Goldman and Morgan Stanley: The Trader's Exit Signal

Wall Street is celebrating record trading profits. Goldman Sachs just posted an all-time high for equities-trading revenue of $4.31 billion last quarter. That's a staggering $700 million above expectations. The firm's stock, however, fell that day. The market's reaction is the first clue that something's off. When profits hit new heights, the smart money often starts looking for the exit.

The real signal, though, is in the filings. While Goldman's trading machine was firing on all cylinders, its rival Morgan Stanley's leadership was quietly cashing out. In the last 30 days, insiders sold $16.43 million worth of stock, with no purchases reported. The largest single sale came from Chairman and CEO Edward Pick, who unloaded shares worth over $164,000 on October 31st. This isn't a one-off. The pattern is clear: consistent sales without corresponding large buys.

That's the classic pump-and-dump setup. Leadership is selling into a rally fueled by record profits, suggesting they see the peak. If trader compensation is indeed peaking, as the massive revenue jump implies, then the incentive for insiders to hold stock diminishes. Their skin in the game is being cut. When the people who run the firm are the first to exit, it's a powerful warning that the rally may be running on fumes. The record profits are the hype; the insider selling is the trap.

Decoding the Insider Moves: Skin in the Game or Routine Exit?

The pattern of selling is clear, but the motivation behind each transaction tells the real story. When the smart money moves, it's not always about a grand exit. Sometimes, it's just a routine tax bill. Take CEO Edward Pick's sale. In October, he sold 100,120 shares for $164.34 each. That's a significant chunk of stock, worth over $164,000. The key detail is that this wasn't an option exercise. It was a straight sale. For a CEO to liquidate a large block of shares without a corresponding buy is a powerful signal. It suggests he's monetizing gains, not just rebalancing his portfolio. This isn't skin in the game; it's a partial exit.

Compare that to a different kind of sale: the CFO of Caterpillar. In July, he exercised stock options and then sold shares to cover taxes. This is a textbook routine move. The sale is directly tied to a tax obligation from a compensation award. It doesn't reflect a lack of conviction in Caterpillar's future. It's a necessary financial chore. The smart money watches for this distinction: sales tied to compensation versus sales driven by a belief the stock is overvalued.

Then there's another group of traders: members of Congress. Their filings show a mixed picture. Last year, some insiders at Morgan Stanley saw members of Congress buy shares, while others sold. This isn't a coordinated signal. It's the messy reality of different traders with different views and different tax situations. For every insider selling, there's often a congressional trader buying, and vice versa.

The bottom line is that not all selling is created equal. Pick's sale is a standalone, large, non-exercise transaction that stands out. It's the kind of move that follows a record profit quarter and a falling stock price. It's the kind of move that makes you wonder if the CEO sees a peak. The Caterpillar CFO's sale is a routine monetization. The congressional trades are noise. When you strip away the routine, the skin in the game at Morgan Stanley is looking thinner.

Smart Money in the Market: Where Are the Whales?

The insider selling at Morgan Stanley is stark, but the broader market's reaction is the real test. Are the whales-those major institutional funds-buying the dip or following the insiders out?

The evidence does not show a clear pattern of institutional accumulation at Morgan Stanley. There's no signal from 13F filings indicating a major fund is stepping in to buy the stock as insiders sell. The filings we have show a different dynamic: members of Congress have been trading, with some buying and others selling. That's noise, not a coordinated smart-money move. For all the talk of record profits, the institutional footprint isn't shifting to support the stock. The smart money isn't lining up to buy.

This creates a tension. Goldman Sachs just posted an all-time high for equities-trading revenue of $4.31 billion last quarter. That's a headline that should rally a stock. Yet, the market's reaction was a fall. The smart money is looking past the headline numbers. They're watching the filings. When the people who run the firm are selling into a record profit quarter, it raises a question: is the revenue spike sustainable, or is it a peak in trader compensation that insiders are cashing out from?

The focus should be on whether the recent record revenues justify the insider sales, not on chasing headlines. The pattern is clear: consistent sales without large buys. The CEO's sale wasn't an option exercise; it was a straight sale of a large block. That's a move that follows a falling stock price after a record quarter. It's the kind of move that suggests the skin in the game is being cut.

The bottom line is that the whales aren't showing up. Without institutional accumulation to counter the insider selling, the rally lacks a fundamental anchor. The record profits are the hype; the insider moves are the trap. Watch the 13F filings for the next sign of alignment-or the next warning.

Catalysts and What to Watch

The thesis here is clear: when the people who run the firm are selling into a record profit quarter, it's a red flag. The next few catalysts will confirm whether that signal is a one-time tax move or the start of a trend. Watch for three key developments.

First, monitor the upcoming earnings for any shift in guidance that might explain the sales. The record trading revenue at Goldman is impressive, but it's not the only story. The firm's compensation expense was 13% higher in 2025, which could pressure future profits. If management's outlook for 2026 hints at a slowdown in volatile trading or rising costs, it would validate the insider caution. Conversely, overly optimistic guidance could be a classic pump-and-dump setup, where leadership sells while hyping the future.

Second, watch for any change in the insider trading pattern, especially large purchases by the CEO. The pattern at Morgan Stanley is stark: consistent sales without large buys. The real test is whether the CEO's October sale of 100,120 shares was an isolated event or part of a broader exit. If we see a significant purchase by the CEO in the coming quarters, it would signal renewed skin in the game and contradict the bearish thesis. Until then, the lack of buying speaks volumes.

The third and most critical test is price action. The real signal is whether the stock price continues to rise on news while insiders keep selling. That's the classic pump-and-dump setup. Goldman's stock fell 2.3% in early New York trading after its record report. If the stock rallies on the next earnings call despite another round of insider sales, it would be a powerful warning. The smart money is looking past the headline numbers; they're watching the filings. When the people who run the firm are the first to exit, it's a powerful signal that the rally may be running on fumes.