I know, I know. Unemployment is a lagging indicator:
Growing pessimism about the prospects for a global economic recovery sent stock and commodity prices tumbling on Monday while new data showed that leading US corporate executives were cashing out of their share holdings at a rapid pace.
***Executives in charge of the largest US companies sent a signal of their concerns by selling far more shares than they bought this month, according to data based on Securities and Exchange Commission filings.
Share sales by so-called company insiders are outstripping purchases so far this month by more than 22 times. TrimTabs, the investment research company, said insiders of S&P 500 listed companies have unloaded $2.6bn in shares in June, compared with $120m in purchases.
“The smartest players in the US stock market – the top insiders who run public companies – are not betting their own money on an economic recovery,” said Charles Biderman, chief executive of TrimTabs.
Again, feel free to flame me, but right now I’m with those of you that think all this talk about green shoots and the irrational market increases really is nothing more than a pump and dump, as some of you have suggested.
(via)
Pooh
Why does anyone still think the stock market has any relation to any underlying fundamentals of the companies represented?
Comrade Stuck
The market goes up
The market goes down
And what we have learned
It is run by clowns
This is the full extent of my economic expertise. But I do get the impression that the whole kit and kaboodle is in an epic shuffle that won’t be completed anytime soon.
jharp
You are correct John.
Pump and dump. 365 days a year. Every year.
d0n Camillo
Would this be the same smartest players who got us into this mess by securitizing home mortgages? This might be a good time to buy after all.
Ditch Digger
I just invested everything I own in Goldman Sachs yesterday after all their good news. Wait, what? Paulson isn’t Treasury Secretary anymore? son of a …
beltane
Does this mean that the old folks won’t have to go hungry this winter on account of paying $5 a gallon for heating oil? Market manipulation hurts real people in the real world, not that it matters to the important people on TV.
jrg
I don’t see how this metric is meaningful without knowing how many are stock grants, or other instruments that are issued by the employer, but not purchased.
DonkeyKong
Bingo! Some compensation rules being batted around in congress tie company profits to stock compensation kept for 5 to 10 years.
Can’t pump and dump under those rules
Johnny B. Guud
I think the article is referring to senior levels at corporations, as opposed to traders and bankers, Wall Street firms, etc.
Johnny B. Guud
@jrg: Trim Tabs breaks out which shares are “purchased” vs “acquired”.
Open market transactions are usually the designation for using your pocket money to go out and buy shares.
The article would be focusing those that were open market transactions.
What would be more relevant, is how many CFOs/Controllers were buying/selling shares. They know the numbers, and are usually a better indicator.
Fulcanelli
You’re right John, ain’t no green shoots here in RI unless they’re sprouting under horse shit where we can’t see ’em yet. Most regular folks are going down for the second time ’round about these parts. Over 12% unemployment and sinking like a stone.
Even the state run pseudo-casino Twin River is going bankrupt to the tune of a half a billion clams. (the State gets 60% of the take, btw). Even the Lottery scratch tickets suck out loud, so everybody goes over the line into Massachusetts to buy theirs because they pay off better.
We might just as we face it that in this country we’re being held hostage by the landed gentry with all the fucking cash and it isn’t going to change anytime soon until people wise up and we publicly finance and elect congress critters that’ll grab Wall Street by the balls and not let go. Ever.
IMO Best case scenario is it would take two of three senatorial election cycles of a bunch of electing iron clad, real progressives and that ain’t likely. Anybody here think the middle class can hold out that long?
The investor class that date raped the middle class, made our homes worth shit and cleaned out our 401k’s over the last 8 years in this country won’t aggressively invest at home anymore in anything other than paper shit like CDO’s and CDS’s that they alone can control with a brown person talking about universal health care, strong unions and ‘sharing the wealth’ in the White House. Fucking face it.
We’re on our own and we’re gonna have get back on our feet another way.
Fulcanelli
Attention Moderashun Godz… Cleanup in Post#11 @10:56PM, if you please. Pretty please.
Brandon
Jeebus. Hold on boys, this is going to be a wild ride.
Elie
Okay — You’re right. There are no green shoots.
