In his morning note, UBS floor guy draws a scary parallel between the market today and last summer.
Let’s Hope It’s Not An Omen – In his column this morning, Mark Hulbert notes that corporate insiders are “now selling their companies’ stock at a rate not seen since late last July. That’s a scary parallel indeed, since that late-July spike in selling came just days before one of the more painful two-week periods in the stock market in years.”
Hulbert then examines how aggressive some of this selling is:
Still, on the theory that corporate insiders — officers, directors and largest shareholders — know more about their firms’ prospects than do the rest of us, it can’t be good news that they are selling at such a heavy pace. Consider a ratio calculated by Argus Research of the number of shares insiders have sold in the open market to the number that they have bought. Last week, according to the latest issue of Argus’ service, the Vickers Weekly Insider Report, this sell-to-buy ratio stood at 5.77-to-1. And among insiders at companies listed on the New York Stock Exchange, this ratio was even more lopsided at 8.2-to-1.
Making these recent readings even more worrisome, according to Argus Research, is that they came on markedly stepped- up activity among corporate insiders. This increases our confidence that the ratio accurately reflects prevailing sentiment among a broad cross-section of the insiders.
In fact, Vickers is so alarmed by recent insider trends that this week it is selling big chunks of its two model portfolios and putting the proceeds in cash. After the sales, its “Insider Model Portfolio” will be nearly 30% in cash and its “Risk Model Portfolio” will be more than 60% in cash.
Let’s hope history doesn’t repeat.