What Do These CEOs Know That We Don't?

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

Last night a good friend of mine came over for dinner.

He’s originally from Poland, and growing up there he heard a lot of bizarre stories about what it was like during the Nazi invasion and World War II.

In 1939, even as 1.5 million German soldiers prepared to invade, the general mood in Poland couldn’t have been more carefree.

My friend’s grandfather once told him that, just prior to the Nazi invasion, the schools in Poland announced they were suspending classes… but only for two weeks, because that’s how long they expected the war to last.

Incredible.

It’s as if everyone acknowledged there would be -some- conflict… but totally underestimated its impact and magnitude.

All the “experts” had forecast a clean and speedy victory, and that life would go on as normal soon.

They couldn’t have been more wrong.

My friend is utterly bewildered that his family didn’t have the foresight to escape prior to the invasion.

But they remained in Poland, along with millions of others, and willfully chose to ignore an obvious threat that ended up having life-changing consequences.

This week we’ve been discussing another obvious threat that most people willfully choose to ignore– the appalling level of US debt.

It’s amazing– as a percentage of GDP, the US has racked up more debt than most impoverished countries in Africa.

The trend holds across the West: Japan, Italy, Greece, France, UK, etc. all share unsustainable indebtedness.

But as we discussed yesterday, government debt is a long-term threat, especially for the United States whose dollar is still the world’s dominant reserve currency.

Despite the debt ceiling fiasco, it’s unlikely there will be a major debt crisis tomorrow. This threat will continue to build.

There are some threats, however, that are much more immediate, and I want to spend the next few days addressing those, starting with this one:

The US stock market is hopelessly overvalued.

By nearly every objective metric, US stocks are ridiculously expensive.

The average Price/Earnings ratio across the S&P 500 exceeds 26.5; there have been exactly TWO times in the last century when the ratio was higher: the 2000 dot-com bust, and the 2008 crash.

Similarly, the Cyclically Adjusted P/E ratio (or CAPE, which smooths out earnings over a 10-year period) has only been higher two other times in history– during the 2000 dot-com bust, and in 1929 just prior to the Great Depression.

There are dozens of other indicators.

Company “insiders”, i.e. senior managers and directors of large corporations, must file a public disclosure every time they buy and sell shares of their companies.

It’s usually a good sign when the CEO of a major company is buying shares; s/he is an insider and knows what’s going on, so their confidence is a positive sign.

Well, according to public data filed with the Securities and Exchange Commission, insider buying is at its LOWEST level in THREE DECADES.

Insider Buys

 

In other words, the people at the top of the corporate food chain who have privileged information about their businesses are NOT buying.

(What do these CEOs know that we don’t?)

Yet the market doesn’t seem to care. There hasn’t even been a slight correction.

In fact the S&P 500 has now gone 105 straight days without a 1% decline.

This is EXTREMELY unusual. Stocks routinely undergo small corrections and sell-offs that cause the index to decline 1% in a single day.

Historically speaking this happens every several weeks.

Going 105 days in a row without a 1% decline is the second highest record EVER, and the most in 22 years.

And the last time the S&P 500 went anywhere near 100 days without a 1% decline was prior to the 2008 crash.

Then there are more technical indicators.

Volatility, a common measure of “fear” in the market place, is at eerily low levels.

And an analysis of S&P 500 options published by the Wall Street Journal yesterday shows that investors are completely unconcerned about a major correction in US stocks.

As the Journal summarized,These markets know no fear.There’s an incredible amount of complacency despite obvious warning signs.

Japan is an interesting case study in financial complacency.

During that country’s boom in the 1970s and 1980s, Japan’s Nikkei 225 stock index rose to extraordinary heights.

The index hit 38,957.44 on December 29, 1989… a 500% increase from its level in 1980.

The “experts” presumed that Japan’s growth would last forever; Americans were terrified that the Japanese were going to take over the world.

But then the Japan bubble burst. Stocks started to fall, and they never regained those heights ever again.

