You may have noticed that yesterday’s markets saw an intraday swing of 450 points.
Volatility has once again reared its ugly (yet oh-so-predictable) head.
Last week the volatility came from our broken repo markets. This week, it’s the painfully awful ISM services index data that’s sending the markets into yet another hissy fit.
The ISM data measures the health of the non-manufacturing sectors of the economy, and they are anything but healthy numbers – just a couple percentage points away from full-on contraction.
And you can bet that’s reason for concern.
And yet by the day’s close, markets rebounded on this bad news.
Bad News Is Good News?
But that’s the character of the “new abnormal” – a stock market entirely dependent upon Fed intervention (i.e. further distortion masquerading as “accommodation”).
In this totally rigged-to-fail market, bad news is ironically good news for the markets, for it means more Fed stimulus (more forced lower rates and inevitable money printing) is soon to come, and we all know how much Wall Street loves Fed steroids.
Thus, critically bad recessionary data like declining industrial production and declining business services means nothing to a stock market sustained by a rich Uncle Fed ready to dole out more printed money and lower-rate debt.
But it’s not just the moral hazard of the spoiled Wall Street speculators/nephews enjoying 11+ years of handouts from the Eccles Building that keeps these entirely fake markets going.
Fat Rats, Sinking Ships
The markets are also rising on yet another (and equally bogus) scam, namely stock buybacks, whose four-week averages just reached their peak.
In other words, the same companies that comprise our markets are the top buyers of their very own stocks in what is otherwise a self-serving circle of pure crazy.
After all, who needs natural buyers of stocks when corporations, drunk on $430 billion in September bond-issued debt (a record high, compliments of Fed-crammed rates), can buy their own shares on borrowed dollars?
Again, it’s crazy – like an author achieving “best seller” status for buying his own books.
But read on, it gets even crazier.
At the very same time these companies are artificially boosting their stock prices via record-high stock buyback schemes, their executives (CFOs, board members, and CEOs) are selling their own personal shares and stock options at record levels – effectively frontrunning their own stocks in order to cash out.
This is shameless.
As of mid-September, corporate insiders (along with their venture capital backers and other early stage investors) have sold a combined $19 billion of their own personal shares.
When annualized, this means the level of insiders cashing out is now on track to be the largest executive exodus of insider selling since the pre-dot.com crisis of 2000.
In short, the rats are fattening themselves just before abandoning their own ships – and at a new record pace.
Actually, that’s not only shameless and crazy – it’s repulsive.
In a nutshell, Wall Street insiders are using once illegal stock buying powers to push up the valuations of their companies so they can jump ship at a nice profit and then leave you – their retail suckers – holding a bag of losses after these corporate “leaders” have safely pocketed a nice fortune, risk free.
That’s like Captain Smith taking the only available life boat on the Titanic and then waving goodbye to the stranded passengers.
Thus, if you needed yet more evidence that the current markets are rigged to fail, now you have it.
You really can’t make this stuff up.
4 responses to “Executive Rats are Jumping Ship as the Volatility Iceberg Looms”
October 04 2019