Ratio Of Insider Selling To Buying: 3,700 To 1

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Mon, 07/11/2011 - 17:59 | 1445571 cosmictrainwreck
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to quote Jamie & Little L-L-L-Loyd: "so??"

Mon, 07/11/2011 - 18:04 | 1445582 iNull
iNull's picture

It's a smart money/stupid money indicator (insiders are in the know). Usually pretty accurate, although is can be an early indicator of a selloff.

I've said on many threads that a major crash is coming no later than this fall and I still hold to that view.

Mon, 07/11/2011 - 18:08 | 1445604 cosmictrainwreck
cosmictrainwreck's picture

fully aware, thanks. and the mofo better come way sooner than this fall. was playing with Jamie & Lloyd - they could give a shit....they're already got "theirs"

Mon, 07/11/2011 - 18:10 | 1445611 BobPaulson
BobPaulson's picture

I've been seeing these numbers up on ZH for a long time. I'm curious if this statistic has been logged over a historical period to know what is "normal". What was it like in the 90's when everybody was buying like crazy? Over what periods was it below 1?

Mon, 07/11/2011 - 19:11 | 1445799 Cheater5
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Using the raw numbers here is massively misleading as it ignores that most sales by insiders are as a result of option grants (i.e., options exercised and shares sold immediately).

 

To get a useful number you need to either 1. do a lot of homework to net out these sales or 2. look to someone like InsiderScore to do it for you.

 

Assuming you got to the correct net/net number you would then also have to assume that insiders had material information that you didn't about market direction (which, in an era of very high correlations, they probably don't).  Where I have found these number useful is 1. as a confirmatory information in putting on pairs trades  and 2. looking to where selling stops (usually a sign of something positive about to happen - i.e., you can't overtly buy on inside information but nothing says that you have to sell ahead of what you (as an insider) consider to be good information).

 

I generally laugh when I see these stories on ZH as it confirms my view of ZH's tendancy to hyperventilate at the slightest whiff of bearishness.

 

Mon, 07/11/2011 - 19:29 | 1445854 Tyler Durden
Tyler Durden's picture

Or, and here's another though, you could actually do some homework, to find the answer to the simple question asked of you and sourced from a publication that has a tendancy to hyperventilate at the slightest whiff of bullishness.

Mon, 07/11/2011 - 19:42 | 1445910 IQ 145
IQ 145's picture

 Good for you Mr. Durden; that ought to shut him up for awhile. 

Mon, 07/11/2011 - 20:11 | 1445944 Cheater5
Cheater5's picture

Gee.  Are you such a perma-bear that you can't handle any opposing views? 

FWIW, I'm no raging bull (I was lined up short today and took home mid-5 figures in my personal account - not counting the 2/20 from my fund), but I also understand that markets can go up in secular bear markets (hence the last couple of years) and if you are either a perma-bear or bull you are going to miss a lot of opportunities.

I guess I SHOULD just shut up (as you suggest) and let my trading programs take your money. 

Cheers.

Mon, 07/11/2011 - 20:26 | 1446038 Raynja
Raynja's picture

you do realize the article said nothing about being bullish/bearish, you drew those conclusions yourself>?

tyler has posted insider ratios many times, granted it has only been the most  ridiculous ratios lately.

claiming profits in dollars and not % is meaningless to demonstrating how much better you are than the rest of us. speaking of which why is someone so blessed with market acumen even reading this commoner shit?

finally, you don't need a magic program or almost any intelligence to realize that a ratio this skewed is not normal.  it may not mean the market will crash tomorrow, next week, or next year, but it in no way shows insiders as having confidence that their stocks are accurately priced.  just because an executive receives options does not mean they are all going to sell week after week month after month.

 

Mon, 07/11/2011 - 22:21 | 1446372 Cheater5
Cheater5's picture

you do realize the article said nothing about being bullish/bearish, you drew those conclusions yourself>?

 

You're right.  I drew that conclusion on the basis of the wording of the post and my view of ZH's general bearish skew.

claiming profits in dollars and not % is meaningless to demonstrating how much better you are than the rest of us. speaking of which why is someone so blessed with market acumen even reading this commoner shit?

You are right again.  The percentage gain was actually very small (approx 100 bps) as  I had overhedged my long exposures to produce a very mild net short exposure.  My personal account trades tend to be day to day as opposed to my fund trades which are much more aggressive in terms of shorter trading time horizons and leverage.  Needless to say we were net short in the fund and did a little better than 100 bps (I have a very strict confi so cant talk about that more even if I wanted to).  My only point here was to establish the fact that I wasn't talking my book. 