Even today, the Nikkei 225 index is at 19,577, nearly 50% BELOW ITS PEAK from 28 years ago.

Anyone who bought into the 1989 complacency, or even at any point in the mid-1980s, has never recovered.

The “experts” would say this is impossible in the US.

But as we’ve discussed before, we live in a world where the impossible keeps happening, where the most unlikely prospects become reality.

This isn’t a hypothetical problem, or some long-term issue that might unfold in the future.

This is now. Stocks are expensive now.

And the potential consequences to your wealth and retirement make this threat too substantial to ignore.

Sure, it’s possible that stocks keep rising forever.

But it’s hard to imagine you’ll be worse off if you at least consider selling what’s popular and expensive, and choosing safer assets that still deliver very strong returns.

We’ll talk about some examples soon.

Do you have a Plan B?

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4shzl's picture

How to fuck over their shareholders?

WernerHeisenberg's picture

When the sheep are scheduled to be sheared again

Raffie's picture

Ahh yes, the wolves gathering the sheeple around the real large bon fire.

Perfectly normal.

GUS100CORRINA's picture

In the article, you asked the following question:

"What do these CEOs know that we don’t?"

In addition, you make the following comment:

"Yet the market doesn’t seem to care. There hasn’t even been a slight correction"

I have been asking this question to myself for the last 6 months as well.

My answer: They are never going to have to deal with the DEBT problems?

Why? The answer is complicated and Biblical in nature, but challenging times lie in the period ahead. While there is never exact dates and times one can assign to future events, one phase should answer the question that was first asked. The phrase is "Earth Polar Shift". 

The earth has been going through the polar shift process for the last decade and it is excelerating. This process is influencing weather patterns, temperature, earth's geography and infrastructure services. I suspect if the models are correct, the governments and people of the world are going to have a lot more on their mind other than current DEBT load. 

The most interesting aspect of this earth polar shift process is that there isn't one single thing anyone can do about it other than prepare for the turbulent times ahead.

This is the conclusion I have personnaly reached having looked at the DEBT problem for a number of years. I finally concluded that the leaders (political, business) are not going to have to deal with the DEBT problems because they will be resolved when the world is forced to reset everything.

I encourage anyone to research the subject of Earth Polar Shift for themselves. Information starting to emerge is sobering. 

8774_44887's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

SilvaDolla's picture

You know, Ive had similar thoughts about this.

I asked myself, "These people all KNOW that it's unsustainable. They've known for decades. If we're approaching a bottomless fissure, why do the elites and governments keep pumping the gas pedal?"

I'm not religious or anything, but the only answer I could come up with was that...there will be no day of reckoning coming for them. They just have to keep the (m)asses happy until the cleavers get here...or Cthulhu or whatever.

A looming ELE would make lots of sense. It would make perfect sense.

Dammit. Now, I need a Xanax. :-/

pilager's picture

What? 

 

.... how many cats you have at home.

Oldwood's picture

Control demands control of our information and the information of primary importance to us is RISK, so those who seek to retain control over us will obscure our perceptions of risk, minimizing real risk while exaggerating lesser risks. 

Islam is the religion of PEACE.

Climate change is our greatest threat in history.

Debt DOESN'T MATTER.

The healthcare CRISIS of 2010

There are two components of this deception. The first is the destruction caused by acting upon the wrong information...destruction that always leads to the NEED for even more destructive actions premised on false information. The second is the general chaos that misinformation creates, chaos which drives people to accept tyranny to restore ANY sense of order and by extension, security, to their lives.

Absolute control demands huge amounts of destruction to retain, and they are willing to take it as far as we will let them...which if history is any clue, can be a long long way.

spicedune's picture

Honestly, Ive got my face buried in this free Bloomberg terminal www.inflation.co

Magooo's picture

You mean your face is buried in your lovers hairy asshole no?

turnball the banker's picture

That they have no conscience

wisehiney's picture

Sit tight and be right.

