New Years Market Points for 2022

An astrologer after having predicted the death of a woman with whom French king Louis XI was in love and who later did die as he (astrologer) had predicted was called in to see the monarch. “You sir, who foretell everything, when shall you die?” asked King Louis. The astrologer calmly replied “I shall die Sire three days before you your majesty.” His reply so shocked King Louis that he ordered a room to be given to the astrologer in one of his palaces for the rest of his life.

The accuracy of our analysis has not been as effective as it has been in the past. Why? One reason is that because the markets are dominated by the fast trading funds that obscure the insiders personal buying and selling. It is now estimated that over 80% to 90% of the total market volume is trading focused volume (hedge funds et al) and no longer term investment volume. So huge volume traders are in fast and out fast.

Don’t get us wrong here. There are always many hundreds if not thousands of stocks that are exceptionally undervalued and merit attention. The problem is that when most stocks are down in price and offer opportunities for exceptional capital gains, few take advantage; that will never change.

Note well that the world’s central banks are huge, regular and often frequent buyers in the stock market. Notice that the money supply growth has recently been so large that in our opinion, it has carried the stock markets to such overpriced and overvalued levels. We are not suggesting that investors should avoid investing, rather that there are hundreds of stocks and more that are undervalued and in many cases being “given away” at their price lows.

For many years we have analyzed the reported daily “buys and sells” of the officers and directors (insiders) of the US and Canadian stocks to help determine if the stocks could be undervalued or overvalued. As you probably know, the officers and directors are required to report within two business days any of their purchases or sales of their own companies’ shares. Keep in mind that it is a criminal offence in Canada and in the United Staes not to report any transactions.

Overall, we used the largest twenty buys and sells for two weeks ago and it was not positive, rather it was alarming, In the largest twenty transactions. For the US stocks the insiders bought a total of approximately $37 million in dollar value of their own companies’ stocks; and for the same period they sold $622 million in dollar value of their own personally held shares in their own companies’ stocks. So for every one purchase there were 16 sales; that ratio is very negative! Very!

And again last week there were no positive indications from the “insiders.” The most informed of all investors purchased approximately $79 million in dollar value, while for the same period; they sold $524 million in dollar value of their own shares. So again in dollar value we saw six to seven insider sells to one insider buy. It suggests that some profits should be taken off the table.

Yet for the insiders in Canadian stocks, for the resource and commodities type stocks such as gold and silver, there is little insider selling (officers and directors) at all. As well, there has been consistent accumulation by their officers and directors (insiders). Our conclusion is that we are in a long term bull market in commodities! Generally and historically if we have a bull market in commodities, we do not have a bull market in the industrial stock market at the same time.

Valuations for too many industrial stocks such as some in the Dow Industrials and S&P500 are carrying high risk. Advice?Time to short? No, not necessarily to short stocks except for experienced professionals. We believe that the precious metals stocks and other resource and commodity sector stocks offer opportunities for exceptional capital gains. We will shortly have list of exploration and mining stocks on our other site “Canadianmineanalysis.com” it is free to Canadians and Americans.

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