What Do They Know That We Don’t?

Wolf Richter's picture

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

Friday evening when no one was supposed to pay attention, Google announced that Executive Chairman Eric Schmidt would sell 3.2 million of his Google shares in 2013, 42% of the 7.6 million shares he owned at the end of last year—after having already sold 1.8 million shares in 2012. But why would he sell 5 million shares, about 53% of his holdings, with Google stock trading near its all-time high?

“Part of his long-term strategy for individual asset diversification and liquidity,” Google mollified us, according to the Wall Street Journal. Soothing words. Nothing but “a routine diversification of assets.”

Routine? He didn’t sell any in 2008 as the market was crashing. He didn’t sell at the bottom in early 2009. And he didn’t sell during the rest of 2009 as Google shares were soaring, nor in 2010, as they continued to soar. In 2011, he eased out of about 300,000 shares, a mere rounding error in his holdings. But in 2012, he opened the valves, and in 2013, he’d open the floodgates. So it’s not “routine.”

Liquidity, Google said. In 2012, he reaped about $1.2 billion from stock sales, and if he can sell this year’s portion at the current price, he’ll reap $2.5 billion. $3.7 billion in total. What exactly would he need that kind of liquidity for? He could buy a Boeing 787, if it ever becomes airworthy again, plus a few castles, dozens of handmade exotic cars.... And it would barely scratch the surface.

Diversification, Google said. Sure, don’t put all your eggs in one basket. Though he didn’t need to diversity from 2008 through 2011, he now needs to diversify urgently. The landscape has changed. And he is reacting to it.

He could diversify into treasuries, for example, which would guarantee him a loss after inflation, thanks to the Fed-imposed financial repression that governs our crazy lives. Or he could buy lots of gold or a myriad of other assets that he thinks make more sense than holding Google stock at the current price.

So, we’re left wondering if there’s something waiting to happen at Google that prescient execs with a phenomenal understanding of the company and the industry can see on the horizon. Google has plowed a lot of money into startups, green energy, and other mind-boggling projects. He might be worried that they won’t pan out, that they’ll have to be cleared off the balance sheet with a huge write-off. He might be worried about a million things.

Yet the fact that he sold practically nothing during the bull market of 2009-2011 suggests that he may see something beyond Google: the hoped for Great Rotation, for example—from those who know to those who don’t. From the Eric Schmidts to mom-and-pop retail investors. And once that’s accomplished....

Small investors lost a bundle in the last crash. At the end of their wits, they got out at the bottom, and stayed out during the subsequent run-up. But now, they’ve been driven to desperation by the Fed’s zero-interest-rate policy, as inflation has hammered their CDs that yield almost nothing. In order to stop losing money slowly but surely, they’re jumping into the stock market once again, buying the very shares Schmidt is selling—or so the smart money hopes—only to face once again the risk of losing a lot of money fast.

That was the Fed’s policy every time. They didn’t care in 2000 that the market demolished a bunch of young upstarts that had gotten unjustifiably and unnecessarily rich. Let them crash. They did it again during the financial crisis. Let them crash. Only when it started taking down their cronies, did they get nervous—and handed them trillions.

Mr. Schmidt isn’t alone. Corporate insiders were “aggressively selling their shares,” reported Mark Hulbert. And they were doing so “at an alarming pace.” The buy sell-to-buy ratio had risen to 9.2-to-1; insiders had sold over 9 times as many shares as they’d bought. They’d been aggressive sellers for weeks. That they dumped shares in December, when the sell-to-buy ratio was 8.38-to-1, could have been the result of the fiscal-cliff theatrics, but the latest sell-to-buy ratio was even worse.

Instantly, soothing voices were heard: “don’t be alarmed,” they said. But Mr. Schmidt and his colleagues at the top of corporate America, multi-billionaires many of them, are immensely well connected, not only to each other but also to the Fed, whose twelve regional Federal Reserve Banks they own and control.