Get paid to wait.

thevekja's picture

O wise one, any advice for a youngster on what we should be waiting for?

At what level will you be re-entering the market?

trouba z ceska's picture

Well, if you really want to know ... Those CEOs know how to miss "once in a lifetime" market rally

myne's picture

Tylers: do you want ad revenue or not? 

 

Get rid of the fucking mobile browser hijackers. 

mily's picture

Adblock and no more shit

Glad 2B Gone's picture

Why would the CEO's need to buy their own stock given they get their shares as part of their compensation plan.  Rather than buying, they are selling them back for major gains as part of corporate share buy backs.

yogibear's picture

Talk to nearly  any 20 something Financial advisor and they'll tell you now is a good time to buy.

They haven't seen the market go down, only up.

Oldwood's picture

All we lack for an eternally up market is optimism. Blind, ignorant, clueless, arrogant, oblivious optimism.

UTOPIA IS "SOMETHING FOR NOTHING"

Giant Meteor's picture

What Do These CEOs Know That We Don't?

Well, right off the top of my head, how to circumvent  actual accounting, Sarbanes Oxley, and RICO indictments ?

serotonindumptruck's picture

Unfortunately, to be a "successful" businessman in this world requires an inate and clinical psychopathy. This involves both a genetic predisposition towards, and an inherent DESIRE to dominate others. Nothing else matters, not even the possibility that such psychopathic behavior might influence the child-rearing and upbringing of offspring that may be brought into such a world.

Domination and complete subjugation of everyone in their immediate environment is all that matters.

divingengineer's picture

Sounds like my old man.
I removed my family from that "environment", permanently.

Sledge-hammer's picture

This article's author is a jew.  He starts off with some anecdote about his friend's (who I presume is a jew) family escaping Poland before WWII.  What does that have to do with the price of beans in Mexico?  The Germans treated goy Poles just fine.  My only beef with Hitler was that his activities caused God only knows how many more jews to come to the U.S.  Regards the CEO issue, many are (((1%ers))) who, duh, know that things are in the crapper, because their treacherous stewardship, nay their corruption (and collusion with our politicos) and lack of stewardship put us in the crapper.  They will come out smelling like roses regardless of what happens. Wretches.

sinbad2's picture

A point about Japan, and its rise, and decline.

It was the Plaza accord that destroyed the Japanese economy, the US forced Japan to raise the value of the Yen to an uncompetitive level. 

The US did the same thing to Germany, so Germany eventually dumped the Mark, for the Euro.

Obama tried the same thing with China, but China was prepared, and wouldn't bow to US pressure.

Whatta's picture

bah....Elon Musk is buying, so it is BTFD!!!! Dow 50K!!!

MrNoItAll's picture

They know that the global economy has entered a freakish phase of existence where the name of the game is to lever up, way up, using cheap debt wherever they can get it.  They know that TPTB have them covered, that they can get away with blatant accounting fraud as long as the play along.  They know that there comes a time when all debt is going to be flushed down the drain anyway because of course they know that said astronomical debt is completely, laughingly unpayable.  And they know to keep their big mouths shut, to not agitate the little people, to play their roles, to keep their company crawling along in step with the rest of the global economy, to do their part to keep the illusion alive.  And they damn sure know (most of them do anyway) to make their escape plans and doomsday preparations NOW using million$ if not billion$ in free digi-bucks stolen from the little people to insure their long term survival -- in luxury.

SgtShaftoe's picture

No shit. Why would you buy stocks now?

divingengineer's picture

I buy what's cheap, PMs not,equities.

whatisthat's picture

I would observe there is an argument the effectiveness of corporation CEO's may not achieve desired end-to-end results (I.e., for employee benefits and compensation and pensions, for customer needs) beyond shareholders value and personal self interest.

Cash Is King's picture

We move to nickel increments or 20 price points and we get "our" market back! Until then the machines do what they're told (by a select few) & for now, that's keep "it" up!