the market tank again than see Obama lead a great recovery. It's spite, not economics.
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slackmaster Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-16-09 02:31 PM
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3. The important question is where there are putting their money
They're putting it somewhere.

I just dumped the last of my IShares Silver Trust (SLV) at $17.09 BTW. Precious metals are the next bubble IMO.
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Statistical Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Sep-16-09 02:33 PM
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4. Buy low sell high.
Edited on Wed Sep-16-09 02:37 PM by Statistical
We are near the top of the rally why would any insider want to buy stocks at this level? Even the talking head on CNBC are chattering about a correction. Prices have risen father than most fundamentals. Also insider buying is very slow because they need to announce in advance. Given the slow reaction time to orders (place commitment to buy today and it clears in a week when stocks are 10% higher just before they tank) it wouldn't make sense to see a lot of buying.

Sadly most retail purchasers (little guys) stayed out of the rally because it was a "sucker rally" and missed the 60% rise and now are buying in near the top just in time to get wiped out all over again.

I have been slowly moving back into cash & bonds little by little over the last month. Didn't do it all at once because I am smart enough to know I don't know where the top is but it is coming soon. In march I was 20% cash now I am nearly 50% cash and with a lot of covered calls protecting equity positions.
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Better Believe It Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-17-09 08:34 AM
Response to Reply #4
5. How do we know when to do that?
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