Are the insiders wrong?
I came across an interesting statistic while reading the always bearish Alan Abelson's column in Barron's this weekend.
The article contains an interesting statistic on what company insiders (officers and directors) have been up to. According to a group called InsiderScore, they bought $410 million in stock during Q3, but sold $7.4 billion. In other words, insiders sold $18 worth of stock for every $1 that they purchased last quarter. Now that's a dramatic difference.
Later on in the article, Abelson mentioned another interesting statistic. He cites a report by David Rosenberg which states that on an operating basis, the P/E ratio of the S&P 500 has expanded by 10 points since the March low to 27.6. Rosenberg claims that historically when an economy switches from contraction to expansion the S&P's ratio is 15.
Now one could argue that this was not a normal recession and the snap back will be much more dramatic this time because the downturn was steeper. That's the V-people's argument. I still see too many headwinds out there and think that it's more likely that we are headed for the "new normal" that PIMCO describes, where we experience sub-par growth for years to come instead of a roaring economic recovery, but time will tell.
I generally like Abelson's column. Yes he's a bear, but in a cuddly koala bear sort of way, not a wacko, lying war-monger we're all doomed so load up your basement with canned goods and shotguns sort of way. I always make sure to check it out. Here's a link to the latest one for anybody who's interested:
Ganging Up on the Dollar