For the mere public, there have been vague and mixed signals that the Fed might finally stop its drunken printing frenzy—that the only thing it is waiting for is the completion of the Great Rotation of equities from the smart money to mom-and-pop money. Once that’s completed, to heck with the markets. But for Mr. Schmidt and his buddies, the signals might not have been vague and mixed, but clear and actionable.

At the other end of the income spectrum: with the average cost of attending college at $120,000, a family of four should expect their children’s college to cost more than a home. Optimism about the value of education provided justification for students to borrow $42 billion from the US this year. Yet many of them will end up as student-loan debt slaves. Read.... College Graduates Are The New Debt Slaves.

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dunce's picture

Obama said that at some point you have enough money, he wasn't talking about his crony capitalists when he said it, but in this case it is true. or another great intellect, Mae West, said that too much of a good thing is wonderful.

Peter Pan's picture

There is no such thing as a safe asset unless you have a society that is functional, civilized and which respects property rights.

As far as I can tell all three of these qualities are becoming severely strained in the USA.

Gold and silver might be the best apocalyptic assets to have but YOU may not be safe once people realise you hold them.

I say let the man sell whatever he wants and let the rest of us draw whatever conclusions we like.

markettime's picture

Don't you think the changes in how he was going to be taxed had anything to do with it? Companies paid out massive diviends last year to avoid a rise in taxes. If I was in his shoes I think I would have sold it all also, I mean why not? Sell at an all time high and pay lower taxes rather than waiting for them to go up in 2013. I agree insiders are selling massive amounts of stock and the dumb money is flowing in, but I think this particular example had more to do with taxes. It isn't like google is going to come out and say he was trying to avoid paying taxes. 

Hongcha's picture

53% of his holdings?  And they say no one rings a bell at the top?

Arthur's picture

Well he could have shorted the stock too.

pragmatic hobo's picture

what I'd like to know is who are the ones buying the dump?

nmewn's picture

“Part of his long-term strategy for individual asset diversification and liquidity,”

Liquidity is good.

andrewp111's picture

That is precisely why he is selling. The stock is at an all time high, and there is a big risk it won't stay that high for long. But it could go higher, so he is retaining 47% of his holdings just in case.

But why would he sell 5 million shares, about 53% of his holdings, with Google stock trading near its all-time high?

flapdoodle's picture

The answer is very, very simple. You folks just need to put two and two together.

Schmidt needs to raise a lot of cash because he just bought North Korea.

Why else do you think he made that trip a few weeks ago? The present supreme helmsman Kim is a bit green behind the ears and ruling with an iron fist is no fun, so he's off to Montecarlo to bang European skanks.

Schmidt always was a bit weird and probably gets off on being worshipped.

I wonder if the price includes the nukes - my guess is that those are actually already bought and paid for by Iran...


Bear's picture

Viewed in percentage terms the "Edububble" is huge, bigger than gold, bigger than equities, bigger than housing, bigger than bonds ... it's about time to securitize the new degrees into to "People Futures" 

Zer0head's picture

posted elsewhere

 This excellent WSJ article from 2010 on Dr. Schmidt


"The power of individual targeting"

Advertisers and local business would likely want to know where Doc lives so that they can distribute the appropriate sales circulars to his mail box  at his summer home in Nantucket

and Doc's house is at  45 Cliff Road conveniently excluded from street view


but you can get a closer look if you spend time at

http://data.visionappraisal.com/nantucketma/findpid.asp?iTable=pid&pid=10328 where he has a couple of properties hidden behind LLCs with barnyard names like Big Hen LLC etc and this stuffed sheep thing going on at the main house; clearly no symbolism in this image bahhhhh bahhhhh 

and this



and this

What does Twitter know about me? My .zip file with 50Mb of data



medium giraffe's picture

He must be absolutely shitting his pants that the new blonde bint at Yahoo! is going to turn the company round and CRUSH Google...

