Monday, November 17, 2008

One Positive, One Strange Conclusion

Bloomberg is reporting that insider buying of shares hit a multi-month high in October.

"CEOs, directors and other senior officers at New York Stock Exchange-listed companies purchased $1.37 billion worth of equities in October, according to Bethesda, Maryland-based research firm Washington Service. They snapped them up as the Standard & Poor's 500 Index fell 17 percent"

I would be willing to take that at face value - if insiders are betting with their own money that their stock is cheap, maybe it is.

Since this market is all about doubt, the article manages to find someone to throw cold water on the whole idea.

"Insider buying, a bullish signal for two decades, lost its prescience this year and now may be a harbinger of a retreat in shares because it signals overconfidence, according to Ben Silverman, director of research at, a stock tracking firm in Princeton, New Jersey."

I completely disagree. It is more likely that recent insider buys have been bad tells because this in the worst macro backdrop these execs have ever seen. I'm not seeing overconfidence at all, especially since Lehman crashed. The insider buys will be right again soon.

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