Why are these stupid insiders still buying?
If you’re not asking that question right now, then you should be.
Because the stock market took another nasty tumble yesterday, the economic outlook is more and more bleak, and people have gone from panicking to practically catatonic states of shock and terror.
Yet, insiders are still pouring millions into General Electric (GE: NYSE), outspending even Warren Buffett.
With shares acting like the company is going out of business, it really does beg the question “Why?”
Simple. GE is making money hand over fist – to the tune of $20 billion a year in net income.
And GE isn’t the only one. At U.S. Bancorp (NYSE: USB) – yes, a bank – insiders are at it, too. And Buffett is now its largest shareholder.
Buffett: Past His Prime Or Still On The Ball?
The problem is that both companies’ share prices seem to be tanking. What’s up with that?
Could Buffett’s name be a curse? After all, Goldman Sachs (NYSE: GS) traded down over 50% from the strike price of his newly purchased warrants. While he’s getting a nice preferred dividend from the capital he ponied up, it appears at first glance that the company isn’t going anywhere but down. And can Goldman pay dividends if it doesn’t exist anymore?
(That’s a rhetorical question. You don’t need to answer that).
It used to be good to be the Oracle of Omaha. But now everyone is beginning to doubt his prowess. Then again, the last time they did, he simply shut up and let the doubling of his Berkshire Hathaway shares do the talking.
Okay, maybe he’s on to something after all.
Oil Is Tanking But These Guys Are Still Buying
If that’s true, then it pays to take another look at oil companies too. Yes, oil prices have dropped $100 per barrel in no time flat. Yet insiders at oil refineries, exploration companies and producers alike are all buying heavily.
And so is Buffett, who just became the largest shareholder at Conoco-Philips (NYSE: COP). What’s with this guy? He’s acting like stocks are cheap or something. If that doesn’t make you think, then you shouldn’t be investing at all.
Could oil go back up?
Oh yeah. Without a doubt. But with the same guys who predicted $200 oil now saying it’s heading to $25, talk is getting cheaper every day.
Sachs In The Citi?
There’s some talk around town that Goldman Sachs could get involved with Citigroup (NYSE: C).
I doubt it’ll happen, or Buffett will have a piece of Citi, as well. He probably doesn’t want that as much as the insiders do, who last week scooped up millions of dollars worth of stock.
My best is that Saudi Arabian billionaire Prince Alwaleed bin Talal asked them to pony up a few million before he came in with another $3 billion. Both are down about 50% on the trade in a week.
Embrace The Gold And Black(Berry)
In other news, gold rallied by as much as $40 today. We like gold but the stocks we own aren’t showing us much love. Yet. Just be patient, because they will in due time.
Blackberry’s new Storm device is hitting the airwaves, with lots of talk about its touch-screen, which allows users to actually feel the keys.
Although it’s a little primitive in my opinion (I guess they didn’t want to spend the money to make it feel like a million bucks), it’s still nice to see further advancement towards that touch-screen feel that has taken the market by “storm” (pun intended).
Ah, makes me wish there was some way to profit from the trend in haptics
The Touchy-Feely Business
Wait there is. And it’s trading at less than its cash value per share. Yes, good old Immersion (Nasdaq: IMMR) has made a round-trip from the $3 range, up to $20, and right back down in the last 18 months. We took some money off the table when it hit $13, but we’re in it for the long haul.
I think the firm will regain its magic touch just as soon as the markets start making sense again. And in case you’re wondering that will happen – and probably sooner than you think.
When? Let me quote my colleague Marc Lichtenfeld to give you a better view of that
The Bottom Isn’t Here Yet, But It’s Well On Its Way
“Nobody wants to miss what might very well be the greatest buying opportunity in generations, especially since many investors have begun to anticipate a market bottom.
“But there’s a problem. Bottoms are rarely set when so many are expecting one, which means we probably have a little longer to go. How long? Just wait until the majority of people searching for the bottom have thrown up their hands in disgust and vow never to return to the markets.
“The bad news is that, after talking to my institutional contacts, I believe I can safely say that we’re not at that point yet, even though you can feel the enormous amounts of fear in the market. The good news is that I suspect we just have a little more deterioration in the markets before we experience capitulation.
“Just remember as dire as the news is right now, it’s always worst at the bottom.”
“I think that by spring, shrewd investors who bought stocks over the winter will start to reap some rewards.
“And sectors that should be poised for rebounds include healthcare, retail and green technology.”
In The Meantime, Take A Look At These Yields
Dividends are king right now. And it’s no surprise to see many investors flocking to dividend-yielding stocks, as they scramble for any bit of income they can. And with good reason
Dow Chemical (NYSE: DOW) is currently yielding 8%
Freeport Copper & Gold (NYSE: FCX) is up to 10.7%
And the two companies I mentioned a moment ago – GE and USB – sport yields of 9.2% and 8%, respectively.
There are other strategies that aren’t just hanging in there they’re actually bringing home the bacon, too
Two Strategies That Love This Market
Two examples include covered call investing – showing that there’s something to be said for hedging your bets – and put-selling. In fact, speaking of the latter, Lee Lowell’s new Instant Money Trader service is having a field day. Check it out here.
Lee also has things to say about his specialized subject – commodities
“Most of the commodity markets are still taking their cues from the stock market as they work their way lower along with stocks.
“Crude oil futures have hit lows not seen since summer of 2005 and prices have cracked under $50 a barrel. At least it means gas prices are coming down, too.
“With the agricultural markets headed lower, we could also see lower prices at the grocery stores, too. I think we’ll probably continue to see selling, as all markets seem to be trading in tandem with each other. Until we see any type of reversal, it’s best to remain on the sidelines.”
I was going to wrap it up here, but now that the markets have closed (and mercifully, the major indexes all enjoyed big gains today), Jim Stanton just shot me an e-mail
“The indexes came down to important technical support today, but the technicals haven’t been very reliable during this liquidation phase.
“The market is very oversold and is due for a rebound. Ahead of the weekend, the short-sellers decided to cover – and especially on options expiration day. If the rally continues next week and the S&P 500 can close above 821, there is a chance for additional gains.
“The key to intermediate-term direction will be how the indexes act in the early part of next week.
“Right now, the market is focused on what the brain trust in Washington is going to do as far as the auto makers are concerned. I f President-elect Obama speaks out in favor of a bailout, the market rally could continue. The problem is, Obama doesn’t really want to get caught in the mess until he’s inaugurated!“
Have a good weekend.
Karim