INSIDER SELLING AT RECORD LEVEL

We have said many times, odd as it may seem, bull markets do not end due to overvaluation. They end with 1- interest rates rising, 2-often with a decline in the money supply and 3-an economic slowdown. But note well that risky market tops are usually accompanied by overvaluation. We are seeing none of the three above ingredients at present. Yet we are seeing extreme overvaluation in far too many popular heavily recommended stocks.

Today, full service brokerages can no longer afford to cover companies on a comprehensive research basis. Thus, they focus on, over-promote and hype a limited percentage of stocks. That is a major impediment to investment success for the retail investing public and institutional investors as well.

Investors and often brokers are guided by often inaccurate inept analysts into their over-touted, over promoted and overvalued stocks rather than the many overlooked and undervalued stocks. Yet in North America there are numerous stocks that are extremely undervalued. Today, we can find many cheap stocks with heavy insider buying (and no selling)in the gold industry and other commodities related stocks.

INSIDER SELLING… Over the last six months, we have seen the LARGEST AMOUNT in dollar value of officers and directors selling their personally owned shares at the highest rate and dollar value in market history. Last week we saw the largest dollar value totals of officers and directors selling their own personally held shares in the companies where they are employed.  Last week’s insider stock sales totaled an astounding value of $1,682,000,000 … that’s approximately $1.7 billion! While buying was barely 10% of the dollar value of the selling. It is quite a contrast and has been ongoing. These “insider sell” levels in the past have always been concurrent with the beginning of what led into brutal bear market declines.

But why has the market not gone through the normal corrections? Several reasons of which I am sure you already know. Two keys are the following….

1-*Interest rates have been kept by the Fed at artificially low levels to support the stock market as the Fed is aware that the country cannot afford the economic tribulations of a bear market. Near zero interest rates have carried the stock market up.

2-*Buybacks which now total over $5 trillion for the last five years are equal to at least 10% to 15% of the total dollar value of the entire stock market. Buybacks bring tremendous buying support to the stock market. (Explained below in more detail)

CAUTION The value of publicly traded U.S. stocks to the U.S. Gross Domestic Production is now over 140%. While not a true “timing signal,” the last two brutal bear markets have commenced from these valuation of Stocks to GDP levels in 2000 and 2008.

Since 2009, S&P 500 companies have spent more than $5 trillion, yes ($5,000,000,000,000) 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” have been a major part in keeping the stock market and many individual stocks at very high valuation levels. With today’s value of the S&P 500 stocks at $23 trillion, we believe that  “buybacks” add at least 10% to 15% to the value of the S&P 500.

*There are numerous companies and sectors that are quite undervalued that offer opportunities for exceptional capital gains. We favor gold and silver mining companies which in most cases are selling at their lowest valuation levels in history. For the most part there is little if any comprehensive research reports available for them.

CYCLICAL ANALYSIS We use cyclical analysis and always have. Our cyclical analysis forecasts the possibility of very difficult times for the markets and the world. We hope that they prove to be inaccurate.