Insiders Bailing Out by the Billions? There Goes the Rally (really)

Jr. Deputy Accountant
Posted: 23 Jun 2009 09:05 AM PDT

Hey remember yesterday how someone or something unloaded 7+ million in JP Morgan shares before market close? Wasn't it something like 1.5 million in the blink of an eye? Someone wants out and now, but that's odd looking at $JPM's performance for the last few weeks and the continued sugar-coated promises of green shoots and glitter-farting unicorns with shiny rainbow tails and happily ever after after all. (See also: JP Morgan's Monday Afternoon Sell-Off: OMG to the JPMth Degree)

And? Well now I get it! Duh, why didn't I think of that? Oh wait, I did. While I was wildly speculating as to why someone would dump 7+ million shares now when things are supposedly looking up. Hello, it isn't just JP Morgan, kids. And know what? I don't hold it against them either. Runnnnnnn!!

Bloomberg:


Executives at U.S. companies are taking advantage of the biggest stock-market rally in 71 years to sell their shares at the fastest pace since credit markets started to seize up two years ago.

Insiders of Standard & Poor’s 500 Index companies were net sellers for 14 straight weeks as the gauge rose 36 percent, data compiled by InsiderScore.com show. Amgen Inc. Chairman and Chief Executive Officer Kevin Sharer and five other officials sold $8.2 million of stock. Christopher Donahue, the CEO of Federated Investors Inc., and his brother, Chief Financial Officer Thomas Donahue, offered the most in three years.

Sales by CEOs, directors and senior officers have accelerated to the highest level since June 2007, two months before credit markets froze, as the S&P 500 rebounded from its 12-year low in March. The increase is making investors more skittish because executives presumably have the best information about their companies’ prospects.

“If insiders are selling into the rally, that shows they don’t expect their business to be able to support current stock- price levels,” said Joseph Keating, the chief investment officer of Raleigh, North Carolina-based RBC Bank, the unit of Royal Bank of Canada that oversees $33 billion in client assets. “They’re taking advantage of this bounce and selling into it.”

Funny business with Bank of America as well.

So?

We've seen it before. But not necessarily like this.


“They’re looking to take some money off the table because they think the rally will come to an end,” said Ben Silverman, the Seattle-based research director at InsiderScore. “It’s the most bearish we’ve seen insiders, on a whole, in two years.”

The last time there were more U.S. corporations with executives reducing their holdings than adding to them was during the week ended June 19, 2007, the data show. The next month, two Bear Stearns Cos. hedge funds filed for bankruptcy protection as securities linked to subprime mortgages fell apart, helping trigger almost $1.5 trillion in losses and writedowns at the world’s biggest financial companies and the 57 percent drop in the S&P 500 from Oct. 9, 2007, to March 9, 2009.

Insider selling during the height of the dot-com bubble in the first quarter of 2000 climbed to a record $41.7 billion on a net basis, according to data compiled by Bethesda, Maryland- based Washington Service. The sales coincided with the end of the S&P 500’s bull market and preceded a 2 1/2 year slump that erased half the value of U.S. equities.

OMG YOU MEAN THIS RALLY WON'T LAST? I am flabbergasted. Not.