U.S. stocks are taking a hit today as news of massive insider sell-offs comes out. Google Inc (NASDAQ:GOOG)’s Eric Schmidt is just one of many insiders to dump his company’s stock. As of the beginning of the month, there were nine insider stock sell-offs for every one insider purchase.
Several Wall Street insiders have began pulling their cash out of the markets, this may be an indication that they believe the markets are about to crash. Investors have also been dumping U.S. treasuries in recent weeks, indicating a bearish view on the U.S. dollar.
Google Inc (NASDAQ:GOOG)’s Eric Schmidt is one of the most high-profile insiders to dump his stock. A filing with the Securities and Exchange Commission late last week showed that he was planning to sell off 42 percent of his stake in Google, or about $2.5 billion worth of the stock. According to the filing, Schmidt has a pre-arranged trading plan set up to diversify his portfolio.
And Schmidt isn’t the only one. Research conducted by Vickers Weekly Insider found that during the last few days of January and the first few days of February, Wall Street insiders were nine times more likely to sell off shares of their own companies than they were to purchase new shares. CNN points out that this is the highest level of insider selling we have seen in almost a year, and if history has taught us anything, it’s that Wall Street insiders tend to have a sixth sense about the near-term future of the stock markets. Previous market crashes have been preceded by insider sell-offs.
All eyes are on the Dow Jones Industrial Average today as it hangs just under the 14,000 mark. The S&P 500 (INDEXSP:.INX)’s index slipped back three points from the five-year high it posted last week. Nine out of the 10 sectors in the index fell, and financial stocks stayed mostly flat.
In recent weeks we’ve seen the U.S. stock market accelerate dramatically. The Dow Jones soared from just under 13,600 up to 14,000 in 30 days. In just two months, more than half of all traders became bullish, while less than 40 percent of them were bullish to close out 2012. CNN’s Fear & Greed Index indicates that the markets have been exceptionally greedy lately. In fact, it hit a record high of 94 out of 100 before pulling back a bit. The index reports that the number of stocks, which are hitting one-year highs is greater than the number hitting one-year lows.
All of these indicators show a very rapid acceleration, and we’ve seen this before. Unfortunately the higher and faster the rise, the harder the fall. The question right now is whether we’re on the brink of a crash or whether there’s something else going on.