Now what?
The Other Steve
As Warren Buffet has long said. Buy when others are scared… Sell when others are exuberant.
PeakVT
Has any of the heads in the octabox talked about fundamentals during this rally? P/E? Price to book? Cost of sales? Available cash? I certainly haven’t seen that much surfing about. Some bounce off the lows was inevitable but I think the talk of green shoots was mostly booster-ish B.S.
Brachiator
This could be as much related to fears of changes in compensation rules as anything else. But in any event, it’s a bad sign when a company’s executives are paying more attention to their paychecks than in delivering value to customers and to shareholders.
And this behavior kinda makes you wish for a little old style payback (Pensioners kidnap financial adviser who lost them £2m and batter him with Zimmer frames):
Yes, I know it’s wrong. And the pensioners’ cash was often from unreported income.
But still.
ninerdave
@The Other Steve:
Bingo.
And I still don’t see anyone addressing the mortgage problems that got us into trouble in the first place. As far as I can tell, they are still out there.
That’s fine imho. buy low, sell high.
The way I view it, if you’re not retiring anytime soon and are not buying up all the indexed mutual funds you can you’re a fool. Either one of two things will happen.
one: everything recovers and you sit pretty.
two: the market tanks, the US goes bankrupt and your investments are worthless, however given the chaos that would ensue even if you were rich your paper money will be worthless when we’re all scrambling to the hills yelling Wolverines.
Bottom line, from an investment standpoint, unless you day trade, this is a time to buy it up!
Nylund
Yes, it would be those same stupid guys who are sitting on the hundreds of millions they made over the past couple years, who we gave billions more to in free money, who just got the biggest bonuses in history this past quarter.
A parable:
There is a small town with one bank. The owner of the bank decides to sell gold bricks to the townspeople on the cheap. He makes millions upon millions of dollars. One day, the people realize that all the bricks are just actually pieces of the banker’s poo electroplated with gold. They all confront the banker, pissed as hell. He says, “hey! I owned a ton of those bricks myself! I lost a fortune too! And, since I’m the banker, if the bank goes under, you all lose! The people take his words seriously, go home, gather up all the cash under their mattresses and give it to him.
“Thank God,” the banker says as he puts all their money into his vault. “Without this, we would all have been screwed.”
One of the townspeople then turns to another and says, “Boy, that banker sure was stupid.”
Some Random Chick
@ Brachiator
Stupid question . . . but hasn’t that always been the case? Or at least for the last generation.
It was my understanding that this was precisely what led to our current situation. We just reached “peak greed”, if you will. So many execs screwing so many customers at one time that the sh*t hit critical mass.
I don’t claim any economic expertise, however.
gex
@The Other Steve: Except this is not exactly a solution to this country’s financial problems, it is just how an individual investor can succeed. And of course, by definition it can only help a small percentage of people. And it has nothing to do with the social value of the stocks being traded – whether actual goods and services are provided to society or if it’s all B.S. CDSes.
Some Random Chick
@ ninerdave
Precisely my position. I just bought my first home, due to dropping prices, glut in the market, super-low interest rates, and, President Obama is giving me a cool $8,000 for my trouble.
Two years ago, when we were doing “well” (or more so than now, anyway) I couldn’t have afforded even a modest abode. Not at those inflated prices!
Or so I thought. Apparently they were giving out mortgages like party favors. Only, no one told me. In today’s market, the gov’t has really cracked down on qualifications. You’ve no idea the hoops I had to jump through to qualify for an FHA loan.
But, overall a good thing. I had to prove I was unlikely to default.
I wonder if I’d gone the traditional mortgage route if I’d have had to go through all the same rigamarole. Is it just FHA and VA mortgages, or do applicants for all mortgages actually have to pass the smell test now?
Ked
I dunno, I guess I’m feeling this is a good time to be putting money into stock funds. I think it’s a coin-flip whether we’re at the bottom of the market, but I also don’t think there are any more structural apocalypses coming. I didn’t invest all of last year, but this year I’m probably putting 8% of my earnings in. Understand, I’m looking at 20-year horizons, so if you need to be generating short-term returns, well… I suppose you should have been shorting GM.
