What does this guy know that other owners of Google stock don’t know? From Market Watch:
“Google Inc. chairman Eric Schmidt plans to sell up to $2.51 billion of his share in the company, according to a Securities and Exchange Commission filing late Friday. Schmidt owns 2.3% of Google’s outstanding shares and has 8.2% of the voting power. Under the plan, Schmidt, who owns about 7.6 million shares of Google stock, plans to sell about 3.2 million shares of his Class A stock.”
Now, why would he do such a thing?
Perhaps he has some kind of emergency that requires him to have some cash on hand. I’m curious as to what kind of situation can come up that requires one to have more than a couple of billion dollars in cash available. This is almost half his stock, plus he already sold 1.8 million of his shares in Google in 2012 and 300,000 in 2011. So, if all goes as planned, he will have sold 5.3 million out of 9.8 shares from 2011 to 2013. So while the story says he is selling 42 percent of his stock, he is actually liquidating 53 percent over three years.
Why? Is this a “routine” diversification, as Google claims? As Testosterone Pit notes,
“Routine? He didn’t sell any in 2008 as the market was crashing. He didn’t sell at the bottom in early 2009. And he didn’t sell during the rest of 2009 as Google shares were soaring, nor in 2010, as they continued to soar. In 2011, he eased out of about 300,000 shares, a mere rounding error in his holdings. But in 2012, he opened the valves, and in 2013, he’d open the floodgates. So it’s not ‘routine.’”
Schmidt is not the only person who is doing this. Last week, Market Watch reported that, CEOs, CFOs, and other corporate insiders are selling their stock “at an alarming pace.”
What do they know that we don’t know?
This is yet another way in which the Federal Reserve is crucifying Main Street in order to pour money into Wall Street. By lowering interest rates beneath the floor, there is virtually no way to save money and get any real interest on it. If people want to make money, they have to put their savings into riskier investments—like the stock market. This way of pressuring people to go into the stock market makes the prices of stocks rise. It appears, at first, that investing in shares of companies was a good idea.
But in this scenario, the companies are not actually offering anything of greater value. The price of stocks goes up simply because more people are desperate to get some return on their money and have no other way to do so. But the wealth of CEOs and other corporate insiders does increase as the price of their stock holdings increases. All they have to do is sell out before the crash comes. Typically, they are in a much better position to guess how long they have before they need to sell their holdings. They have inside information about their company and how well (or badly) it is doing. They sell off and make a profit before the crash. The rest of us are left with a loss.
This process especially hurts pensions. Pension managers have to avoid risk as much as they can, but they also have to grow their money so they can pay out their pension obligations. These stock market crashes destroy pension growth. People who were made promises end up eating dog food to stay alive.
This entire system is perpetuated by Obama with Bernanke and Geithner, just like it was by Bush with Bernanke and Paulson. It is not true free-market capitalism and it is not just.