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It’s the most reliable thing on Wall Street: time after time, billionaires and institutional investors easily outperform retail traders. They have more data, entire teams of analysts and researchers, and vastly more experience than the Average Joe or Jane investors – all of which translates to better returns and less risk over the long term.

While the Uber driver and the school teacher are first investing in stock-market index funds, hedge-fund managers are taking profits and moving into safe-haven asset classes. It’s part of the reason why the rich get richer and the poor get poorer: almost invariably, the wealthy are better educated on finance.

However, you can level the playing field by following the smart-money moves and seeing where they’re allocating their capital now. And, with an expensive blue-chip stock market that’s completely disconnected from the slowing global economy, the smart money is exercising extra caution and turning to “alternative” investments for yield.

When corporate insiders start heading for the exits, that’s a clear indication that it might be time to lighten up on your holdings in S&P, NASDAQ, and Dow companies. They’re paying attention to data that isn’t on the radar of most retail investors, such as the fact that short-duration bonds are paying more than long-duration bonds.

Take, for instance, David Rosenberg, the chief economist and strategist at Gluskin Sheff & Associates. He’s taken to Twitter to warn amateur investors of an ominous sign in the bond market that has tremendous implications for the major stock-market indexes:

Courtesy: @EconguyRosie

Indeed, the spread between 3-month Treasury bonds and 10-year Treasury bonds recently hit -50 basis points – something we haven’t seen happen since March of 2007, soon before the global economy went south and the stock market collapsed.

It’s also worth noting that the 3-month Treasury yield has now inverted with 30-year yield, which also happened on July 31, 2007, while the spread between the 10-year Treasury yield and the 2-year yield recently fell to -5 basis points, its lowest level since 2007.

Another market insider, Art Cashin, is the director of floor operations at Swiss analytics firm UBS Global Wealth Management. He’s focusing on the velocity or steepness at which these yield-curve inversions are taking place: “The primary thing is, yields are going down and going down with some acceleration,” observed Cashin.

Yet another prominent wealth manager, UBS Global Chief Investment Officer Mark Haefele, is citing the glaring red flags in the global economic landscape as his motive for reducing his exposure to stock-market indexes: “Risks to the global economy and markets have increased… investors should brace for higher volatility… We believe it is prudent to take action to neutralize part of this event risk,” explained Haefele.

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It makes perfect sense, then, that according to TrimTabs Investment Research, corporate insiders sold an average of $600 million of stock holdings per day in the month of August. In fact, August was the fifth month of 2019 in which insider selling topped $10 billion; the only other times that happened was in 2006 and 2007, not long before the Great Recession.

Additionally, in another sign that corporate insiders aren’t super-bullish on the economic outlook, S&P 500 companies recorded a 13% decline in Q2 2019 stock buybacks compared to the same period from the previous year:

Courtesy: CNN.com

Corporations stop buying back their own stock shares primarily because they know that it won’t be profitable to do so. If they truly believed that their stock prices had strong upside potential, they’d be buying the shares with both hands, believe me.

And if these S&P corporations aren’t buying their own stock, should you be buying it right now? Or should you trade like UBS analysts Giovanni Staunovo and Wayne Gordon, who are predicting that gold will likely hit $1,600 very soon?

If you do choose to invest in precious metals and miners, you’ll be in good company. Bridgewater Co-chairman Ray Dalio, for example, has explicitly stated that “it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.”

John Paulson, the hedge-fund titan who runs the New York-based Paulson & Co., had more than half a billion dollars invested in gold according to a 13F filing – another financial whale taking a stake in the best crisis hedge and store of value that civilization has ever known.

But you don’t have to be a multibillionaire to trade like the smart money; just follow their moves and continue your financial education – it’s the smartest thing you can do.

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