Planmark Capital Management

The Markets

Here is one place where insider trading is legal—and it’s sending us a bullish signal.

Officers, directors, and large shareholders are considered “insiders” by the Securities and Exchange Commission and as a result, they are required to report their buy and sell transactions in their companies’ stocks. A company called Argus Research publishes the Vickers Weekly Insider Report and it’s one of several companies that tracks how heavily these insiders are buying and selling their stocks.

So what’s recent insider trading activity telling us? According to a report at MarketWatch.com by Mark Hulbert, publisher of the Hulbert Financial Digest, “It turns out that insiders in recent weeks have dramatically cut back the pace of their selling. In the Vickers Weekly Insider Report published Monday (November 19, 2007), Argus Research reported that in the week ended Friday (November 19, 2007), the average insider sold just 1.68 shares for every one share that he bought. That's well below the historical average for this ratio, and well below where the ratio stood as recently as early November, when it stood at 3.04-to-1.”

Hulbert went on to say, “This is good news for the bulls. After all, if insiders did not believe that their companies' stocks would soon go back up, they would have reacted to the recent decline by immediately selling. That they did not must mean those shares will recover relatively quickly.”
Insiders are not always right, however, the fact that they slowed down their selling in recent weeks may be seen as a bullish sign for the markets. We’ll see…

Returns through 11/23/07	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Dow Jones Industrials	-1.5	4.2	5.7	7.9	8.3	5.4
Nasdaq Composite	-1.5	7.5	5.5	8.2	12.2	5.2
Standard & Poor's 500	-1.2	1.6	2.8	7.4	9.4	4.4

Sources: Yahoo! Finance, Barron’s. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three-, 5-, and 10-year returns are annualized. Assumes dividends are not reinvested.

DESPITE A SLUMPING HOUSING MARKET, RISING OIL PRICES AND A WEAK DOLLAR, the U.S. economy will not slip into recession, according to University of Michigan economists.

“There is enough resilience in the economy to keep output expanding,” said Saul Hymans, University of Michigan professor emeritus of economics, in a November 15, 2007 news release. “The Federal Reserve’s recent action to contain the credit crisis stemming from problems in the subprime mortgage market appears to be averting the development of a system-wide credit crunch, and lower interest rates are lending support to economic activity.”

In their annual economic forecast, Hymans and colleagues Joan Crary and Janet Wolfe note, however, that national economic output growth (as measured by real Gross Domestic Product) will remain sluggish in the short term—due to the ongoing decline in residential construction and subdued growth in consumer spending. They estimate the rate of economic growth will be just 2.1 % this year, down from 2.9 % in 2006.

On the energy front, although oil prices have jumped more than 50 % since the end of last year (from $60 per barrel to more than $90), the economists predict a 15 % decline over the course of 2008. Additionally, they say interest rates will hold steady throughout 2008, but should rise in 2009.

The University of Michigan forecast is based on the Michigan Quarterly Econometric Model of the U.S. Economy and compiled by the U-M Research Seminar in Quantitative Economics (RSQE).

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* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

Brain Teaser Answer: It contains the numbers one to nine, in alphabetical order.