Why the insiders have quit buying stocks
Commentary: The ratio of insider sales to purchases has jumped
By Brett Arends, MarketWatch
BOSTON (MarketWatch) — Something ominous is happening on Wall Street, but nobody has noticed.
The insiders have vanished.
Chief executives. Board members.
The head honchos. The people who know.
Just a few weeks ago, they were out in force, buying up shares in their own companies with both hands.
No longer. They’ve disappeared. Almost overnight.
“They’ve stopped buying,” says Charles Biderman, the chief executive of stock market research firm TrimTabs, which tracks the data. “Insiders aren’t buying this rally.”
Insider stock purchases, which surged above $100 million a day in the market slump last month, have now collapsed to just $13 million a day.
Meanwhile the ratio of insider sales to purchases has skyrocketed. Today insiders are dumping $7 in stock for each $1 that (other) insiders are buying. That’s a worrying ratio. Six weeks ago the amounts of purchases and sales were about equal.
It’s the kind of news that should give investors pause.
What insiders do with their own money is one of the stock market’s best barometers.
After all, who better than company executives know their own order books? Who knows the conditions in their industry better?
You find insiders typically buying heavily at the market lows — they did in 1987, in 1998, and they did during the financial crisis in 2008-9.
(You also typically find them cashing out big-time at the peak)