Stay away from REIT’s though. I literally lucked out, cashing out of the two I was in on the very day at the beginning of 2007 when they peaked. I didn’t know the bubble was going to burst, but when they spiked fifteen percent in a week I figured that the market was smoking something and it was time to run. Real estate, of any flavor, is going to be down for a long while yet.
Granted I’m just an amateur, and even if I’ve been right more than I’ve been wrong, I can’t claim any advantage other than common sense.
FormerSwingVoter
TANDEM SKYDIVER 1: “We’re still falling really fast! Did our chute deploy?”
TANDEM SKYDIVER 2: “Don’t worry! Falling speed is a lagging indicator!”
Zifnab
@ninerdave:
It’s not quite that simple. In what has been a bear market for months, simply buying up indexes at whatever price you can find isn’t necessarily smart investing. I mean, just from a bare basics perspective, do you go DJIA or S&P or NASDAQ or Russell or Wilkshire? There’s a difference between them. NASDAQ, for instance, has been doing comparatively well, while the DOW itself has taken a real beating.
And even after you’ve selected your index of choice, the market may still have a fair distance more to drop. I bought BoA back at $17 a share which, a year ago, would have been a fucking steal. Not looking so hot now. Back when it was skating around $3-$4, it looked a lot better. And if you run out and picked up a stock like GM, you were really holding the bag when that mess went bust.
I knew a guy who was crazy over municipal bonds because of their great rates of return three months ago. That might have seemed really smart back before California decided to leave solvency up to the popular vote.
I’m just saying, it’s not so easy to just announce “Everyone into the pool! In ten years, we’ll be in the money!” There’s still a lot of wiggle room for recession.
Brachiator
@Some Random Chick:
Not exactly. The financial markets mess has been an extra crispy version of corporate greed that has pulled down good companies and bad as it has wreaked havoc on the global economy.
Nobody can give you the magic formula for identifying a market bottom. Nobody. And uncertainty is not the same thing as a 50-50 shot. That said, it might not be bad to invest in stock funds or index funds, as long as you diversify and don’t commit all your money into one fund at one time. I would suggest looking at value funds as well, undervalued companies which are doing well, companies which still pay a dividend (and are doing well, etc).
Brick Oven Bill
Bill becomes a protectionist.
Zifnab
@FormerSwingVoter:
Your mom is a lagging indicator.
Drive By Wisdom
Behold, democrat figures out green shoots is a Pakistani dish, best served cold.
Fulcanelli
@Some Random Chick:
Yes they do. Big time… Among her many talents my wife is a state licensed mortgage originator. All mortgage applications get the electron microscope treatment these days, more so than they have in many years. And if anything, I’d wager that privately backed mortgages get as much if not more scrutiny than gov’t backed programs.
The appraisal process is much, much tighter also and so are the programs available. Qualifying debt-to-income is tighter. No more “no-documentation” and other bogus qualifying stunts allowed, which is a good thing, IMO.
inkadu
I have to remind myself to read the comments here more often. It’s like Molly Ivins and PJ O’rourke had a litter of puppies and gave them their own comment thread.
Also, is there a filter here for LOL’s and ROFL’s? I can’t seem to find any. Did you people learn to write before the 90’s, like in school or something? I am perplexed.
Brachiator
@Zifnab:
Fixed.
inkadu
I’d also like to add “Argue Like Jim Cramer Day” to the calendar.
Steeplejack
@inkadu:
We’re all old. Some of us learned to write before cell-phone texting, IMs or even computers–eek!–and it is rumored that there are a few dinosaurs who remember mythical devices called typewriters and rotary dial telephones.
Now get off my lawn.
eyeball
first of all, the stock market is NOT the economy. It’s an indicator of the economic outlook of some players. the tectonic reshaping of the economy right now is thankfully killing off the fossil fuel that nourished the current foul beast for decades: ponzi markets for securities based on quarterly earnings expectations and market TV chitchat (later, day trading).
this in turn has lead to … episodes of pump and dump, which are the only ways to keep the meth-addled beast moving slightly forward enough to leave a small trail of spoor for “marketeers” to feed off. So John is right — it is pump and dump. (There is no talk of fundamentals because there are none.)
this economic recovery will be main-street lead, not wall-street lead, thank god, meaning it will take longer, but grow more sustainable, and kill off these toxins, at least until some fresh set comes along to replace them.
