Are Corporate Insiders Ditching Their Firms for Precious Metals?
By Dr. Jeffrey Lewis
Corporate insiders are flocking out of their own companies, selling $290 in stock for every $1 they buy in S&P 500 firms. With outflows of more than $439 million dollars in equities by corporate insiders and inflows in the billions flowing into precious metals ETFs and securities, would it not be safe to assume that the same insiders dumping their shares are on the buying end of the metals spectrum?
Bloomberg reports weekly data on the number and value insiders in S&P500 companies buy and sell on a week to week basis. In the week ending September 17, insiders made purchases of just $1.4 million and sales of $441 million for net outflows of $439 million. Breaking down the numbers, investors should see that for every $1 of stock purchased, $290 was sold – a very clear trend. Last week, that ratio was even higher at 649:1.
It should be obvious that insiders are starting to get at least a little concerned about their financial position and the relationship their finances have with their employer. Inflows in commodity exchange-traded funds suggest that while insiders are buying, at least someone is buying precious metals, maybe the very people who are selling out of their employer’s stock.
Last Friday, the popular GLD ETF added 6 tonnes of gold for net inflows of 2 tonnes for the entire month of September. That amounts to $270 million in inflows on Friday and net inflows of $90 million for September.
Mix and Match
Pundits are saying bullion’s run is due to fear, and fear only. While we can agree, at least in the perspective that gold and silver are generally purchased during times of economic uncertainty, gold is not a natural response to fear. People don’t go buy jewelry after visiting a haunted house, nor do they go grab their gold when a stranger comes knocking on the door at midnight.
No, investors are buying gold and silver because it works. Unlike currency, stocks, or even their own employment, gold and silver are forever. They’ve been valuable forever, and they’ll be valuable for forever more. Only in that perspective can we agree that in fact, gold and silver are a response to fear.
But don’t buy into the idea that it is only fear that keeps gold and silver rising higher. Certainly, at least to some degree, we are paying higher silver and gold prices today than a few years ago due to increased concern about the state of the economy. However, we must also point out what it is that has investors so fearful: the decaying dollar, growing disparities between the ultra-rich and ultra-poor, exploding global debts and declining economies in virtually every post-modern civilization.
Gold and silver have outlasted each of the above events – whether it was the hyperinflation of the first US Continental dollar, the class war that was the French Revolution, the decades-long stockpiles of decades worth of war debt, or the fact that emerging economies today and in the past are the only ones that have shown growth. If gold and silver buying must be due to fear, then it is due only to rational fear.