When investing in markets, it’s sometimes a good idea to look at what other people are doing. Sometimes that take the form of looking at what they’re doing and doing exactly the opposite, like taking a short position on a hot stock because it’s fundamentally undervalued. Other times that takes the form of watching closely as those in the know make moves in their own self interest. The latter is what we’re seeing today, as corporate insiders have been leaving stock markets in huge numbers. What do they know that everyone else doesn’t?
Most corporate insiders probably see the writing on the wall that the stock bull market of the past few years is over and there’s no more room to run. With a weakening economy, headwinds from the trade war with China, and a huge amount of unknowns on the horizon, those insiders are looking to cash out their stock holdings while stocks are still high. They know that within a few months stock markets could start to plummet, costing them hundreds of thousands or millions of dollars in losses.
The level of insider selling reached over $600 million per day in August, making the month the fifth this year in which insider selling has reached over $10 billion. The last time we saw numbers like that was in 2006 and 2007, right before the last stock market peak and crash. The insiders today know that the top is here and are rushing to get out while they still can.
The question now is, what are you going to do? If you’re still heavily invested in stocks, particularly through a workplace 401(k) plan, how are you going to keep your assets safe? Are you going to keep your investments in stocks, hoping that the crash won’t be too bad? Will you shift into bonds, hoping that prices will go up as yields fall? Or will you invest in gold, taking advantage of a safe haven that has been trusted by investors for centuries?
We’re facing another stock market crisis just like 2008 and there’s no way around it. And just like 2008, gold is showing signs of making another price surge. It’s already up over $200 an ounce this year and has a long way to go over the next few years. The worse stock markets perform, the better gold will perform. Are you going to do the smart thing like the insiders moving to protect their assets, or will you be left holding the bag once the bottom drops out of stock markets?