As to why I read ZH.  I read a lot of sources, some of which I agree with and some I don't.  Reading ZH has given me good tradable ideas in the past and I will continue to read it (understanding it's bearish bias). 

finally, you don't need a magic program or almost any intelligence to realize that a ratio this skewed is not normal.

I'm not so sure about that.  Just looked at the overall InsiderScore data as of July 7 and it showed a slight bullish bias (see ISDR[GO] if you have a BB terminal).  As indicated above, I don't put that much faith in this data, but I have even less faith in the raw data cited by ZH (also FYI - the chart Tyler put in the comments sections seems to end in May).

just because an executive receives options does not mean they are all going to sell week after week month after month.

Actually, that is exactly what they tend to do.  You should take a look at 10b5-1 plans if you are interested in the dynamics here (see also my earlier point, and if my recollection is correct, 10b5-1 plan sales cancellations <> insider trading).  My overall point was that you need to filter out the planned/option exercise sales (and other factors) to get usable data here, and even when you get that data it has limited (NOTE not 0) usefulness regarding the overall market direction (however it does seem to be more useful in forecasting the  relative performance of individual names). 

In my opinion, the insider buying and selling data set has tradable information contained in it, but simply to post "3,700x.... 3,700x!!!!!" and let readers draw the simple conclusion that this is bearish is overly simplistic and potentially bad for the P&Ls of traders who may not have experience with this data set and its intricacies (BTW, we are a quant shop and we don't even crunch our own numbers in this area).  But if you disagree with me I'm not going to loose any sleep over it.

Well that's enough for the evening.  This has been an interesting diversion while watching all of the crashes on the Tour today (I had forgotten how tiring posting on ZH can be).  BTW, can you believe a press car hit two riders in the breakaway group today including new holder of the Polka-a-dot jersey.  Now THAT is F@#Kin ridiculous....

 

Mon, 07/11/2011 - 22:38 | 1446429 JW n FL
JW n FL's picture

Tyler is far to polite.. IMHO.. so I will say it, you are about to get caught in the next two weeks.. unless they announce a settlement for the debt ceiling.. the floor is going to disappear.. and you are not name brand enough to have your code on silicon. which for those that don't know what that means, he doesn't even have a chance at a chair when the music stops. so you dance instead of taking a vacation, lets hope that only the most polite people have trusted you with their money.. god forbid you have a client like me, who would have you fall on your own sword.

Mon, 07/11/2011 - 23:27 | 1446590 Cheater5
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You obviously either 1. haven't been reading my posts or 2. don't have the analytical ability to understand even the simplified version of my argument that I have discussed above.  BTW, can you actually tell me what your logical issue is with the core of my argument?

You are obviously also a very angry person who spends way too much time on this site posting. 

Here is a shocker for you.  I was trying to be helpful to people (something I think I will avoid in the future) who haven't spent the last 20+ years of their lives in front of computer screens watching the market move tick by tick, and don't have exposure the the insider sales data set. 

Here is another shocker for you since your reading comprehension seems to be suspect.  I am net short in both my fund (in which btw I have a significant personal interest) and my personal account.  So unless you tell me that the OEX is going to be up 1000 bps overnight - I'm going to be sleeping fine.

BTW, thank you for your wishes of good luck in trading (not that I believe in luck but..).  It is so nice to see someone who is not suffering from a major case of anticipatory schadenfreude.  Please DO try to hold your breath until I am forced to liquidate my fund (an appropriate response given your apparent age).  I'm sure it won't be that long at all - I'll let you know.

Cheers.

Mon, 07/11/2011 - 23:59 | 1446691 JW n FL
JW n FL's picture

you can derive good information from anything you choose too..

my message was clear. You are the 13th man incue on a twelve man line.

I hope you are short oil.. I would hate for you to have to unwind all that would be sub second stuff you were lag-edout of to begin with.

Good Luck with the bullish, bearish approach. do you fuck your wife or does she fuck you? I only ask because you seem confused on a few things, I am wondering if your professional confusion carries over into you private life as well?

 

as long as you can afford it! as long as it is safe sex! have fun! you only live once.. but if you allow that ego to write checks your body cant cash with all the confusion that is in the market place right now.. well, I have warned you what could very well happen.

 

I will say it again, Better safe than sorry! Oil ='s the ONLY FED approved short.

Tue, 07/12/2011 - 14:12 | 1448528 Abitdodgie
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So you have lots of Fiat money, Booyar

Mon, 07/11/2011 - 19:43 | 1445911 Cheater5
Cheater5's picture

LMAO.  Mr Durden is nothing if not funny. 

