Shares of Sharper Image (NASDAQ: SHRP) are set to open down more than 60% following the company's announcement that it has filed for Chapter 11 bankruptcy protection. The press release was terse, adding that the company will "continue to conduct business as usual while it devotes renewed efforts to resolve its operational and liquidity problems and develops a reorganization plan."

Just last week the company announced that it had hired a "turnaround expert" as CEO, but apparently it was too late to salvage anything for the company's stockholders.

Back in October, shares of Sharper Image surged more than 45% in 1 day after 6 executives bought a total of $400 thousand worth of stock. The lesson for investors is clear: when insider buying is clearly done to try to send a message that the company's insiders are confident, don't buy the hope. Look for sustained, meaningful buying, not publicity stunts if you're going to invest based on what the insiders are doing.

In the bankruptcy filing, Sharper Image claimed $251.5 million in assets and $199 million in debt, with cash on hand of just $700,000.

MAJOR PAPERS:

• The Wall Street Journal reported that KKR Financial Holdings LLC (NYSE: KFN), a unit of Kohlberg Kravis Roberts, revived concerns of a credit crunch after it asked for a restructuring of billions of dollars in short-term debt.

OTHER PAPERS:

• According to sources, the Chicago Tribune reported that Deutsche Lufthansa AG (OTC: DLAKY) could look to take an equity stake in a merger between Continental Airlines Inc (NYSE: CAL) and UAL Corporation's (NASDAQ: UAUA) United Airlines.
• The Associated Press reported that the pilots' unions of Delta Air Lines Inc (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) are unable to agree on how seniority for the companies' pilots would work under a combined carrier. The impasse puts the deal in "serious jeopardy," inside sources reported.

WEB SITES:

• Electronics retailer Sharper Image Corporation (NASDAQ: SHRP) has filed for bankruptcy, citing declining sales and profitability, Bloomberg reported.

Sharper Image (NASDAQ: SHRP) is down almost 31% on news that it will file Chapter 11.

Nutrisystems (NASDAQ: NTRI) is off 23% on poor earnings and a weak outlook.

Hewlett-Packard (NYSE: HPQ) is up over 4% on a strong quarter.

AT&T (NYSE: T) is trading off almost 3% on analyst downgrades.

Shares may trade differently in the premarket than they do in the regular session.

Douglas A. McIntyre is an editor at 247wallst.com.

Back in October, shares of Sharper Image (NASDAQ: SHRP) surged a staggering 45.5% in one day after six executives bought a total of $400,000 worth of the company's stock. At the time, I said that investors weren't too sharp for giving the stock such a run-up on the news:

They added about $13 million to the company's market cap -- an amazing return on a total of $400,000 worth of buys by insiders -- a "creation of value" equaling a return of about 3,200%. Warren Buffett, eat your heart out!

Folks, here's the thing: Insider trading is illegal. If you think that this "vote of confidence" is indicative of anything material, then you just bought stock in a company where 6 executives, including the Chairman and the CEO, should be under SEC investigation.

Well now that CEO who was buying, Steven Lightman, has been pushed out in favor of Robert Conway of Conway, Del Genio, Gries & Co, LLC. According to the press release, "Mr. Conway has over 25 years of experience advising companies on financial and operational issues as a banker, consultant and senior executive officer. The Company also retained a team of specialists from Conway, Del Genio, Gries & Co., LLC to assist Mr. Conway in addressing business improvements and help implement necessary operational changes."

With numerous retail stocks hitting multi-year lows and daily headlines about weak consumer spending, something is interesting is happening: The people who should know the most about these companies, the insiders, are buying their own stock at an unprecedented clip, reports Bloomberg.

Executives at Limited Brands (NYSE: LTD) and Dillards (NYSE: DDS) have been scooping up their own beaten-down stock. Executives at Foot Locker (NYSE: FL) and Chico's (NYSE: CHS) have also been significant buyers.

Is this a bullish signal? Perhaps. After all, it's been said that while CEOs sell their shares for all kinds of reasons, they only buy stock for one reason: they think it's going up. That's a pretty good maxim, but it can lead you astray in some cases.

Shares of Sharper Image Corporation (NASDAQ: SHRP) soared 45.5% yesterday. Did the company report an amazing quarter? Nope. Did it receive a buyout offer? Nah. So what drove it up? 6 executives bought a total of $400,000 worth of company stock. This was seen as a vote of confidence after the company's stock price has spent the past few years tanking on declining sales, huge losses, and a massive class-action lawsuit brought by consumers who purchase the Ionic Breeze.

BusinessWeek takes an excellent look at just how much uncertainty there is surrounding the company.

But back to yesterday's big gains: They added about $13 million to the company's market cap -- an amazing return on a total of $400,000 worth of buys by insiders -- a "creation of value" equaling a return of about 3,200%. Warren Buffett, eat your heart out!

Folks, here's the thing: Insider trading is illegal. If you think that this "vote of confidence" is indicative of anything material, then you just bought stock in a company where 6 executives, including the Chairman and the CEO, should be under SEC investigation.

And besides, who wouldn't buy stock when the act of buying would drive up the share price 45%?

It's entirely possible that Sharper Image is a good investment. But a few executives buying an average of less than $70,000 worth of stock each isn't any reason to think that.

No one would be particularly surprised that Chinese stocks traded on U.S. exchanges did well in the third quarter. The Shanghai Composite has doubled so far this year, and many stocks like Baidu (NASDAQ: BIDU), the China search engine, have made stunning gains.

In the third quarter, China Eastern Airlines (NYSE: CEA) moved up 112%. China Finance Online (NASDAQ: JRJC) ran up 282%. It is hard to imagine that the Chinese market can keep up this momentum, but analysts say that every quarter.

No one would find it odd that home builders and mortgage lenders were among the big losers in the quarter. Beazer Homes (NYSE: BZH) fell 66% to $8.25. Fremont General (NYSE: FMT), which has a subprime lending operation, fell 63.4% to $3.90. Mortgage lender Novastar Financial (NYSE: NFI) was down 68% to $8.87.

As retail sales fell, specialty store operations took a pounding. Gottschalks (NYSE: GOT) fell 63.5% to $4.34. And, Sharper Image (NASDAQ: SHRP) dropped 63.7% to $4.13.

The toughest part of the quarter is the realization the retail, housing, and mortgage shares could actually go lower during the October to December period.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Shares of Sharper Image (NASDAQ: SHRP) are down more than 20% today as bankruptcy looms due to lawsuits alleging that the company's air purifiers are ineffective.

According to the Daily Business Review, "Financial experts for retailer Sharper Image are expected to testify today that the company could be pushed into bankruptcy if it is forced to pay up to $900 million to settle a class action lawsuit being pushed by 27 state attorneys general and several plaintiffs attorneys."

It doesn't really take a financial expert to tell that Sharper Image doesn't have $900 million to settle a lawsuit. The company has been reporting massive losses in recent quarters, and shareholder's equity has dwindled to around $100 million.

The lawsuit alleges that the company's wildly popular Ionic Breeze air purifiers don't do what they say they do and, in many cases, can exacerbate health problems.

In addition to the company's financial problems, the negative press surrounding the lawsuits has very likely eliminated much of the value of the Sharper Image brand.

Sharper Image might look cheap with its market cap of $65 million. But there's a good chance that it's headed to zero.