The Cat Who Would Be Tunch
@Brachiator & @Some Random Chick
Well, the way corporate governance and compensation schemes have been set up haven’t really helped here in the US. I found it pretty fascinating that the US has one of the largest pay gays between the CEO vs. the average worker, around 500 times or so. With that much money on the line and with such a core focus on “the next quarter”, why would any CEO care about the long term? As a banker, why wouldn’t you have pushed out mortgages to as many people as possible the last couple of years, qualifications be damned? If you met and exceeded your quarterly goals, you were set.
I’ve always thought that one of the solutions would be to have co-CEOs but each CEO wouldn’t directly overlap the other’s years of service. That way, a “junior” CEO isn’t going to be too keen on the “senior” CEO from taking excessive, short term risks lest he/she be stuck with it when the “senior” CEO leaves. Granted, this approach also presents its fair share of problems as even this can be circumvented by several willing conspirators.
Here’s the link to that study about CEO pay ratio versus the average worker. The chart is on page 6.
CEO Pay Rates
U.S. vs. Foreign Nations
The study is a bit old (2005) so things may have changed quite a bit since then. Still, other countries would’ve had to go through some drastic changes to meet the 475:1 ratio that the US had at the time, since the next highest in the study was 50:1 in Venezuela.
@Drive By Wisdom:
A couple of corrections. First, “green shoots” would be “sabzi”. Secondly, as anybody who’s ever had food from the subcontinent, Pakistani dishes are usually best served hot.
If you’re going to insult the Democrats or the current President, get some decent material. Like this, for instance:
Does nobody realize the national security threat that a president, who knows how to cook curry, presents to the US? Bear witness to the destructive power of curry:
OMG IT’S THE MASALA CANDIDATE.
ninerdave
@Some Random Chick:
Unfortunately I bought at the top of the market. I always said, when watching CA real estate start to take off, when it was time to buy, I’d do it at the top of the market because that was my luck.
And so it was.
However the house was too awesome to pass up, and well if the wife and I were thinking of moving, we’re not now. Such is life.
steve s
Right. Because the smarter ones are the ones who spend more gas to get their lottery tickets.
(facepalm)
JGabriel
OT but, Republican Women of Anne Arundel County, manage to pull off the rare Hoekstra/Godwin combo spin w/ twist:
What should this be called? A Goekstra? A Hoekswin?
.
Fulcanelli
@steve s: We are talking about Rhode Island here. Not Texas. Less than a 15 minute ride for over half the state to the Mass state line, O wise one.
Comrade Stuck
@steve s:
It’s the adventure. Like taking the family for a Snipe hunt.
bago
Arianna Huffington bitchslaps envious reporters. The steroids line was most amusing.
cliff
check out the slosh report.
Just like last fall …
the fed has started draining liquidity (slosh) right before the s&p started trading sideways into quad options expiry (last friday)
last time they drained faster and it killed.
selling 160billion in bonds this week as well as staying under 200day EMA s&p is now under 200day sma And the 50day ema And sma
target 750-800 (although the 38.2 fib is around 845 -expect a pause there)if it drops below that next stop is in the 5XX range
so far there has been nothing but a v. slight change in the Rate of the freefall in trade/homeprices/job losses etc. Nothing is getting better, only getting worse v.slightly less fast.
blah its late … enjoy the green shits.
oh, and commercial realestate is about to impload .. and alt-a resets are starting soonish as well. and those are mostly in that bankrupt state of denial known as cali.
Cash is king unless you are short.
stay safe guys.
one last — Japan exports fall 40.9 percent in May (who buys our treasuries again? – and yea china trade is thru the floor as well.)
