Warning! The Rats Are Exiting Their Vessals In The Stock Exchange.
Picture that you’re at a major league football game. It’s a sunny day, and your favorite team has a respectable lead. Enough to be reasonably sure that they’ll win, but not yet certain. Just enough to make the game thrilling .
Except that you’ve had a tough time concentrating on the game for the last 30 minutes or so, because you’ve spotted something peculiar. Your tickets were in the cheap seats, a good ways up, but with a good view of the field. It’s a good place to see the game, but you wish you could afford to pay for one of the much better seats closer to the field, or maybe even in the boxes. So you glance in those places sometimes, thinking about what it might be like to be really close to the action.
However the people in those seats aren’t observing the game much. In fact, they’re all standing up and leaving, at first in ones and two’s, and then in bigger groups. You don’t understand it; it’s a really thrilling game, so how can they just leave in the middle of it?
A short time after those seats clear out, you see the teams abruptly stop playing. Both clubs at the same time simply walk off the field, with no word to anyone. Soon afterwards, a statement comes across the PA system that the players have gone on strike, and that the owner of the stadium refuses to be held responsible for this, therefore no refunds will be given for tickets from here forward.
And all of a sudden it becomes clear that the people that you saw leaving the game had gotten their money back before the strike started, but you’re just left with a bad memory.
So what exactly does this have to do with economics or stock market? It highlights a basic yet crucial rule of investing that you need to understand, that is “The smart investor gets out of the marketplace ahead of a large downturn.” Average investors usually stay in the market too long, and suffer the price tag on that downturn, but market insiders usually have a better warning . Consequently, any time that you notice the insiders abandoning a market, you need to carefully consider precisely why they’re abandoning the ship.
Professional sports are a bit different from the stock exchange, needless to say. In the real world, the players would certainly say they’re about to go on strike to everybody, while in the stock exchange, the insiders don’t want you knowing what they think, particularly when they’re attempting to get out of their positions, so you’ll seldom receive any advance warning.
Apart from right now. Something unheard of is currently taking place in the stock exchanges, and you need to aware of it.
A stock market insider is identified as a person who owns greater than 10% of the stock in a company, or is an officer or director. These people are required by law to document times when they purchase or sell their shares in their firm to the SEC, mostly to reduce the possibility of some types of stock manipulation.
And what are those insiders doing right now? They’re scrambling for the exits, that’s what. Almost universally, the people who know more about their businesses than anyone else are selling off their shares. This isn’t just a modest trend, it’s huge. During the last six months the insider sell to buy ratio has averaged 3,177 shares sold for every one share bought! That’s 120 million insider shares sold with only 38,000 shares purchased!
Ladies and gentlemen, some thing’s about to happen in the stock market. I personally don’t know what, but the insiders are leaving their ships, and we aren’t in a position to look at those ships for leaks, regardless of whether they’re carrying the cargo of our retirement investments with them.
I personally invite you to come over to my blog, The Rogue Economist, or check out my online E-Book, The $300 Trillion Dollar Crisis.
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