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No one understands market trends better than its top insiders. They can foresee bullish and bearish developments way before everyone else does. Insiders are corporate CEOs, senior executives, board members, or shareholders who own at least 10 percent of a company. They always come out on top when buying and selling stock. They always reap the biggest profits. They are always one step ahead than everyone else.
What most Americans believe and what many market watchers have been telling us is actually correct: The stock market is a rigged game that benefits corporate executives who can hide behind trading plans as they buy or sell stock, sometimes based on nonpublic information. That’s what ZeroHedge analysts have been warning their readers for years. And now, they’re inviting the public to see what those insiders, executives and CEOs are doing right now and what that means for the future of the stock market.
A disaster is looming — and corporate executives are already looking for ways of protecting their wealth before things get out of control. Recently, we have been hearing stories of billionaire executives massively dumping their company’s stocks. That’s actually been happening at a much faster rate than we’ve seen in over a decade. The twist is, as ZeroHedge analysts explained, that they’re ramping up selling while their own companies engage in record stock buybacks.
Last month, insiders dumped a total of $15.59 billion — an absolute all-time record. According to the Wall Street Journal, citing data from the research firm InsiderScore, 48 top executives have collectively disposed of over $200 million each in stock sales in 2021. That’s nearly four times the average of stock sales from 2016 through 2020. The avalanche of insider selling includes the two richest men in the world, Amazon CEO Jeff Bezos, and Tesla CEO Elon Musk, as well as Google co-founders Larry Page and Sergey Brin, cosmetics billionaire Ronald Lauder, Walmart’s Walton family, and Facebook and Meta Platforms CEO Mark Zuckerberg, among many others. In recent weeks, they have significantly accelerated stock sales.
InsiderScore data reveals that corporate insiders sold a whopping $63.5 billion in shares in November, a mind-blowing 50% increase compared to all of 2020. This selling trend is developing as major equity stock indexes are signaling peak levels and stock buybacks are occuring at breakneck speed. The largest share of insider dumping is happening in the technology sector, which recorded a staggering $41 billion in sales.
Stock buybacks are an alternative form of wealth protection. CEOs sell their stocks to raise cash, but instead of using this cash to expand production, increase sales, acquire competitors, or buy new products or services, they use it to reduce the outstanding share count of their company and artificially inflate earnings per share. That’s what Real Investment Advice Chief Market Strategist Lance Roberts has explained in a 2019 article. “The reason that companies do this is simple: stock-based compensation. Today, more than ever, many corporate executives have a large percentage of their compensation tied to company stock performance,” Roberts highlighted.
That’s to say, when things are about to fall apart on Wall Street, a way to reduce the damages faced by a company is to decrease the amount of this company’s shares in the market. In that way, when the market goes down, the impact on the company’s stock price is far more manageable. “Share buybacks only return money to those individuals who sell their stock. This is an open market transaction, so if Apple buys back some of their outstanding stock, the only people who receive any capital are those who sold their shares,” Roberts explained.
If it wasn’t for stock buybacks, all of these insiders wouldn’t be able to sell off their stock at record-high valuations without suffering major losses. Today, at least 40% of the current bull market is entirely due to buybacks. That’s a Ponzi-like scheme that allows corporate insiders to prepare a financial cushion before the market takes a turn for the worse. This insider selling wave accelerated in recent weeks because, as Goldman warned, the buyback open window for 2021 ended on December 10.
If we take a deeper look in the current market, we can see that damages are not superficial, as some are choosing to believe. This sell-off madness is proof that a much more devastating stock market crash is fast approaching. Investors betting on higher stock prices will be bitterly disappointed. Even the dotcom crash wasn’t recognised as such until it was too late. It’s time to wake up now. Otherwise, you might be left scrambling when all of these stock market crash predictions become a reality.