As I have mentioned before, I have been increasingly uncomfortable with the market and my long positions not to mention being unable to find new stocks to buy.
Below are articles that support my discomfort and make me wonder if I should be more aggressive in selling instead of just not finding new buys.
I would appreciate comments from fellow value investors.
Thanks,
Bob
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Sy Hardings Street Smart Report
July 30th (sample copy sent to me)
INVESTOR SENTIMENT
Substantial growth in investor optimisim and complacency is in evidence.
For instance, at the market bottomlast october, investors were pulling money OUT of mutual funds at a substaintial clip. But, Lipper reports investors poured $`9.5 BILLION into stock funds in June, the largest inflow since March of last year. (The market topped out on March 19 last year to begin 6 down months in a row)
Bullishness amond investors as measured by the AAII,II, the VIX index,etc, have also shown significant growth. All reached extremes of optimisim in recent weeks that have not been seen in a number of years,and in the past were associated with important market tops being near.
INSIDER ACTIVITY
There has also been an impressive growth surge in the amount of selling by corporate insiders.
According to Thompson, insiders are selling $25 for every $1 they are buying. Anytime its above $20, its usually been bearish.
This is only the 2nd tyime in the last 10 years the indicator has been over $20 for 3 months in a row. Last time was July,august & september of 2000. (6 months later the S&P 500 was down 25%, the nasdaq 54%)
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WSJ Augest 13
LACK OF INSIDER STOCK PURCHASES SENDS A WARNING TO THE MARKET
By Tony Cooke
--The message that insiders are sending to the market can be summerizerd in one word :Sell.
The sustainted drought in insider buying versus selling that began 3 month ago has been matched only once in the past 10 years,according to data from Thomson financial.
That occasion- july through september 2000- preceded a 19% drop in the market in the ensuing siz month period and a 28% drop in the following year, said Lon Gerber,director of insider reseatch for Thomson Financial.
"It just so happened that was the worst 12-month performance in the decade,"mr Gerber said.
Mr Gerbers measure of insider sentiment compares the dollar amount of purchases to the dollar amount of sales. Last month, that ratio stood at $32 of sales for every dollar of purchases,the third consecutive month in which the ratio topped the 20 to 1 measure that Gerber considers a sell signal.
Gerber said a dearth of purchases rather than a glut of sales, has driven that ratio higher in recent months. He said he suspects market valuations have gotten ahead of earnings results,making insiders reluctant to add to their holdings.
"Executives right now are not willing to buy...untill they see more earnings visibility" gerber said.
Michael Painchaud, reseatch director for market profile therorems,tracks insider transactions by their number rather than their dollar value,but reaches conclusions very similar to Mr Gerbers.
"We dont think its an accident that the markets have been moving sideways. Insiders tend to be very good predictors of value".
Other trackers of insider data are similarly gloomy about the stock markets prospects. David Coleman of Vickers has moved his model portfolios out of the market and Jonathon Moreland of InsiderInsidersm recently took positions in funds that are betting on a drop in technology stocks.
Gerber said that in the past 10 years there have been 14 months in which the ratio exceeded 20-to-1. On 11 of those occasions,the stock market was lower 6 months later.
Painchaud said that although there have been limited signs of improvement in insider sentiment in the past week,he remains wary.
"we wont begin to turn bullish untill the insiders turn bullish" "We're waiting. They'll tell us"
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