– ok – ok – one more last one for anyone getting foreclosed – refuse to leave till they can prove they own the house – just say these magic words “provide the note”
ninerdave
@Zifnab:
Oh I agree to an extent. While I’m about half in the Wilshire 5000, the other half tracks other index funds. I keep an eye on what’s going on in broad terms. I don’t “invest and forget”. And yes I’ve lost a bunch in the WIlshire. However the stock market as a whole, over the long term historically yields an average of 8% a year. Since my goals are long term, short term losses to me are an opportunity to buy more at a cheaper price. Essentially I’m taking it in the shorts now to take advantage of the historical performance of the market over the longer term. To me, it’s a long term investor’s time to buy low and sell hopefully high.
I think what you’re saying (not to put words in your mouth) is do your research, have a plan and a reason to put your money in an investment. If that’s the case I agree, my coarse statements earlier not withstanding.
JGabriel
Fulcanelli:
Wow, you’re not exaggerating. I just looked up Rhode Island on Wikipedia, and came up with this:
– Width, 37 miles (60 km)
– Length, 48 miles (77 km)
Damn, that’s small.
.
Fulcanelli
@JGabriel:
Grounds for a psychological evaluation?
ninerdave
@cliff:
As I said above the real estate problem still has not been dealt with (mortgages and thanks for reminding me commercial real estate).
That’s the fundamental problem and until it’s addressed, green shoots my ass. The Stimulus, while I agree with it, is like using a wood plank to bail your car out from mud or snow. It works for a bit, until you get caught in the next bog. The fundamental problem is the boggy foundation. You could wait until the ground dries out and then drive out, or you could build a solid foundation to drive out on. However you have to ask yourself if the damage to your car sitting idle during the winter is worth the wait until summer.
(that analogy from someone more in tune with economic issues that I, lame but it made his point)
cliff
ok, I couldn’t resist one more –
newsfrom1930.blogspot.com/
Enjoy(?) the green shits!
Buy Buy Buy!! (srs was up 20% this week! hehehe)
ps. don’t hold leveraged etf(u)’s for any extended period of time they have massive time decay.
cliff
@ninerdave
please don’t be silly and stay in the market ATM we Also bounced hard down off a trendline I drew in oct 2007 just days ago.
the long term signal is when the s&p 500 20 week ma crosses the 50 week by 1% buy/sell
you would still be out since Long Long ago. would have saved buku bucks as a long term investor in all of history.
Ruckus
A friend has the best investment/life strategy:
Buy high – sell low.
No second guessing, no bad feelings about yourself, you’re just always wrong. You learn to accept it and get to the next panel in the comic book of life.
Brachiator
@The Cat Who Would Be Tunch:
Pay gays? Kind of like a Don’t Ask, Don’t Tell compensation scheme?
First of all, the financial mess is global. And some of the worst offenders have been British and German banks and financial institutions, so your references to US CEO disparities immediately falls apart as a primary cause of, or key factor related to, the current global economic decline. Greed is a part of it, but it is more about greed that fueled a stupid, suicidal deregulatory regime.
Yeah, CEO compensation is excessive, but it is not a zero sum game. Capping CEO pay does not necessarily benefit a consumer who buys that company’s products, nor does capping CEO pay necessarily mean that employees will see a rise in their paychecks.
And, since there are few studies that compare CEO pay to the profits of their companies or to other performance indices, you really can’t say whether the CEO pay gap is bad or good. By the way, in one of the reports, the comparison of CEO pay to GDP is both inaccurate and highly flawed.
How would this help a company make better products, or more profitable products?
There may be reasons, and ways, to try to rein in CEO pay, but I’m not sure that it really ranks as a high priority.
I would probably eliminate the cap on Social Security and use this to tax more of CEO total compensation.
JGabriel
@bago:
Hmm, that’s almost enough to make me sign up for logins at Politico and WaPo – just so I can tell Michael Calderone, Ben Smith, and Dana Milbank to grow the fuck up.
Almost.
.
Bill E Pilgrim
@bago:
That was more satisfying than anything I’ve read in months.
What’s hilarious is how they spend years and years with this little insider’s club with David Gregory and Chuck Todd et al getting to ask the questions, and the moment some DFH blogger gets to ask one they’re screaming “Insider! Collusion! Not fair!” in a near-hysterical fit of outrage.
