Clinton Says, "Sell Everything!"

Insider selling. Everyone knows it's a bad sign, so what does it mean when the insider-est of insiders sell every stock they own, all at once?

Politicos and conspiracy theorists alike are going to love today's story, which concerns the consummate insiders: former President Bill Clinton and would-be-President Hillary Clinton, and one of the biggest stock dumps in recorded history. On Friday, The Washington Post regaled its readers with a story titled "Clintons Dissolve Blind Financial Trust" (I'll leave the puns on that one to someone else).

According to documents just reviewed by The Washington Post, the Former First Family is putting its financial house in order ahead of the 2008 election. In an effort to head off press stories scrutinizing (and perhaps criticizing) their investments, the Clintons liquidated their "blind financial trust" entirely in April. Of course, when they did this, the contents of the trust were exposed to the light of day. And what did we find therein? Shares of:

Let the conspiracy theorizing begin
And now we get to the fun part: the whys of the sell-off. At the risk of preempting the professional cynics, let's examine a few theories for why the Clintons dumped these stocks, likely to be voiced in the blogosphere over the next few days.

Theory No. 1: Democrats hate [insert industry name here]
Price-gouging oil companies. Environment-fouling chemical makers. Patent-hugging pharmaceuticals. According to the generally accepted wisdom, if the Democratic Party captures the White House next year, and holds the House and Senate to boot, each of these industries could be in for a rough four years. No friend to business in general (again, I'm just repeating the stereotypical view, and not necessarily my own), these industries are usually considered to be high on the party's hit list, right up there with defense contractors and health-care insurers.

One conspiracy theory likely to pop up in response to the Clintons' sale of stocks in these industries in particular, is that they're getting out while the getting's good. Taking their winnings off the table so as not to suffer financially from the presumed policies of their own administration (or of one run by a Democratic-victor-in-2008-to-be-named-later).

But I see a couple problems with that theory. First off, there aren't a lot of winnings to be taken here. Of the six stocks named above, for example, just two -- DuPont and ExxonMobil -- have outperformed the market over the last 52 weeks.

Second problem: The Associated Press dug up a few other stocks, contained in the Clintons' trust, that didn't make their way into The Washington Post's report. Companies like Walt Disney (NYSE:DIS) and eBay (NASDAQ:EBAY), for example. Perhaps I'm naive, perhaps just ill-informed, but I've yet to run across the conspiracy theory that Democrats have it in for Mickey Mouse and the secondary market in Pez dispensers.

No, it seems to me that the Clintons sold off their stocks pretty much willy-nilly (that pun was intended).

Theory No. 2: The market is going to crash
OK, then. So if it's not individual sectors the Clintons fear investing in, then perhaps these consummate insiders know that the whole market is about to crash and want to "get out" before it happens. That would certainly explain the wholesale sell-off of their stock investments, right?

Indeed, with the S&P 500 currently trading at a pricey 18.5 times trailing earnings (15% to 23% above the "norm," depending on how you define normal), there does seem to be some basis for this theory. But in any market -- even during the bubble -- there are undervalued equities to be found.

Theory No. 3: The obvious one
The more I look at the facts, and the wide range of stocks being sold off from the Clintons' portfolio, the more I think the real reason for the sale is the obvious one -- the one Sen. Clinton says is true: If a non-professional-conspiracy-theorist like myself can spend a few minutes musing and come up with a handful of cynical spins on this story, then professional cynics would certainly be able -- and in an election year, motivated -- to uncover the contents of the Clintons' trust and use it to criticize the Senator in her White House bid.

Companies residing in the Clintons' portfolio -- Wal-Mart, ExxonMobil, Pfizer -- each attracts criticism in its own right. Paired with a presidential candidate whose positions sometimes contradict with their corporate goals, and at other times align a little too tightly with them, these holdings were tailor-made for spawning accusations of conflicts of interest. The simplest solution for the Clintons was to close the trust, sell off the stocks, and buy some nice, inoffensive CDs. Worst case, now they'll have to get by on 5% interest on a reported $10 million to $50 million in assets. Best case, they'll have to bear this hardship for the next four to eight years.

I feel their pain.

eBay and Disney are Motley Fool Stock Advisor recommendations, while Pfizer is an Inside Value pick. Eli Lilly and Dow Chemical are both recommendations in our dividend-focused newsletter, Motley Fool Income Investor. You can try any of our investing services with a free 30-day trial today.

Fool contributor Rich Smith does not own shares of any company named above. He does, however, aspire to one day face the dilemma of needing to sell off $50 million worth of 'em and eke out a living on the interest. The Motley Fool's disclosure policy is a registered Independent and never forgets to vote -- not even in the primaries.