More often than not, corporate insiders know far more about the health of the economy than the average investor. Presumably, it’s because they have access to high level sales numbers, customer sentiment, inventory levels, and a whole host of information that is not easy to come by. When confidence abounds, business is doing well, and customers are satisfied, insiders buy. When things are looking bleak, insiders sell. So what are insiders doing right now? They’re selling. Big time.

According to Charles Biderman, CEO of TrimTabs, an independent research firm, the average insider selling ratio, that is, number of sellers divided by the number of buyers, is around 7. That means there are typically 7 times more sellers than buyers on any given day. There are a number of reasons the number is so high, one being that many employees are paid in stock, and sell immediately when the stock vests, but that’s not really all that important.

The vast majority of small business owners rely on credit to fund the operations of their businesses: to make payroll, buy supplies, and smooth out their operational cash flow.

Any disruption to the supply of credit to these firms can be very damaging to our economy. According to SmallBusinessNotes.com:

Ignore everything you hear on television. Especially CNBC (owned by GE). While they’re busy pumping the markets, this is what’s happening in the real world (from Bloomberg):

Borrowers such as Dayton, whose 2004 compensation was almost 10 times the median U.S. household income, are becoming trapped by the same issue facing the poorest subprime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.

The widely discussed stress tests were published yesterday evening and showed that capital shortfalls of some of the largest banks were significant. Bank of America (NYSE: BAC), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), and 7 others were being asked to raise roughly $75 billion in order to shore up their balance sheets.

This “test” was meant to see how the top 19 banks would hold up in a worsening economy; using both an opitimistic and pessimistic set of assumptions. I want to focus primarily on the pessimistic assumptions for now; specifically the assumption that the unemployment rate for 2009 would be at 8.9%. Well, Mr. Geithner, just this morning there were 539,000 layoffs in April, which brought the total unemployment rate for 2009 (thus far) to 8.9%.

It’s official; General Motors (GM) common shares are in their final death throes.

Yesterday, General Motors indicated its intention to seek a 1-for-100 reverse split on its common stock. If you’re wondering what a reverse split is, Investopedia has a fairly accurate definition and example:

Many individual investors select stocks, bonds or mutual funds solely to create a diversified portfolio. Buying based only on diversification will deliver only average performance (at best).

If you possess the skills and are prepared to put in the necessary time and hard work to become a top 20% performer, then why accept being mediocre? If there are insufficient quality investments available, then be patient and wait for the right opportunity. Diversification is good for limiting risk (to an extent); it’s awful for maximizing return.

Warren Buffett’s Berkshire Hathaway Corp (BRK.A) disclosed yesterday that it had increased his Burlington Northern Santa Fe Corp. (BNI) stake by nearly 16% with the purchase of more than $271 million worth of BNI shares on the open market in the past 5 days.

In an article I wrote back in April of 2007, I assigned blame to various individuals, industries, and institutions for the financial and mortgage meltdown that led us to the current financial mess we find ourselves in. One such perpetrator has received a significant amount of flak recently, and some suggest they should be restructured or even eliminated altogether. I am speaking, of course, of the credit rating agencies, such as Moody’s Corp. (NYSE: MCO), Fitch’s, and Standard & Poors - which is owned by The McGraw-Hill Companies (NYSE: MHP).

Through further research, I compiled a list of options we have for dealing with the credit rating agencies.

I was recently perusing some investing blogs and ran across an article I feel adequately captures my concerns (and belief) that financial mass destruction is probable in 2009. Rakesh Saxena, the article’s author, does a good job explaining the unbelievable amount of financial engineering by the likes of Citigroup (NYSE: C), JP Morgan (NYSE: JPM), Bank of America (NYSE: BAC), Lehman Brothers, Bear Stearns, and many others. Reading this article, as well as the insightful comments, reminded me of two specific reasons why I urge everyone I know to stay away from financial stocks - even shorting them.

What Do Banks Do?

