I am pretty sure that all the craziness this past week has led to new all-time highs in theories and predictions issued via phone, email and social media.
I have heard the initial selloff described as a plot by China to destabilize the U.S. economy and, of course, the plunge protection team gets all the credit for the price recovery that followed. The GDP print yesterday was posited as a fabrication by the Obama Administration to keep stocks from selling off.
One kind fellow who I fear may have discovered my gin stash was quite sure that the Koch brothers were driving down stock prices so they could buy up America on the cheap.
According to all the wild guesses I heard this week, the stock market will close the year at either 900 on the S&P or 2800 or some point in between. Likewise, oil's suggested range is between $17 and $95 a barrel by years end.
These are the kind of weeks that can make you crazy if you let them. A hint of fear and the slightest tinge of mania brings out confident predictions and wild theories that have about the same chance of being accurate. Once folks find out you have the slightest connection to the market they feel duty bound to share all their thoughts with you via text, Twitter and carrier pigeon, if necessary,
For a dose of reality I stepped back and took a good look at what corporate insiders were doing during this wacky week. I focused on the buy side of the equation as I thought it might be interesting to see if any sectors were seeing strong buying as prices swooned and recovered.
I am reasonably convinced that the people running the businesses that make up the market have a better indication of what's ahead than those guys dreaming up the theory of the day.
There was buying in the energy patch, especially early in the week. On Monday, executives of oil and gas blue chips such as Chevron (CVX), Marathon Oil (MRO) and Halliburton (HAL) stepped up to buy stocks in the open market. That's fairly uncommon and a solid indication that they believe these very large well-financed companies were getting too cheap.
There was also strong buying in some of the master limited partnerships (MLPs) that own storage and transmission assets. Some of the larger buys this week were at NuStar Energy (NS), Tallgrass Energy (TEP) and Dominion Midstream Partners (DM).
Meanwhile, private equity executives took advantage of the slide in their shares this week. Executives at Carlyle Group (CG), Apollo Global Management (APO) and Fortress Investment Group (FIG) opened their check books earlier this week to take advantage of the initial selloff. All three stocks have very nice yields at current levels and while the payout at Carlyle and Apollo may recede somewhat, the strong pace of realizations and fund raising indicate that the share of gains and fees paid to shareholders should continue to provide a comfortable yield for a long time to come. I have not yet stepped up on these names, but if they continue to decline, my private equity mindset may insist that I take a long-term stake.
Another group seeing a lot of insider buying was community bank stocks. Officers and directors are well aware that there is a lot of money still to be made in this sector as conditons are improving and M&A activity shows signs of accelerating. Some of my favorite regional and community banks that had insider buying this week include MBT Financial (MBTF), Atlantic Coast Financial (ACFC) and Banc of California (BANC).
Oil's slide helped bring buyers to Texas banks as Prosperity Bancshares (PB), Legacy Texas Financial (LTXB) and First Financial Bancshares (FFIN) all saw open-market buying. We have not seen a lot of buying in the region as prices have been quite high in the Lone Star State, but fears regarding energy lending are starting to bring prices down a bit. Some of the most profitable investments I have ever made were Texas-based banks when oil fell back in the late 1980s and early 1990s. I am watching banks in Texas very closely in hopes of replicating some of that success.
Theories and predictions are fun to listen to and debate but they probably won't make you any money. Indeed, there is a significant chance they will end up losing you money. However, listening to and watching what people running businesses are saying and doing with their cash just might help you earn outsized long-term profits.