On a more serious note, if you feel the need to trade on the basis of this chart  alone Tyler please feel free.  Good luck.

Mon, 07/11/2011 - 19:46 | 1445921 Tyler Durden
Tyler Durden's picture

On a most serious note, if you feel the need to trade on the basis of any chart alone or in tandem with any chart, not to mention any other data, real, imagined, or manipulated, please feel free. Good luck.

Mon, 07/11/2011 - 19:54 | 1445950 francis_sawyer
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on a 'less' serious note (not that any of this is actually funny)

"golden parachutes" & "golden showers" seem to be in high season...

Mon, 07/11/2011 - 20:00 | 1445975 Cheater5
Cheater5's picture

if you feel the need to trade on the basis of any chart alone or in tandem with any chart, not to mention any other data, real, imagined, or manipulated, please feel free. Good luck.

 

That was sort of the point - I guess my sarcasm got lost in translation.

Have a good night.

 

 

 

Mon, 07/11/2011 - 21:08 | 1446146 Shell Game
Shell Game's picture

You missed the point completely. This is not trading advice. Much here at ZH is the shining of light upon a very sick marketplace. It really is as simple as that.

Mon, 07/11/2011 - 22:14 | 1446358 JW n FL
JW n FL's picture

Everyone missed it.. even Tyler because he works for a living..

 

Mr. 2/20 has to sell his clients on the fact that leaving money in the market when Pomo Lite (or the retirement funds, $62b left? ish?) is running out of gas, is the right thing to do.. thats how he makes his money, selling someone something.

 

I dont give a fuck if he brings me my coffee or has a float of my money.. the help is the help.

 

The fact that this Bloomberg info does carry an immense amount of weight with people who have money out and who cant be bothered to complete elongated mathematical equations.. is what the help, Mr. 2/20 is angry about. Tyler providing real, easy to digest information for those who wanna know but dont wanna know that much, is a God send.

 

So, Tyler! Thanks Bro! and dont worry about Mr. 2/20.. his paper wealth is at risk and as well his client base.

 

Toodles!

Mon, 07/11/2011 - 22:59 | 1446504 JW n FL
JW n FL's picture

http://www.youtube.com/watch?v=tWfDm_bqwUU&feature=share

Did Positive Thinking Wreck the Economy? - Barbara Ehrenreich
Tue, 07/12/2011 - 08:52 | 1447289 Zero Govt
Zero Govt's picture

Cheater5  -  your original point was the S&P's insider selling to buying ratio of 3,700 to 1 is "massively misleading". That's the numbers (facts). How precisely have you been misled?

Mon, 07/11/2011 - 20:02 | 1445972 Max Fischer
Max Fischer's picture

Mr Durden

First of all, I really love your website, and I'm more than a little excited to make new friends around here.  I haven't been this excited since I joined the Verizon Friends and family program.

Secondly, over the past year, this chart shows no real conviction one way or the other. However, equities have had a nearly uninterrupted 25% climb that would qualify as one of the most bulletproof bull markets in history.

So.... all I can really deduce from this chart is that the insider buying/selling ratios have utterly no relevance whatsoever.

Was this the point of the article?  That insider transactions mean nothing?

- Max Fischer, Civis Mundi

Mon, 07/11/2011 - 20:28 | 1446051 Tyler Durden
Tyler Durden's picture

The point of the article is that there were 3,700 more insider sales than buys in the past week. If you feel that data is irrelevant, you should probably ignore the weekly post that looks at insider selling and sometimes occasional buying.

Mon, 07/11/2011 - 20:35 | 1446067 Max Fischer
Max Fischer's picture

Ok... that was very clear.  In the future, I will ignore it.

Thank you. 

- Max Fischer, Civis Mundi

 

Mon, 07/11/2011 - 21:22 | 1446177 Shell Game
Shell Game's picture

Yourself and Cheater5 are failing to connect with Tyler amid the nuance of marketplace vs. market price, they are distinct and do not necessarily correlate with one another. 

Mon, 07/11/2011 - 22:32 | 1446405 Cheater5
Cheater5's picture

I don't understand what you are getting at with your statement.  Are you saying that insicer sales data indicates some sort of market dislocation that is not yet reflected in the price data?  If so that was never my point.   My point all along has been that the raw data (which, unless someone corrects me, is what I assume is ZH has been quoting) can be massively misleading (see above). 

But hey, I'm always ready to be proved wrong.  If someone has a study that shows a statistically significant correlation (or, better yet, a lagged correlation) with the raw data and index prices and the kurtosis isn't to high, I'm all ears.

