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Chief executives and other corporate insiders, whose personal and corporate coffers are supposed to fatten under the policies of President-elect Donald Trump, are dumping stock during this postelection rally while other investors are falling over themselves to buy into the "Trump trade."
So who's the sucker?
Insider sentiment collapsed soon after the postelection rally began and insiders have continued to cash out even as Trump put together one of the most business-friendly Cabinets of all time, according to two measures of buying and selling by company executives.
Look at what happens on the chart below from InsiderScore.com after November. The black line is the research shop's proprietary insider sentiment score, roughly a measure of the net buying volume versus the net selling. The lower it goes, the more selling there is versus buying. The blue line is the stock market, represented by the Value Line Geometric Index.
The selling is even more intense in the banking, industrial and energy sectors, according to Ben Silverman, director of research at InsiderScore.
Here's Silverman's explanation to CNBC.com:
"It's certainly interesting that insiders in three sectors — financials, industrial goods and energy — that seem poised to benefit from the incoming administration's policies are leading the selling charge. Likewise, the type of tax code changes being talked about seem likely to benefit high-income individuals. I think this speaks to the fact that there is always uncertainty when there are administration changes and that insiders are their own breed of market participant. No one else gets 'free' stock annually so when stocks rally like this an insider's holdings in their company can become very imbalanced relative to their wealth, which is going to lead to some selling."
But the sheer volume of the insider selling would argue against Silverman's point that this is mostly financial housekeeping.
There were nearly 5 insider sale transactions for every 1 purchase on the U.S. stock market last week, according to Vickers Weekly Insider. That's nearly double the 2.5-to-1 ratio it takes for that firm to get bearish.
"Insider sentiment continues to reflect apparent caution on the part of corporate executives, directors and beneficial owners, this as major equity indices hang near all-time highs but seem unable to muster the needed strength to push still higher," the Vickers report said.
So which CEOs and executives are dumping?
In the last week, insider selling at United Rentals, a construction equipment provider which has made many Trump trade lists because of a potential big infrastructure build-out, is at the highest levels in nearly five years, according to InsiderScore.
"The most recent selling included CEO Michael Kneeland's first-ever sale outside of a 10b5-1 plan in an opportunistic-looking disposal," said the latest InsiderScore report.
A representative for United Rentals said in an email the "primary driver" for the CEO's stock sales was "tax driven, at [the] direction of his financial advisors" and noted that the majority of his wealth is "still tied to our company and stock."
So this is either some typical year-end insider activity accelerated a bit by the removal of a big uncertainty in the election or a subtle vote of no confidence in the president-elect to achieve his stated economic goals by the very group of people who are supposed to benefit the most from those plans.
"It's worth pointing out the irony of Trump's populist victory," said Silverman. "Most insiders fall into the top 2 percent of income category, be they a CEO or a vice president at a manufacturing company. Stock-based compensation has helped create the wealth gap and the rally has, at least temporarily, likely widened that gap as a group of very wealthy individuals has been able to generate substantial liquidity."