Montreal Analyst

Commentary of Robert Brusca, FAO Economics, New York The stalactites on the chart above tell a tale of Canada flirting with some very large deficits for some time, though 2016 and into 2017. After a short hiatus the deficit erosion seems to be back.  While exports and imports both rose this month, and exports did rise more than imports, the trends for exports and imports remain unfavorable to Canada’s trade condition. Exports have been slowing from a 3.1% pace over 12-months to an annual rate of -14% over 6-months to an annualized pace of -17.2% over 3-months. This progressive deterioration has deep roots in trends for farming and fishing exports, Industrial machinery exports, motor vehicles and parts exports as well as all other exports. None of these trends are Canadian ‘friends.’

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 […]

                      What the media doesn’t mention and public doesn’t know but should. For months the officers and directors of the largest U.S. companies have been selling their own personally owned shares in the very same companies that they work at the highest rate in history.  Yet, we rarely if ever see “insider transactions” mentioned on business television. Yet it can be one of the most accurate indicators of overvaluation and undervaluation for the stock market; additionally it is a superb indicator for individual stocks as well. For example, three weeks ago, in the ten largest transactions, officers and directors sold over $520,000,000 in dollar value of their own companies’ shares.  At the same time, they bought slightly over $30,000,000 worth in dollar value that is 17 times the value of sales as buys. That should tell you something.  Why can’t business Television report it? Because their sponsors will not tolerate it if they point out the insiders selling out large positions. It hurts business….but it hurts the investing public even more!                     Did you know or are you aware that………..? Why such bad stock recommendations?  The full service major American brokerage houses no longer allow their brokers to choose their own stocks or to make recommendations for clients of stocks that are not covered by their own firms’ research departments. That restriction is in spite of the fact that the major brokerage houses’ performance historically  is generally pathetic as experienced investors know […]

For well over a year we have written here and reported to friends and partners primarily in Quebec that the officers and directors of the major American companies have been selling their own personally owned stocks at the highest rate in history. The last six months have often seen sales of U.S dollar values of over $1,000,000,000 per week !!! Note well that the “one billion dollars per week” amount merely represents the largest ten officers and directors’ sales and not what may be hundreds of other sales not in the largest ten sales. “Insider Sales” is such an important and accurate indicator that a major stock market decline is forthcoming that one would think that business television would report it. But they don’t!  People have complained to us bitterly that they rarely ever see insider sales or hear it mentioned on business television; they find out too late. Many investors believe that they (business television people) do not want to see the investing public aware of the heavy selling as it interferes with their advertising revenue. That must be just an ugly rumor as it would be down-right un-American and un-Canadian as well.  Yeah sure. I did appear on television over seventy times in the U.S. and Canada so I have experienced the “goings on.” As we are probably commencing a harsh bear market, we believe that the investing public should be at least forewarned. In an industry having such little credibility one would think that any accurate indicator(s) that would benefit the […]

   We are in the early stages of a long and major bear market that will inflict more pain and in many stocks it has been painful already. While we have never recommended shorting the stock market, we have advised people to “take money off the table” for several years. We have forecast a 30% to 40% market decline off the top with many rallies in between. The brokerage hucksters and banksters, due to the fact that they must keep the commission “meters running” cannot afford to allow periods of reasonable corrections and low volume. The old term was “healthy correction.” They cannot recommend waiting for better buying opportunities which causes many stocks being bought at the highly overvalued prices.  Few investors realize that in the life of any stock(s) there are sellers near the top when profits can be taken and the people who take the lion’s share of the profits are the brokers’ trading desks and foreign off-shore traders who have no tax implications and impediments. As is always the case, the average Canadian and American investor and many institutional investors gets the short end of the bargain. The trading desks and off-shore investors have the enormous advantage of selling without time constraints due to taxes or any tax implications. What many investors and people in the media do not understand is that today a very small percentage of the public is in the market trading or investing at this time. Many are tired of overvalued brokerage recommendations […]

    If our fundamental,technical and cyclical indications are correct and we hope that they are not,we are heading into very difficult times, a long bear market for the stockmarkets and the world economy. We expect a major bear market for many but not all stocks.                              Yes, for several years we have suggested that intermittent 20% plus market declines should have occurred to be followed by rallies back up. Those interim corrections could have prevented the stock market from carrying dangerousovervaluation and would have offered opportunities to invest when stocks areundervalued and literally “on sale.” Too many stocks have been purchased at very overpriced levels.    The cardinal sin of “paying up” was committed again. What? Note Tesla, Netflix, Amazon, Facebook ! Good companies but selling at too high prices. UNFAIR FOR MANY INVESTORS   Worse yet, numerous Canadian and American stocks are undervalued and represent exceptional value, yet they are overlooked by the major full service brokerage industry.   Why? Because the large U.S. brokerage firms focus on common stocks that offer adequate liquidity for trading to accommodate hedge funds and high frequency traders as well as stocks with whom they have corporate finance relationships.      For years they have overlooked companies that are exceptionally undervalued with consistent insider buying and ownership by their officers and directors. We find that the average person using all the investment information available in market newsletter services and on the […]