 

 

Mon, 07/11/2011 - 22:17 | 1446365 JW n FL
JW n FL's picture
by Max Fischer
on Mon, 07/11/2011 - 20:35
#1446067

 

Ok... that was very clear.  In the future, I will ignore it.

Thank you. 

- Max Fischer, Civis Mundi

*********************************************************

 

How much did POMO effect that 25% bull market?

 

If POMO is drying up.. and people are pulling the eject switch..

 

I guess you are one of those cases of "You cant fix Stupid".

Mon, 07/11/2011 - 22:38 | 1446422 Max Fischer
Max Fischer's picture

POMO?

Tyler made it very clear a few weeks ago that POMO doesn't exist.  All the QE2 money went to foreign banks. 

- Max Fischer, Carpe Hunc

Mon, 07/11/2011 - 22:42 | 1446443 JW n FL
JW n FL's picture

with all of the charts of who bought and who sold back.. can you source me a foreign name? thanks for playing.

Mon, 07/11/2011 - 22:48 | 1446466 Mactheknife
Mactheknife's picture

Is Cheater overlooking the main point? There can be a million reasons that an insiders sells...to raise money for a million different things...diversify...etc. But there is only one reason on this earth why an insider would buy his own stock...he thinks he will make money and they are not and have not been doing this for a while.

Mon, 07/11/2011 - 23:52 | 1446648 Cheater5
Cheater5's picture

I don't think I'm overlooking the main point.  While I generally agree with you on purchases (putting aside what I suspect are the statistically insignificant senior executive buys to bolster confidence and .....).  You still need to look at the numerator and filter the data on sales.  In order to assume that the raw data sells/buys fraction is useful, you would have to assume that the planned insider sales data is not lumpy (i.e., that all weeks have a statistically insignificant variation in the amount of planed insider sales for that week so that you could essentially ignore them and use the week to week delta's in both the insider sales and buys as the relevant data).  I'm reasonably sure this is not true and even then you are effectively filtering the data. 

Again, I'm NOT saying that the insider sales data is irrelevant, what I am saying is that it needs to be filtered to be relevant.  And then even if it is filtered it doesn't necessarily have a high correlation to OVERALL market returns as opposed to individual name relative performance.  Consider thinking about it this way - corporate executives know their business and their expected cash flows, but they are not necessarily good traders of the market as a whole.  So hypothetically if you get a lot of net insider buying in say Apple vs a lot of net insider selling in Rimm, you might consider doing a pairs trade long AAPL/short RIMM, but you may not want to go out and start buying massive amounts of S&P futures.

Cheers.

 

Tue, 07/12/2011 - 08:37 | 1447251 o2sd
o2sd's picture

If you have any data showing this ratio (bearish or bullish) occurring in the past, please share.

Again, I'm NOT saying that the insider sales data is irrelevant, what I am saying is that it needs to be filtered to be relevant.  And then even if it is filtered it doesn't necessarily have a high correlation to OVERALL market returns as opposed to individual name relative performance.

Sounds like sophisty.

Mon, 07/11/2011 - 20:32 | 1446062 SamuelMaverick
SamuelMaverick's picture

WTF is wrong with you ??  The amount of one sided insider trading across all these different businesses is an indication of what these Companies management thinks about the future of their stock. Why the fuck would they sell their options if they thought the stock would be going up any time soon.  Better yet, why not correlate the massive insider selling with which companies are doing stock buybacks at the same time ( in order to prop the price up while the insiders dump theirs ).  Yeah , you cant trade based on this factor alone, but it does help formulate a better informed macro view.  Keep up the ass kicking work Tyler, thank you.

Mon, 07/11/2011 - 21:35 | 1446213 MisterMousePotato
MisterMousePotato's picture

Your economy of words is a thing of beauty.

Mon, 07/11/2011 - 23:00 | 1446511 Max Fischer
Max Fischer's picture

Why the fuck would they sell their options if they thought the stock would be going up any time soon....

Perhaps you could ask Steve Jobs the same question.  When AAPL was at $250, Jobs "worst trade ever" was calculated to be a $10.3B mistake.  So with AAPL at ~$350, it's quickly approaching a $15B-20B mistake. 

http://www.marketwatch.com/story/apples-steve-jobs-blunders-on-options-s...

Insider selling/buying is rarely an indication of what executives think about their stock.  Did Dick Fuld sell?  What about Jimmy Cayne? Chuck Prince?  There are thousands of examples of executives selling years too early, and thousands of examples of them keeping shares straight into bankruptcy. Not to state the obvious, but if the executive sells before negative material information is publicly disclosed, he goes to jail.  So how reliable can this ratio possibly be?

