An Avalanche of Insider Stock Trading (Evidence of August Bank Holiday or Worse?)

As we see more and more banks closed by the FDIC and as we see record foreclosure rates in July, 2009, there is definitely something up in the financial arena. Is it the proverbial calm before storm or the eye of the hurricane? An international financial analyst at the Royal Bank of Scotland agrees and basically says to take your profits out of the markets and head for the hills.

Britain's Uber-bear is growling again. After predicting a torrid "relief rally" over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.

My gut tells me that something big is going to happen between now and October 1. My current report says that we are scheduled for a bank holiday on or about August 26 based on the news I have been able to review. Corporate insiders have been dumping stocks left and right over the last few weeks (see graph below). If the information is to believed, then it appears that the rats are abandoning ship.

What's the "message" of the market here? Over the last two weeks corporate insiders have dumped over $2.1 billion in stock vs. $73.1 million in buys. I'm not sure I've ever seen the ratio of insider sells vs. buys this skewed toward officers and directors looking for the exit door. Talk about the captain jumping into the lifeboat and speeding away before the ship sinks....

Given that the trailing, "as reported" price/earnings ratio is now 144, or substantially above the peak p/e ratio on the Nasdaq at the top of the tech bubble, what is the market trying to tell us?

Think about that when you call up your financial advisor or broker and tell him you want get out of the stock market.

Source: Market Watch ; The London Telegraph ; The Golden Truth