For several years the stock market has move up unfazed by fundamental and technical indicator warnings that have clearly indicated that too many (but not all) stocks were dangerously overvalued. Historically, along the way up, moderate if somewhat harsh corrections followed by returns up have been the normal market occurrence and would have avoided high risk overvaluations that we have seen before brutal bear markets such as those of 2001 and 2007. We have seen it presently in too many trader and hedge fund favorites such as the high volume “fang stocks” and others that favor institutional investors but not the retail investors. A serious problem with many major full service American brokerages is that they no longer can earn the same commission revenue as in the past. The fact is that they have been bludgeoned by the discount brokerages whose commissions are mere fractions of the full service brokers’ commission levels. 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 very limited percentage of stocks. That is a major obstacle to investment success for the retail investing public and many institutional investors as well. They are guided by inaccurate inept analysts into their over-touted, over promoted and overvalued stocks rather than the many overlooked and undervalued stocks. Yet, in Canada and the U.S. there are numerous stocks that are incredibly undervalued such as the gold industry companies and other commodities related stocks. Hype?… Just […]

1-For the last several years the stock market has rewarded investors in many stocks; however we always emphasize that from time to time, profits should be taken. Keep in mind that the largest percentage of the profits are taken by the professional traders and trading desks.       The market volume and direction  is dominated  by high frequency trading and hedge funds which are estimated to be 80% of the overall volume.  Over the last twenty years, trading volume has increased as a percentage of the overall volume. The market is heavily trader influenced. 2-We have expected the stock market to have suffered 20% to 25% corrections over the past five years each time to be followed by rallies to the upside, those corrections did not occur. Those normal corrections would have prevented the stock market from its current extremely high overall valuation for the overall stock market but also for many of the highly touted stocks. 3-Most importantly, severe corrections offer investors whether institutional or individual exceptional opportunities to invest in shares at lower prices while they are “on sale.” Unfortunately the stage is now set for another possible brutal bear market. We are not short sellers but various indicators strongly suggest caution and possibly a severe bear market.  Yet, we have many stocks that we will be buying if they decline to our buy levels. 4-We have said many times, odd as it may seem,  bull markets do not end due to overvaluation. They end with interest rates […]

 Last week officers and directors of major American corporations in merely the largest eleven reported sales transactions as required by law had a total value of One billion and six hundred and ninety nine million dollars worth of sales. That is $1,699,312,421.00 to be exact.     Conversely the largest ten insider purchases by insiders totaled $215,679,188.00   That was the largest one week total of officers and directors  (insiders) in market history as far as we could find. When that level of insider selling occured in the past, the stock market did coreect approximately 40%.   *** WHAT WE FIND SO DECEITFUL AND DEVIOUS IS THE FACT THAT RARELY DO THE INVESTMENT INDUSTRY, BUSINESS TELEVISION AND THE BUSINESS MEDIA EVER MENTION AMOUNT OF THE INSIDER SELLING. *** There is an ugly rumor that those daunting figures are not reported because they interfere with business and advertising, but that is just an ugly rumor-of course! Ugly rumors such as that bring tears to our eyes.

One month ago, we reported that insider selling reached $450 million daily in August, the highest level this year; on a monthly basis, insiders sold more than $10 billion of their stock, the most of any month this year and near the most on record. “As corporate buying is at least taking a breather, corporate insiders are ramping up share selling as the major U.S. stock market averages are at or near record highs,” TrimTabs wrote in a note. One month later, TrimTabs is out with a follow up monthly report which finds even more of the same: according to the investment research company, the “best-informed market participants” are selling their own stocks at the fastest pace in September in the past decade, even as stock buyback announcements have hit record levels. Corporate insiders have sold an average of $400 million daily in September through Friday, September 21, TrimTabs founds, adding that this month’s volume of $5.7 billion is already the highest in any September in the past decade. Of course this comes at a time of record corporate stock buybacks, resulting in a perverse loops in which insiders dumping near record amount of stock to their own, far less informed, shareholders. “While insiders are selling hard with their own money, they’ve committed record amounts of shareholders’ money to prop up stock prices this year,” said David Santschi, Director of Liquidity Research at TrimTabs Investment Research. Indeed, stock buyback announcements by U.S. public companies have already reached $827.4 billion in […]