Immelt's GE purchases signal more falls to come

General Electric Co Chief Executive Officer Jeffrey Immelt and Citigroup Inc’s Vikram Pandit are back to buying their own companies’ shares. That means there may be more stock declines to come.

CEOs, directors and other senior officers at New York Stock Exchange-listed companies purchased $1.37 billion worth of equities in October, according to Bethesda, Maryland-based research firm Washington Service. They snapped them up as the Standard & Poor’s 500 Index fell 17 per cent, the most since 1987.

Insider buying, a bullish signal for two decades, lost its prescience this year and now may be a harbinger of a retreat in shares because it signals overconfidence, according to Ben Silverman, director of research at InsiderScore.com, a stock tracking firm in Princeton, New Jersey. The last time officers bought as much was in March 2008, preceding a drop in the S&P 500 a month later, data compiled by Bloomberg show.

“Everyone’s drinking the Kool-Aid,” said Michael Levine, a money manager at New York-based OppenheimerFunds Inc, which oversees $160 billion. “These guys know their companies better than the market, so they think they’ll be right. But the economic slowdown has happened much more quickly and has been much deeper than people expected.”

Insiders stepped up purchases in the past four months, buying $57 worth of shares for every $100 sold in October, from a low of $21 bought in June. The last time the amount of buying increased as much was in March, when executives bought $62 of shares for every $100 they sold.

Futures on the S&P 500 added 0.6 per cent on Monday. The gauge gained 7.9 per cent from the end of March to 1,426.63 on May 19, before giving up the entire advance the next month.