Dear Reader,
Today I want to talk about a piece I saw in the Financial Times.
They showed this chart showing U.S. executives have never sold this much of their companies’ stock in history!
The ratio of insider sellers to buyers hit an all-time high of 6X…
Meaning that there are 6-times more insiders selling than buying.
That’s the highest ratio ever recorded!
This is yet another piece of evidence showing that U.S. executives are cashing out.
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And you know – this doesn’t mean the market’s going to crash tomorrow.
But if you want to know how important this is, insider selling usually telegraphs problems in the market a quarter or two before the market actually crashes.
That’s why it’s so important to prepare.
So, while it doesn’t mean a crash is coming overnight, it is telling you sky-high valuations are pushing insiders – people who have a very good idea of what their own company’s worth – to sell.
Which tracks what we’ve been saying, that this market is very high, by any historical measure of value you want to use…
But it’s also a market that can make you look like a fool.
And certainly, I’ve looked like a fool from time to time in this market.
Because this is the kind of market where you can sell something and it goes up the next day.
But again, just like in blackjack, you don’t want to hit on 18.
So you look at the facts:
Corporate executives are selling the hell out of this market…
People like Warren Buffett are obviously selling everything they can.
Einhorn – a lot of these people are saying “get out.”
And even to the extent that a lot of corporate insiders are freezing their buyback programs.
You know, Jamie Dimon who runs JPMorganChase has frozen his buyback program as we’ve talked about…
Warren Buffett has frozen his buyback program.
So where does that leave us?
It leaves us really with what we’ve been saying the last few months – you just have to be very, very careful.
We have to recognize that there’s kind of a “melt up” going on here on one side of it…
And on the other side of it, valuations are just obscenely high.
So it’s important not to get tempted by FOMO.
You really need to guard yourself against fear of missing out.
I have seen that hurt so many investors in my lifetime.
You know, they see something they own – let’s say they bought it at $10. And now it’s $25, $30 a share.
They want to squeeze out that last $10.
You know, they read a report that says “this can go to $50.”
They don’t know if the investment bank writing that research, that buy recommendation, is trying to win a banking relationship or has a million shares of stock to quietly sell for another institution.
You don’t know if the analyst is an idiot who just has family connections that got him the job.
You’d be shocked, by the way, at how many Wall Street analysts are the same snot-nosed kids we knew in grade school that just stumble their way into these things because of their family name and have zero common sense.
We don’t know any of those things.
So right now, I urge you to be skeptical of everybody raising their estimates…
“Oh, the S&P’s going to be at 7,000!”
“Oh, Bitcoin’s going to be here! AI’s gonna go there!”
There’s animal spirits and it’s like being at a party where everyone’s had too much to drink…
You know, you’re drinking and you think you’re making good decisions and you’re really not…
(As I have learned very painfully in my life with plenty of stupid phone calls and plenty of dumb things that I’ve done.)
So, I know those of you listening can understand.
The euphoria of a market like this, and the psychology of the fear of missing out – that FOMO feeling – starts to play tricks on our ability to reason.
And it’s our ability to reason that really comes in handy during markets like this.
So, take a cue from insiders who are selling at all-time highs.
Take a cue from the investing legends who are selling out in markets like this.
Take a cue from the CEOs and the owners of Palantir and Berkshire Hathaway and JPMorganChase and all these other folks who are cashing out stocks at all-time highs.
Look at that as an important warning and a red flag for us as we continue to navigate this market day-in and day-out.
Remember, right now my research is pointing to a coming stock market crash of at least 50%, a real estate crash of 40%, unemployment tripling and savings accounts losing 30%.
Also remember, I’ve made the vast majority of my personal fortune from market crashes.This is what I do.
Again – yes, we’ve had a banner year here as the market has marched up.
But those who take 4 steps right now could avoid disaster and see the biggest fortunes of their lives.
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