...unless it's something else entirely. ;)

Matt's picture

is this sarcasm? it's hilarious either way, +1

medium giraffe's picture

What are you trying to say? That Yahoo! is a pathetic has-been that pissed away the opportunity to capture the market years before Google came on the scene, and no amount of publicity stunt pulling, such as installing cougars in top positions who clearly aren't equal to the task, will turn their business around, and no matter how many management meetings they hold where buzzwords such 'mobile' and 'social media' are thrown around by workshy metrosexual iPad junkies with stupid haircuts and skinny jeans, they will ultimately fumble along in the dark offering nothing more that a bit of poorly edited news, a crap search engine and free email until they ultimately curl up and die?

Seems a little unfair Matt! :) :)

KansasCrude's picture

Eric Schmidt is ass wipe, I remember watching a interview with him and they asked why Google didn't pay a divvie when they had a MASSIVE hoard of cash.....guess we just found out.  Because it doesn't benefit scum sucking turds like little wienee Eric.  He had they typical BS answer no surprise about Google creating more value, blah blah blah.  Talk about a POS that hit the lottery....yeah that be Eric

Matt's picture

Do you think Microsoft and Apple issuing dividends was really such a fantastic thing?

GeezerGeek's picture

A few other possibilities:

1) he wants to pay his fair share, so he's taking profits in order to pay a boatload of taxes.

2) he knows that Obama is about to get us engaged in a hot cyber war with Iran and/or China and/or Russia. End of internet when our enemies respond.

3) he knows that Obama is about to launch a false flag cyber warfare attack on the US. End of internet.

I think I'll keep my tinfoil hat on a while, just in case.


ptolemy_newit's picture

It is very reasonable to sell when you do not have control over your own company (google) anymore!  The search engine is a NATIONAL SECURITY device.

Obviously google data mining has turned up serious facts and understandings of world trade, economic and military war plans that signal a soon to explode world.

Schmidt will be a high end prepper and the southern hemisphere is a lot safer then the north.

Everybodys All American's picture

Number three sounds about right. The Marxist mole knows if he intends to transform America he is going to need to get rid of his opposition.

Yes We Can. But Lets Not.'s picture

Wouldn't be surprised if Schmidt backs up the truck and loads it with gold.  Perhaps he feels just a bit queasy about holding only digital wealth - were I worth a large sum, I'd feel that way. In this age, there are so many shifting currents and they shift ever more rapidly, and I think that factor alone bodes well for gold as a lasting store of wealth.

are we there yet's picture

House resolution HR 390 known as the FEMA internment authorization bill is back. THis will allow homeland security to to head 6 military bases for controlling their internment needs.



hardcleareye's picture

I try not to wear my tin foil hat to often, scares the grand kids....

Butttt, I did a brief read of the bill,  anyone else read it? 


I find it disconcerting.


The above bill died, (that's what I get for blindly following the above commenters links) but this Jan it was resurrected as HR 390 (as stated, however this is the link to HR390)


and this is were you can follow the status of the bill


Current status is it has a 3% chance of getting out of committee... ie it ain't happening... take your tin foil hat off...... lol

Hobie's picture

I've been watching the insider trades at CAR and executives there have sold over 13 million shares in the past 6 months. And there was a major sell off from 24-26 January.

A big correction is overdue and if the Fed stops the printer... look out!

knowknotwit's picture

In 2009, I was a Google shareholder and listened in on their conference calls at earnings and heard frequent interviews with Schmidt. One thing that he said stuck with me even after I sold the stock. He said in 2009, that he would make sure to sell high and get off before the wave crests and crashes. He said in the interview it is as easy as that. He said that was what he learned from the 2008 crash. I think he is well aware of the impending break in the wave and that we have hit the high in the markets for quite some time. 


Valentine's day will be a turning point. 

eatthebanksters's picture

Schmidttyis just one ot the many indicators that the centrally planned/manipulated bull market is soon to end.

Lmo Mutton's picture

When the DOW breaks 14 that will trump any radiating nuclear meltdown spewing EMP shit.

Long DOW derivetives.

