What Are Corporate Insiders Telling Us?

1) INSIDERS – Corporate insiders sell their stock for a whole host of reasons: portfolio diversification, new home, kids’ education, helicopter…whatever. So using insider sell data usually isn’t a very good indicator. Buying, however, is different. Insiders only buy for one reason: they believe their stock is going to go up. Corporate insiders, far from turning more bearish during March’s stock-market decline, are slightly more bullish than they were in February.

2) RATES – The US 2-year yield is an important indicator of Fed action. And so when we watched the yield spike to a 4.00% high in late March, it cause pundits to declare a new regime of structural inflation and endless Fed hikes. Could that have been an illusion? Very likely. The move was more likely than not a mechanical liquidity event—a sudden market move that triggered big losses on highly leveraged bets that the yield curve would steepen, forcing those traders to sell assets quickly to meet margin calls. Due to this, front-end Treasuries were indiscriminately liquidated to reduce gross exposure. Inflation is not the concern. I continue to believe Truflation is the “most” honest reporter of current prices, and they show CPI well below the Fed's target:

Today, the 2-year yield has fallen back under 3.80%. The mechanical liquidation is exhausted. The global panic actually funded the U.S. Treasury market, as capital fled the structurally “doomed” industrial centers of Europe and Asia and flooded into the only sovereign safe haven that is a net-energy exporter (the US). But it didn’t reach 3.80% in a straight line. A “stellar” jobs report and rising PMI prices raised doubts that the Fed will need to cut. But wait, PMI Prices…hmmm…whatever could it be? Oh yes…oil, which I still think topped in April. Will it be volatile, and maybe even bounce some? Yes! Oil volatility is at a sky-high 84! But I’m looking for a lower high on any bounce. Meanwhile, bond volatility (MOVE Index) continues to drop…115 end of MAR to 78 now. That’s good.

3) FINANCIALS – I’ve written plenty about the importance of financials in any bull market. During the GFC (Great Financial Crisis) in 2008, financials went through one of the biggest collapses of our lifetime. So, of course, the repair process has taken time. As Louise Yamada put it, “The bigger the collapse, the longer the time needed for repair.” Now that repair has happened, and balance sheets are stronger along with management having real discipline now. The issue is that the market just hasn’t repriced it yet. I think that is coming. When you can find systemically important assets (financials) still trading like a crisis is ongoing when it isn’t, you don’t need everything to go right. You just need the narrative to change. Most often, everyone is looking for the next disaster. I understand that, but most times the opportunity is sitting in the last one.