Let’s see, someone whose Iran coverage has won world-wide praise for his coverage is called on to ask a question about Iran, and because he’s not one of the anointed Beltway Insiders who would have asked another question about smoking or “can you respond to the Republican talking point that you’re either from Islamo-land or Neptune?”, they’re furious and stamping their little feet all over the Washington Post.
Heh.
More please.
LD50
Obama’s only been in office a few months and I can barely understand what the fuck wingnuts are saying. I can’t imagine what it’ll be like in 4-8 years.
Elroy's Lunch
@Bill E Pilgrim
I’m thinking more like scared is what they are feeling. About time that someone shook up the little boys club in this town.
Yeah, more please.
media browski
John, why not wait until the stimulus funds are actually *distributed* before joining the DFH doom chorus?
I know we academic libs with our “lagging indicators” and our “policy lag”, but you know, the last time you ignored us (see iraq invasion) you ended up switching parties and spent the next few years apologizing.
A Mom Anon
Can someone explain to me why we even NEED the stock market? I’m serious about that,I honestly don’t understand it and don’t know what purpose it serves other than making the wealthy even more wealthy.
All I know is that my hubby’s old 401K from his old job(he doesn’t have one at the new job) is worth about a third of what it was last year at this time. Doesn’t seem like much of a good deal to me.
John Cole
@media browski: I/ tired of feeling like I’m watching an armed robbery in progress with the cops holding the door.
bob h
I don’t know-at this time of year the attention of the Masters of the Universe turns to the Hamptons and Bar Harbor, and stock prices always languish. As for Biderman, I remember a prediction from him last Summer that all would be well with the economy in late 2008.
IndieTarheel
@JGabriel:
A Beck. It covers all (with tears, even).
Jim-Bob
I think I’m going to get a job offer today*, so the recession is officially over••.
*yes, really.
**NOT!
IndieTarheel
@LD50:My guess is something like this.
The Cat Who Would Be Tunch
@Brachiator:
Ha!
Yes, I’m well aware that the financial crisis is global and a result of systemic failures, i.e. lax or no standards being following in lending, failure of oversight on said lending practices, lack of regulations of exotic financial instruments, etc. However, while there’s plenty of blame to go around, I still contend that the biggest fault lies with the the lenders/mortgage originators in the US. We had a framework in place for many years for determining who was eligible for what kind of loans but all that was chucked out the window at the start of the decade. There was simply no excuse for this to occur considering the standards that been proven over and over to work and yet, it still happened anyways.
Looking at my post, I didn’t mean to imply that the CEO pay gap was the primary factor in the current mess, although I did think it was a contributing factor. I do concede, though, that it may not have been a factor since financial institutions from all over, as opposed to just the ones in the US, took part in the securitization of these mortgages.
One of the issues that any company has to deal with is balancing resources such that it can generate revenue from existing products and services while doing enough R&D/innovation to create new products and services for the future. I think that the current structure in corporations exacerbates the problems in the principal-agent dilemma, as opposed to alleviating it. As the head of a company, from a purely selfish point of view, why would you be overly concerned with how a company fares after you’ve left it? As long as you had strategies in place to meet/exceed goals during your tenure, thereby maximizing your compensation, that’s all that matters. The idea of overlapping CEOs would be to create an adversarial relationship, with the junior CEO ensuring that enough innovation was happening so as to meet the changing demands of the consumers in the future and the senior CEO focused on profitability now. As the junior CEO, if he/she saw that the senior CEO was adopting strategies for a short term increased profits but at the cost of R&D, you can be pretty certain that junior CEO would alter the priorities, since he/she wouldn’t want to be stuck with the sagging profits when the senior CEO left. However, like I said in my original post, I know that this isn’t bulletproof.
I should add that I’m actually not in favor of caps on compensation by the government on the private sector (bailed out companies are a different story). I was annoyed when Congress decided to spend a week on hearings about the AIG bonuses while in the background, AIG’s CDS obligations were being paid out pretty much 100% to the tune of billions.
Agreed.