This page has been archived and commenting is disabled.
If Stocks Are So Cheap, Why Are Insiders Selling the Farm With Their Own Money?
This will end very badly.
According to The Economist, American companies have bought over $500 billion worth of their own stock in the last 12 months. We haven’t seen this kind of pace in share repurchases since 2007.
We all remember what followed soon after this buyback craze. Indeed, one could easily argue that the buyback craze helped create the bubble in stocks in 2007.
Today, what’s particularly disturbing is the fact that many corporations are issuing debt to do this.
This is called leveraging up. And it’s telling that companies are doing it to boost stock prices at a time when they’re not expanding cap ex or payroll.
It’s often believed that companies buy their own shares because the shares are undervalued… but the flip side of this is that companies also do it because they don’t have anything better to do with the money.
Here’s a random question… if corporate executives believe so strongly that their companies are trading at attractive prices… why are almost NONE of them buying stock personally?
American companies have seldom spent more money than they are now buying back shares. The same can’t be said for their executives.
A total of 7,181 insiders bought their own stock this year through Sept. 12 and 23,323 sold shares, according to data compiled by Bloomberg and Washington Service. The ratio of buys to sells is near the lowest since 2000. At the same time, corporate repurchases reached $275 billion in the first half of the year, the second busiest since S&P Dow Jones Indices began tracking the data in 1998.
So corporate insiders are spending tens of billions of dollars in corporate cash to buyback shares… but are personally dumping their stakes in their companies at a pace not seen since 2000?
Put another way, why are corporate insiders selling the farm when it comes to their own money… but spending corporate cash like drunken sailors?
This is just another data point indicating that we’re back in a 2000 or 2007-era mania in stocks. Eventually the bubble will pop, just as the ones in 2000 and 2007 did. At that point we’re due for another crisis.
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.
Best Regards
Phoenix Capital Research
Our Actively Updated Forum:
http://phoenixcapitalmarketing.com/dma.html
- advertisements -
Spamspamspamspam...
Um the stock market generally does benefit people. It's probably the most successful social program in history. I'll never have my own business, but I can still own a piece of businesses that are already successful.
S&P500 going in the Toilet !!! Ha-Ha. making money; ha-Ha. I told you to short it.
Plus, with interest rates so low, thanks to the Fed, savers are faced with 0% return in bank accounts, CDs, and money markets. Almost 0% in govenment bonds. They can't build their retirement accounts, or even protect their savings from inflation, that way, so why not take a wee risk and buy corporate bonds (or municipal bonds)? Thus, with so little supply of low-risk vehicles for risk-averse savers' investments, the demand for corporate bonds increases, and corporations can easily issue them at gradually increasing prices. If corporations then want to use the proceeds from those bond sales to buy stock from option-holders, great for option-holders, who, as others have noted here, can then tell themselves how smart they are. Anyway, it seems to me that, as long as the Fed continues ZIRP (or whatever it calls it now) this can continue, until, of course, like anything else, something happens, and it can't.
"Insiders do not buy stock because they are granted options which they exercise. Why buy stock when you can get it for free?"
People invest in the company when they think the future is bright. Example: you might buy your own stock if you're working on a deal and it looks like the deal will happen. Selling small amounts of stock doesn't mean much - people can sell for all sorts of reasons. Selling huge amounts of stock would be a bit of a red flag.
Right now Exxon Mobil (XOM) has very little insider selling. Yahoo says insiders sold 0.6% in the last 6 months. That could either be neutral or a bullish position.
In contrast, Caterpillar (CAT) has 7.1% sold. That might be a red flag.
Right now Visa is seeing over 50% insider selling. That's a red flag with flashing lights and sirens:
https://ca.finance.yahoo.com/q/it?s=V
Actually it is easy to explain. It's a cycle. Corporation issues stock options to the very top people, that have no holding limits. Corporation issues debt to buy stock on open market, thus forcing up stock price via higher EPS (less stock available). Said corporation puts stocks bought into corporate treasury to allow top executives to exercise options given. Executives sell stocks into open market from these exercised options, as corporation anounces new stock buy-backs, of course, with issuing more debt for stock repurchases. This goes around and around, much like a financial circle-jeck. This will go on until corporate debt gets so high that the debt can no longer be serviced and stock price collapses. At which time it will be said: " no one could see this coming". Then corporations will claim that there "will be tanks in the street" if they aren't bailed out. Onward: privatize profits and socialize losses, you peons.
