Comments on: Market Views on Mr. Market – Bearish Edition

By: Stewart Ng

Stewart Ng — Sun, 18 Oct 2009 22:50:59 +0000

Awesome article Shishir.

I have to agree with Mohamed about the insider positions. Ratio of selling-buying currently is quite high, but their stocks, options, and warrents are really their main source of salary, especially if its a junior company and I would assume that the majority of them loss quite a bit in their accounts with the downturn. Also I would assume that just like many others (i.e. David Rosenburg) would like to take some cash off the table because the markets have rallied substantially based on…

All in all, I for one would keep an eye out for when insiders start loading but in terms of selling, I wouldn’t give a lot of thought to it, unless, of course all insiders start killing their positions =/.

I look forward to your future articles.

By: Wafic

Wafic — Wed, 07 Oct 2009 01:24:22 +0000

Shishir, good article. I will be a reader going forward. On the insider trading, while I agree the ratio of selling to buying is high, i dismiss its relevance because the amount, $6 billion is immaterial relative to the total amount of transactions in the market in August.

By: Mohamedhassan

Mohamedhassan — Mon, 05 Oct 2009 04:10:58 +0000

I actually agree the ratio is way out of whack but frankly I don’t see insiders being able to predict what their stock is going to do even with the extra info. I’m not the expert but recently earnings have not been the best prediction of stock movements and stocks beating estimates haven’t always got the big bump up. That goes the same for companies giving average to weak numbers not always dropping like we’d be used to seeing (except for RIMM but lets not go there). Add to that the additional volatility from fairly low volumes, insiders probably figure now is a good time to cash out while the market has sustained a rally and not risk the possibility of a dip.

Overall, the only way a market rally can be maintained is if revenues start to drive profitability and not bottom line cuts like you mentioned. For the US that simply means increasing consumer spending to get the wheels rolling which can only happen when unemployment decreases which isn’t going to happen while companies are cutting back. Economic black holes are a pain to get out of and continuous stimulus packages with monster deficits aren’t the answer either. Barack sure has his hands full What do you think?

By: Shishir Nigam

Shishir Nigam — Sun, 04 Oct 2009 23:56:55 +0000

Thanks for the feedback everyone, you can subscribe to the RSS feeds for this blog over here: http://feeds.feedburner.com/youngandinvested , it’ll send you updates on the blog as they come!

Mohamed, thanks for your comment. I agree with your point partially. Insiders cashing out or for that matter buying in will make up what is the regular churn in insider trading numbers. But when we’re talking about the ratio of insider selling to buying, that ratio should be relatively close to equal if it’s just normal churn in a neutral market. The point is that with insiders selling more than 60x more, that is a reflection of the additional information they have about the true state of their company, and not just its stock price. Agreed that cash needs due to the last year could increase insider selling but I don’t believe that factor by itself can justify a 60x ratio. Let me know your thoughts.

By: Mohamedhassan

Mohamedhassan — Sun, 04 Oct 2009 23:00:40 +0000

Like the article Shishir. Its simple and well articulated. I actually would dispute the insider trading conclusion. As much as its easy to say all the insiders are trading because they see a downturn, it could just as easily be the insiders cashing out what is part of their salaries. Most of the insiders have probably lost a whole bunch of money in the past couple of years on their investments and most of their options would be worth something now that some of their companies are going up. What do you think?

I actually enjoy the part about the automated trading causing a lot of the volume in the market. Would actually like to see an article in more detail about what the triggers are for automated trading etc… hint hint.

Will be reading these more often. If I was a betting man (and short-term trading in a volatile market driven by emotion is a complete gamble), I’d go with the trend heading to the end of the year was down but with the volatility there’ll be a lot of volatility along the way. Lets see if I’m close or not

By: Hira Fatima

Hira Fatima — Sun, 04 Oct 2009 22:48:57 +0000

Great article Shishir! I am hoping that you would be sending alerts for all new ones as well so that I can keep up with the reading!

By: Wilson

Wilson — Sun, 04 Oct 2009 05:38:16 +0000

Great article Shishir, along with the previous one. I look forward to future ones.