One indicator of the quality of the markets is the level of insider buying. Insider buying since last summer has been anemic........more selling than buying. Insiders are not showing a lot of confidence in their companies, and in turn, this economy.
ted
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Insiders Followed Market's Lead
By Jon D. Markman
RealMoney.com Contributor
2/1/2005 11:39 AM EST
If you guessed that corporate insiders were snapping up stocks in January as the investors tossed them out, you would be dead wrong. According to Thomson Financial, insider buying last month totaled just $35 million, barely more than one-third of December's anemic $95 million and one of the lowest monthly buy volumes on record.
Only 4 million shares were purchased by 532 executives in 273 companies, a level of disinterest that is very unusual when stocks are falling. Last August, for instance, when stocks were plunging to their lows of the year, executives jumped in and bought more than they had in any single month in the prior two years.
At the same time, Thomson calculates that insiders sold $1.9 billion worth of their companies' shares in January. That was a relatively low count, especially when measured against $4.9 billion in sales in December. But when you add the two sides of the equation up to reach the dollar sell-buy ratio, a measure of investor sentiment, it amounted to a whopping $55 last month. In other words, for every dollar of stock that insiders bought, they sold $55. Thomson says that is the most bearish monthly reading it has witnessed in the past decade. To provide another perspective, a multiple of $20 has historically been considered a bearish extreme.
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