When The Smart Money Says ‘Sold To You’

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by jessefelder

Over the summer I highlighted the rapid increase in leverage being put to use on the part of speculators in the equity markets. Since that time, it has only continued to grow. Margin debtcall option volumesnet futures positioning and leveraged ETF assets (depicted below) all show these folks putting on the most extreme leverage we have ever witnessed.

What makes this all the more notable is that the smartest of smart money, corporate executives and other insiders, are now selling at the fastest annual pace on record (largely driven by the most valuable companies in the market). Setting aside the economic message of the indicator below, the simple fact that insiders are taking the other side of speculators’ record leverage is significant, especially given their stellar track record.

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Clearly, America’s CEOs and CFOs are taking the timeless advice of the great John Templeton: “When you find that the crowd is overenthusiastically trying to buy, help them and sell. It usually works out.” Caveat emptor.

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