Super Broccoli's picture

oh come on i'm sure he just wants to buy some AAPL ;-)

ebworthen's picture

"...that the only thing it is waiting for is the completion of the Great Rotation of equities from the smart money to mom-and-pop money."

Yes, now that the FED has robbed four generations of their future to bail out the banks and elites, they can let this Black Tulips bubble of a market pop as soon as their masters cash out.

Ramp it up, reel the pension and mutual funds in, then ring the cash register.  A lot of people (me included) know the markets are a casino - a Ponzi - and got out and aren't going back.

Many more, however, are trapped in the markets through IRA's and 401K's with little choice.

No coincidence that ETF's are being pushed and sold like snake oil in the Old West.

lakecity55's picture

Burned in '08, I have sold out xcept for silver miners; have bought a little of them on dips.

The rest went into fizz.

rustymason's picture

IIRC, Larry Ellison sold 500,000 Oracle shares a month at the height of the Internet boom. He ddid't know dick about databases or running a company, but he knew a market balloon when he saw it.

Mesquite's picture

Actually quite simple...Just look at the charts...And ignore the 'noise'...,

WillyGroper's picture

WTF is it w/all these blog spammers?

All_Is_Well's picture

Cause we talkin bout the CEO of GOOGLE!!!!!!!

AnAnonymous's picture

What he knows others want to ignore: strength of the USD.

trendybull459's picture

All this system had hold on Apple shares,Googly,Shmugle,Facelook and so on,all this bloff is traded on inside information without to shy,allas!Visit us at new page and let your idears on FED pool we long awating you:


azzhatter's picture

The old "liquidity" excuse. Everyone needs a few billion liquid, you never know when an emergency might come up

Winston Churchill's picture

Its a bugger that its always in the other  jacket though.

NEOSERF's picture

Vringo is going to settle with MSFT/YHOO and get an injunction on Google...game over.

Stud Duck's picture

Didnlt ya all hear??? He is like Geo Bush, bought a 70,000 acre ranch in Chile, with a water aquafer under it larger than any known in the world.  I hear from the boys down south that he is looking for lots more!

DoneThis2Long's picture

FWIW, I think t'was ~100k in Paraguay/Uruguay!


Legolas's picture

The funny thing is they think they are going to survive the coming "great vindication".

willwork4food's picture

Even if the bastards & their progeney live 30 years past their peers, Karma's. still. a. bitch.

adr's picture

Mom and pop work hard to save up $10k. Cramer tells them the stock market is going to explode to new heights like the 1980s all over again. Mr. Nice guy CEO decides to sell his shares to mom and pop, thanking them for the $10k.

Thanks for the cash, now I won't lose it in the crash.

DoneThis2Long's picture

With pre-tax $, he too will buy an island, hire an army, buy gold to preserve his ass(ette...s), then, when Obozo will start selling long held national assets, along with properties/assets held as collateral by banks and those of corporations going belly up due to the up-coming global depression,  further driving down the value of any hard assets, Mr Schmidt will be going to Washington, to buy for pennies on the $ whatever is left behind by the chinese and the russian governments.

God, the Washington DC, Chicago, NY and L.A. mafias destroyed this nation and fucked over the American people. Clearly we are replaceable/disposable. The thieving bastards are proving it right now, by shafting all those who helped build this nation as they are getting on in years, and now are starting to need aid from the nation they, and many of their ancestors, built and sacrificed for. No good deed goes unpunished (again).

Why are so many wealthy ..... really wealthy Americans selling assets and moving abroad? MAny even denouncing their American citizenship? I doubt it they are sick of the 'good life' or feel like starting over in their later years ?!?!

battle axe's picture

Reason for selling: Obama got elected, enough said. 

Middle_Finger_Market's picture

Reason for selling: the supposed 'market' and 'model of growth' is absolutley meaningless in the evolving society of mankind...you think we stopped at opposable thumbs?!

Joe moneybags's picture

Reason for selling:  Schmidt has been lurking at ZH.