Insider selling at highest level in history,

Let’s say it again, bull markets do not end due to overvaluation. They generally end with interest rates rising, often with a decline in the money supply or recession. But again dangerous market tops are usually accompanied by overvaluation and euphoria. Are we seeing overvaluation now?  We think so.     
 

  We see high risk in many popular and highly recommended stocks. Opportunities for capital gains are always present in many stocks but far too many “popular” stocks are being recommended by the so called experts at the very high end of their valuation and price ranges. It violates the standby rule to focus on what is undervalued and not what is popular. Many of the best performing stocks are now selling at extremely high valuations. That always ends sadly. 

 

INSIDER SELLING… Last week, we saw what was the largest dollar value total of “insiders” who are the officers and directors selling their own personally held shares in the companies where they are employed. It was by far the largest total dollar value of sales. Their stock sales totaled an astounding value of $1,174,371,122 (over one billion dollars worth) while buying was slightly over $31 million in dollar value…. quite a contrast. These insider sell levels in the past have in the past concurrent with the beginning of what led into brutal bear markets and declines of 32% to 40%. 

 

The value of publicly traded U.S. stocks to U.S. Gross Domestic Production is now over 143%. While not a “timing signal,” brutal bear markets have commenced from these valuation levels in 2000 and again in 2008.

 

Since 2009, S&P 500 companies have shelled out more than $4 trillion ( $4,000,000,000,000) on share buybacks. A share buyback occurs when a company buys its own stock in the market to lend support to its share price. Few people are aware that “Buybacks” are one of the major drivers keeping the stock market and many individual stocks at these high valuation levels.

Yet still there are numerous companies and sectors that are undervalued that offer opportunities for exceptional capital gains.

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