When we research stocks for our investment management clients, insider purchases play an important role in our research. Why? Quite simply because insiders almost always know more about the business than any analyst could ever know.

Obviously we cannot - and do not - rely solely on insider purchases, but we feel that it is a very good way to find potentially great companies to invest in.

With significant turmoil in the financial markets around the world, some analysts are thinking gold will skyrocket as investors flee to safety. One such prediction from Citigroup (NYSE: C) pegs gold at $2,000 per ounce - roughly 150% higher than today’s $800 per ounce.

Investors in Dow component General Electric (NYSE: GE) finally had some semblance of good news Thursday, as Jeffrey Immelt, CEO and Chairman of GE, bought $820,000 worth of stock on the open market. In addition, GE’s Vice Chairman Michael Neal purchased $750,000 worth.

Though these purchases are relatively small compared to the wealth of these two men, it’s an important first step in the long recovery process that GE investors have been waiting for. It goes quite nicely with Warren Buffett’s purchase of $3 billion worth of GE preferred stock.

With the stock market reaching new lows every single day, I thought it’d be interesting to run my trusty ol’ Ben Graham stock screener. Because this screener is primarily focused on finding undervalued companies – and with the market undervaluing companies left and right – I’m not surprised to see more results than usual.

Benjamin Graham is widely regarded to be the founder of modern value investing. His greatest student, Warren Buffett, attributes much of his success to Graham’s teachings. In this article, we will provide an in-depth look at stocks that Ben Graham, the father of modern value investing, might have liked.

Henan Zhongpin (Nasdaq: HOGS), one of the top pork producers in China, reported phenomenal second quarter 2008 results this morning, and further solidified my belief that this company is likely to reward investors very handsomely over the long haul.

Can anyone overtake Exxon-Mobil (NYSE: XOM) in the energy arena? What if I told you that there’s a company out there that is half the size of Exxon but will likely overtake the company as the world's largest energy company? Well, read on and I’ll tell you exactly why I believe this company will.

Garmin (NasdaqGS: GRMN), whose shares closed at a 52-week low of $35.19, is now on the verge of being one of the top value plays on the market today. Investors hammered Garmin in response to lowered guidance and a delay of its new smartphone, dubbed “nuvifone.” Was this response an over-reaction?

On Tuesday, many financial stocks rebounded, thanks to a drop in oil, the Consumer Confidence Index coming in above expectations, and a Merrill Lynch (NYSE: MER) offering. Does this mean we found the bottom and are now on our way to a solid recovery? Some say yes. I say absolutely not.

Remember a time when jobs flocked overseas and everything we bought was from China, India, South America, or Japan? Well folks, you’re about to see a reversal of that. In fact, we’re already seeing signs of it. Why? It’s simple: the value of the American dollar has fallen so far that foreigners now want to buy our products because they are so cheap. What does this mean for us, as investors? It means now is the time to buy undervalued manufacturers of specialized products.

As is common in the FIPortfolios.com Small Cap Momentum model portfolio, we have picked one of the finest companies to benefit from this change in economic momentum. This company is called Hardinge Inc. (HDNG).

About Hardinge
Hardinge engages in the design, manufacture, distribution, and marketing of computer controlled metal-cutting lathes, machining centers, grinding machines, collets, chucks, indexing fixtures, and other industrial products. Hardinge provides its services to aerospace, automotive, construction equipment, defense, energy, farm equipment, medical equipment, recreational equipment, telecommunications, and transportation industries, as well as to small and medium-sized independent job shops.

Benjamin Graham is widely regarded to be the founder of modern value investing. His greatest student, Warren Buffett, attributes much of his success to Graham’s teachings. In this article, we will provide an in-depth look at stocks that Graham might have liked.

Benjamin Graham is widely regarded to be the founder of modern value investing. His greatest student, Warren Buffett, attributes much of his success to Graham’s teachings. In this article, we take an in-depth look at stocks that Ben Graham might have liked.