For you to get hooked on such a transparent propaganda piece speaks volumes about you.

- Max Fischer, Carpe Hunc 

 

 

Tue, 07/12/2011 - 04:18 | 1446786 MisterMousePotato
MisterMousePotato's picture

Sigmund Freud, of course, made the same mistake as you; viz., he tried to draw general conclusions from a few, specific, aberrant examples. In other words, from a few wackadoodle patients, he concluded that all men want to sleep with their mothers. Well, for one, I know that I do not. (Although I do want to sleep with your mother, maybe.)

As he once told his daughter: "Sometimes a cigar, Ingrid ... is just a cigar."

Oh, by the way, I really am not sure what lesson can be drawn from Steve Jobs not knowing back IN MARCH 2003 that Apple was going to hit $250 or $350 or anything close. Not only did his decision predate the undeniably surprising successes of the ipad, iphone, and all the other icrap, but the current valuation is even so absurd and artificial, and it would have seemed only more so back then. Sheesh. Next you're going to criticize and/or try to draw some lesson from the fact that my grandfather did not purchase ALL of Boca Raton back in the thirties for the pittance it was offered to him then?

 

Mon, 07/11/2011 - 20:08 | 1445995 double 007
double 007's picture

Mon, 07/11/2011 - 23:01 | 1446516 JW n FL
JW n FL's picture
by Cheater5
on Mon, 07/11/2011 - 19:11
#1445799

 

Using the raw numbers here is massively misleading as it ignores that most sales by insiders are as a result of option grants (i.e., options exercised and shares sold immediately).

 

To get a useful number you need to either 1. do a lot of homework to net out these sales or 2. look to someone like InsiderScore to do it for you.

 

Assuming you got to the correct net/net number you would then also have to assume that insiders had material information that you didn't about market direction (which, in an era of very high correlations, they probably don't).  Where I have found these number useful is 1. as a confirmatory information in putting on pairs trades  and 2. looking to where selling stops (usually a sign of something positive about to happen - i.e., you can't overtly buy on inside information but nothing says that you have to sell ahead of what you (as an insider) consider to be good information).

 

I generally laugh when I see these stories on ZH as it confirms my view of ZH's tendancy to hyperventilate at the slightest whiff of bearishness.

***************************************************************

http://www.youtube.com/watch?v=tWfDm_bqwUU&feature=share

Did Positive Thinking Wreck the Economy? - Barbara Ehrenreich
Tue, 07/12/2011 - 10:21 | 1446878 Urban Redneck
Urban Redneck's picture

In this case the raw numbers are not massively misleading.

In the entire corporate universe of US listed and SEC regulated companies- a grand total of 3 firms had insider buying valued at a combined USD70,750 (i.e. less than the median single household income in Switzerland).

It just depends on what you look at within the raw numbers. 

 

Mon, 07/11/2011 - 21:33 | 1446210 Buck Johnson
Buck Johnson's picture

I agree with you, I believe a major crash is coming this fall that will harken back to Dow 6,450 in 2009 or more.   

Tue, 07/12/2011 - 10:40 | 1447639 Jalaluddin
Jalaluddin's picture

So: My brother believes the sky is about to fall.

I also believe the sky will fall, but just when is the question.

They say that a drowning person comes up for air three times - so get out your slide-rules.

Mon, 07/11/2011 - 18:00 | 1445577 Greenhead
Greenhead's picture

I guess some folks don't believe in QE3.

Mon, 07/11/2011 - 18:03 | 1445588 centerline
centerline's picture

Or the money is best speculated somewhere other than long equities.

Mon, 07/11/2011 - 18:06 | 1445595 NotApplicable
NotApplicable's picture

Yeah, like hookers and blow.

Mon, 07/11/2011 - 18:13 | 1445619 papaswamp
papaswamp's picture

+3700

Mon, 07/11/2011 - 21:09 | 1446151 PC Load Letter
PC Load Letter's picture

+ 2 and 20

Mon, 07/11/2011 - 18:00 | 1445579 Misean
Misean's picture

Holy crap! Someone's buying! Better load up while the gettin's good.

Mon, 07/11/2011 - 18:06 | 1445597 Translational Lift
Translational Lift's picture

Smart money....Cha....sarc off....

Mon, 07/11/2011 - 18:03 | 1445587 egdeh orez
egdeh orez's picture

300 tab excel... #ref... brings back really bad memories!

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