Sunday, September 13, 2009

The Smart Money has left the Building

According to this article at, corporate insiders recently have been selling their shares at a 31:1 rate ($31 in stocks sold for every $1 in stocks bought). Selling really picked up during August as you can see via the bar chart to the right of the article. These insiders are the ultimate "smart money" and they are now selling their stocks at a level last seen at the stock market's all time highs two years ago.

Beyond the obvious bearish implications of this data, certain observers have rightly pointed out that the motives behind this "manufactured" stock rally are bordering on fraudulent. The story goes like this: The Fed (Wall Street's stooges) throws a wall of money at the financial markets, a big chunk of that money ends up in the stock market, corporate insiders (the "smart money") take the opportunity to sell down and slip out through the back door right before the economy collapses for good aka. false rally as insider exit strategy.

This revelation comes as no surprise though, because I made the point several posts ago that all this rally would do is temporarily propagate the illusion of financial solvency and economic recovery. Economists have speciously pointed to the rise of the stock market and improvement in consumer sentiment as "leading indicators" that the recession is nearing an end; however, it's long been known (obvious) that consumer sentiment is linked to the performance of the stock market and in turn the performance of the stock market is linked both to consumer sentiment (duh!) and to Central Bank monetary policy. So, as you see, the Fed is conveniently at the front-end of this financial daisy chain / circle jerk.

And as can be expected the illusion has been propagated just long enough to not only guarantee the smart money safe egress, but of course to assure the sheeple that their money is safe and sound in their stock mutual funds - don't worry, go back to your mind numbing ESPN and American Idol, everything is perfectly fine... Therefore, once again renewing faith in the buy and hold fantasy just long enough to lock the general public into their seats for the long ride into the abyss.