Insiders selling with both fists

I have written about trends in insider selling several times over the years.  In my experience, individual insiders sell stock for a few common reasons:

  • When a restricted period lifts and they are finally able to, they commonly sell to lower company specific risk as a percentage of their net worth.  Restricted periods can be nerve racking, as insiders have limited windows to work with and this can leave them uncomfortably locked in and exposed to bad market moves.
  • To raise cash to fund their typically huge spending habits (building mammoth dream homes being one popular item). Cash in hand has great appeal.
  • When they didn’t sell in the last downturn, lost heavily and promised their spouse they would never let that happen again.
  • Because they are getting older and realize they only have so many business cycles left in order to “get out and get liquid”
  • When they see uncomfortable risk of downside in their business model, sector and/or the global economy and fear their stock prices are at unsustainable prices in the circumstances.

When insiders as a group sell in volume at the same time, it tends to be for the last reason above.  It is then that insider selling can offer a warning shot about future risk for ‘outsiders’.

Here is a direct link.

Meanwhile many are now selling their Euro-based holdings for similar reasons. See:  Investors Prep for Euro Collapse.

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2 Responses to Insiders selling with both fists

  1. michael says:

    “the unintended consequence of Bernanke’s arrogance”

    The consumer is spending less and saving more….who is left to buy the useless consumer junk which has undoubtedly driven global growth …..time to cover and brace for the inevitable… VXX ?

  2. Chris says:

    > German insurers and managers of large family fortunes have reportedly invested with Paulson and other hedge funds. “They’re sawing at the limb that they’re sitting on,” says an insider.

    Does no one understand hedging? They’re not “sawing at the limb they’re sitting on”. Rather, if the Euro goes down, they make a profit in the hedge that only partially offsets the economic pain that a European depression will cause them.

    It’s not a cynical bet; it’s insurance against unmitigated disaster.

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