In my F-500 company [redacted], there've been some redemptions the last couple months. Less than 10% overall holdings (as far as publicly disclosed sales go,) but selling nonetheless.
Un-doubtedly because the market will go up forever ??
issue massive amounts of options to insiders. borrow money via corporate debt for free. use money to buy up corporate stock and boost share price. insiders profit and turn corporate debt into personal wealth.
When it all goes to shit, the company dies and the debt doesn't come back to the insiders, who walk away with piles of money and spend the next decade or two flauting how smart they were.
We are on same page. I got a phone call so I wasn't able get mine posted as fast as you. Well done.
Insiders do not buy stock because they are granted options which they exercise. Why buy stock when you can get it for free?
They actually have to pay for excersing the options, but at a lower price than listed market price.
Corporations are buying back their shares because this drives up the stock price. Executive compensation is linked to the stock price. Therefore stock buybacks directly enrich the executive class. American corporations are, at this point, little more than vehicles for the enrichment of corporate insiders.
But, but, that's not fair. The stock market is supposed to benefit the people. it says so right here in my high school civics class ?
Should I sell my Nortel stock?
eh?
Well, you could trade up to some Lucent.
Alcatel-Lucent. THAT was a success story.
Oh, the adventures I had working with one of their departments.
Lotta Chiefs; few Indians; no genius creators; they all left. Another triumph for Bureaucracy.
Repost:
Maybe I'll bring the Govt down on me for saying this, but there are larger issues in play:
- Integrity in Government, Original Regulation was in response to Robber-Baron Monopolies, Regulation Capture is where people with money, power & influence pay, bribe, or offer career advancement to government officials for their influence and support for documents
- Jobs are down, Wages are down, Savings are Down, Wealth of US Middle Class is down, it is a break down in the education system to have young people say that education is too expensive, Culture has broken down to equal just corporate culture as parents must work, parents just manage their kids like human resources, ... we no longer get to know our kids & don't help to see that they have normal relationships and don't look to see how they respect themselves OR Understand Themselves OR How they relate to other kids and adults and learning...
- Today marks the high point in US Middle Class Wealth and the Top for their Strength, this means this is the last chance for Revolutionary changes in Federal Government, In Simplifying Income Taxes, In simplifying Accounting, In simplifying Financial Instruments, and in ending the crazy stuff that caused the 2008 Global Financial Crisis
- The US Ideal is gone, The Vision is Gone, the basis of USA's Unique Freedom & Liberty & Equality is gone as the US Constitution is pushed aside by Presidential Signing Orders and Everything that the US Congress Does or signs
- Militarism is up, Violence is accepted, Women are now part of the Male Culture of Tough and Violent
---
- Everyone Agrees that the USA Joining World War I was a big mistake and possibly a huge PR Campaign, I agree with this... War doesn't pay off for anyone even if you claim the high ground by saying your smart bombs reduce Civilian Casualties
- facts seem to indicate that Bankers operate behind the scenes to promote war, war loans, war debts, payments to Defense Contractors of which they are investing, and today we have Contractor Logisticians, Contractor Mercenaries, Contractor Armies, and it is big Business
---
- You gotta talk about the loss of small businesses, there is even federal legislation to favor small businesses, but the system is working against the small business
- Systemic Analysis does help greatly in understanding the USA, it seems that you can't understand the media or rumors and grasp the USA's Problems... You see that the US Government is made up of many systems... and many systems can be called "Broke" as they fail for their intended purpose,... this is very important as this means we need "Federal Commission or Inspections" to bring out the facts,... after all we Tax payers are footing the bill for systems that don't work and actually support corporate Subsidies, awards to giant corporations, and... well a kind of Fascism
Hey, how about some CYNK? It's a real bargain now at 0.10. That's down from 0.16 yesterday and surely will go back up to 5 billion or whatever it was.
T here you go; t here's nowhere to go but up ! HA-HA-HA-HA.