• 728 days Will The ECB Continue To Hike Rates?
  • 728 days Forbes: Aramco Remains Largest Company In The Middle East
  • 730 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,130 days Could Crypto Overtake Traditional Investment?
  • 1,135 days Americans Still Quitting Jobs At Record Pace
  • 1,137 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,140 days Is The Dollar Too Strong?
  • 1,140 days Big Tech Disappoints Investors on Earnings Calls
  • 1,141 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,143 days China Is Quietly Trying To Distance Itself From Russia
  • 1,143 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,147 days Crypto Investors Won Big In 2021
  • 1,147 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,148 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,150 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,151 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,154 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,155 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,155 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,157 days Are NFTs About To Take Over Gaming?
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

  1. Home
  2. Markets
  3. Other

Utility Sector: Divergence Between Smart and Dumb Money

The Utility Sector is thought to be a safe haven in the time of market duress. There is no question that the market is under pressure, but I would be very careful about betting on the assumption (dogma?) that safety will be found in the Utility Sector. Currently, it should be noted that utility company insiders are net sellers of their shares to an extreme degree. This is the "smart money". On the other hand, utilizing the Rydex asset data, these market timers (who we might call the "dumb money" because of their propensity to get it wrong) are betting to an extreme degree on higher prices in the Utility Sector. I ask: in such a weak market, why would I bet against the "smart money" and on the "dumb money"?

Figure 1 is a weekly chart of the S&P Select Utilities Spyder Fund (symbol: XLU). The indicator in the middle panel is the "smart money", and this is the InsiderScore buying and selling index for company insiders in the Utility Sector. The trading bands look for extremes in the data with a 52 week look back. The indicator in the lower panel is the "dumb money", and this is the amount of assets in the Rydex Utility Sector Fund. Currently, these market timers have plowed the highest amount of assets ever into this sector fund.

Figure 1. XLU/ weekly
XLU Weekly Chart

So the current set up has the "smart money" selling and the "dumb money" buying - both to an extreme degree. Past and similar set ups are noted by the vertical blue bars in figure 1. If the past is any prologue for the future, it would seem unlikely that investors will find salvation in the Utility Sector.

 

Back to homepage

Leave a comment

Leave a comment