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Investment Advice From A Chicago Pimp

By Stansberry Research Interview Series
Wednesday, November 14, 2007

In light of the current market's madness, it's time to revisit our old friend Iceberg Slim.
Iceberg Slim reached infamy as one of Chicago's most successful pimps. By the time he retired at the age of 42, he'd amassed a fortune. According to his publisher, he went on to sell more than 6 million books. He later attributed his success to maintaining his cool in any and all situations. "The best pimps," he wrote, "keep a steel lid on their emotions and I was one of the iciest."
It's advice we could all do well to heed right now…
There's been a fundamental shift in investor sentiment since this summer. This time last year, the market was unstoppable, rallying day after day. Bad news only resulted in a slight hiccup – if it did anything at all.
Today, however, investors have little confidence in the market. In fact, they're more worried than they've been in more than three years. Have a look at the Chicago Board of Options Volatility Index (VIX): the bellwether for investor confidence.
When the VIX spikes, investors are nervous about the market's future, and they bid up the price of "insurance" in the form of options. When the VIX plummets, investors are calm. As you can see from the chart above, investors are not "keeping a steel lid on their emotions." Instead, they're spooked, big time.
Corporate insiders, on the other hand, are taking a page right out of Iceberg Slim's book, and calmly buying in the face of these corrections. The sell-to-buy ratio for the last week was a bullish 1:14 – anything below 1:20 is bull territory. In terms of actual insider buyers and sellers, there are 1.5 sellers for every one buyer: again, very bullish.
These guys aren't traders, nor are they looking to make a quick buck.
Because of the short-swing profit rule, insiders are required to hold on to the shares they purchase for a minimum of six months. So the guys who are buying right now aren't short-term traders. They're seeing value no one else is, and they're looking to hold their positions well into next year.
So while everyone else panics, the guys who run these companies are slowly loading up on the two most beaten up sectors: finance and consumer discretionary. Does this mean we'll see a big year-end rally in these sectors? Not necessarily. But insiders are definitely betting that their businesses will do well.
Here is a short list of companies with insider support:
Insider Buying
World Acceptance
Credit Services
$10.1 million
Western Alliance Bancorp
Regional Bank
$4.2 million
American Eagle Outfitters
Clothing Retail
$24.8 million
Peb Boys
Auto Parts
$10.6 million
What happens with the broader market is anyone's guess... but if you're looking to buy shares when most folks are panicking, this list is a good place to start.
Good trading,

Recent Articles
Market Notes
Telecom remains safe haven... France Telecom, Deutsche Telekom, Vodafone, Indosat, and Partner Communications at new highs.
No home, no decorations... Jennifer Convertibles, Decorator Industries, and Home Solutions of America at fresh lows.
America's largest senior living company, Brookdale Senior Living, at new 52-week low.
Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%