In a recent Commentary- MicroStrategy Is A Leveraged ETF In Disguise – we discussed the company’s business model, which revolves almost entirely around highly speculative
Leverage and speculation can drive markets higher than most investors forecast. However, in the process, they create a divergence between fundamentals and valuations, thus exposing the markets to risk. Increased leverage and speculation are not reasons to sell immediately, but they indicate that markets are getting frothy, warranting our close attention., we touched on the recent surge in small and mid-cap stocks.
Record numbers of US executives are selling shares in their companies, as corporate insiders from Goldman Sachs to Tesla and even Donald Trump’s own media group cash in on the stock market surge that has followed his election victory. Insiders sell stock for various reasons, many of which are unrelated to their company’s prospects. Therefore, record selling is not necessarily a dire warning. However, given recent returns, high valuations, the growing use of leverage, and a generally highly speculative environment, insider sales are another warning that markets may underperform expectations in 2025.