KEVIN O’LEARY: The real reason Jeff Bezos, Mark Zuckerberg and Warren Buffet are suddenly selling billions in stock – and what you must now do with your own money before the election

Average investors may be on edge as US stocks hit record highs and America’s biggest financial gurus are on the sidelines of the market.

Last week it was reported that Amazon.com’s Jeff Bezos and Meta’s Mark Zuckerberg sold billions of dollars worth of their own company stock this year – while the S&P 500 posted its best nine months ever.

Even the Oracle of Omaha Warren Buffett has cut Berkshire Hathaway’s stake in Apple and built up a massive stockpile of $277 billion in cash.

And it’s not just the heavy players who are missing out on this market rally.

The officers and directors of all U.S. companies – the “corporate insiders” – reported the lowest net purchases of shares of their respective companies in a decade (22 percent in September, below the 10-year average of 26 percent), according to InsiderSentiment. com.

That caused hysteria in some parts of the mainstream media.

Last week it was reported that Amazon.com’s Jeff Bezos and Meta’s Mark Zuckerberg sold billions of dollars worth of their own companies’ shares this year – while the S&P 500 posted its best nine months ever.

The officers and directors of all U.S. companies—the “corporate insiders”—reported the lowest net purchases of their respective companies’ stock in a decade.

A finance professor told the Wall Street Journal last week that insiders are worried about a looming recession.

“Insider trading is a very strong predictor of total future stock returns,” says Nejat Seyhun, a professor at the University of Michigan’s Ross School of Business. “The fact that they are below average suggests that stock returns will also be below average in the future.”

What’s going on? What do these top business people know?

The answer is that they know their own limitations.

For all their brilliance and access to insider data, even Bezos, Zuckerberg and Buffett can’t predict what the market will do, so they’re diversifying their assets – and you should too.

I’m here to tell you that ‘insider trading’ is virtually useless. If someone tells you they can predict how stocks will move, run the other way.

After all, nearly nine out of 10 hedge fund managers can’t beat the S&P 500’s annualized gains. I don’t accept any advice from anyone who claims to be able to predict what will happen.

In this last financial quarter of 2024, I am both selling and buying shares.

If a group of my investments, such as energy sector stocks, has grown to significantly more than 20 percent of my total portfolio, then I will sell them. I will use that money to build my positions in one of ten other sectors of the market, such as healthcare, financials or real estate.

It’s great when stocks rise in value, but that also means there’s more to lose if that sector turns south.

Even the Oracle of Omaha Warren Buffett has cut Berkshire Hathaway’s stake in Apple and built up a massive stockpile of $277 billion in cash.

I’m here to tell you that ‘insider trading’ is virtually useless. If someone tells you they can predict how stocks will move, run the other way.

And there’s one more factor to consider as the year draws to a close: the US presidential election.

I won’t be placing any big bets between now and November 5th.

Just like the markets, no one can predict what will happen in the elections. And I believe that whoever sits in the White House in January 2025 will shape the future of the American economy.

In recent weeks, Vice President Kamala Harris has finally begun unveiling some of her economic policies after studiously avoiding revealing details for months.

It is now clear to me that Harris will pursue an agenda similar to President Joe Biden’s — meaning she will direct the federal government to favor certain “preferred” industries over others.

I call that ‘picking winners and losers’.

The CHIPS and Science Act, which was signed into law by President Biden in August 2022, is a good example of this.

The government decided that they would give trillions of dollars – through various federal investments – only to companies that produced certain types of computer chips.

Under the Biden White House, those companies were the “winners.”

Now VP Harris is proposing that the federal government will continue this strategy and pay for it by raising corporate taxes on all other businesses (from 21 percent to 28 percent).

Those companies will be the ‘losers’ under President Harris.

If you, as an investor and voter, believe that the federal government is good at picking “winners and losers,” then you may favor Harris’ approach. (Although there is no evidence of a successful centralized economy in more than 200 years of economic history.)

On the other hand, former President Donald Trump has made it clear that he will cut corporate taxes, allow companies to compete among themselves and let the markets decide who wins and who loses.

It is now clear to me that Harris will pursue an agenda similar to President Joe Biden’s — meaning she will direct the federal government to favor certain “preferred” industries over others.

On the other hand, Donald Trump has made it clear that he will cut corporate taxes, allow companies to compete among themselves, and let the markets decide who wins and who loses.

I believe this is the way an economy works most efficiently. I am waiting for the outcome of the elections to determine my investment strategy for the future.

So here is my best advice for the investor facing this market rally.

Keep your powder dry and keep investing in a 401K that guarantees a return of nearly eight to ten percent over a long period of time.

If you fancy a little more risk, buy a basket of higher-quality stocks through ETFs like the Russell 2000, which tracks two-thirds of the most profitable companies in the S&P 500.

And remember: if America’s financial gurus can teach the average investor anything, it’s that no one can predict the market.