Monday, July 27, 2015 09:29pm
North Adams, MA now: 72 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
LOG IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: Gordon Gekko Should Run for Congress
By: Bill Schmick On: 01:39AM / Saturday May 28, 2011

Did you know that congressmen and senators consistently outperform the stock market year after year? On average, the lower house members beat the market by about 6 percent a year while those of the higher chamber wrack up a 10 percent level of outperformance annually. Now, if you believe that's purely coincidental, well, I have a bridge I can sell you cheap.

Don't take my word for it. Four university researchers from four different schools poured over 16,000 stock buys and sells of 300 congressmen over a 16-year period and found "significant positive abnormal returns." Five years ago, the same team uncovered even better results when investigating the personal stock transactions of Senators.

As a full-time portfolio manager myself, I know managing money is a 24/7 job that requires an enormous amount of research, experience and time. How can our politicians manage to pull out these startling returns year after year, while serving in Washington, running election campaigns and travelling back home to their constituents?

The university report speculates (without forming a conclusion) that the out performance may have something to do with the ability of members of both houses to trade on non-public information or worse, vote their own pocketbooks.

But wait, how can that be? Isn't trading on insider information illegal?

Well, it turns out that our lawmakers are excluded from the same insider trading rules that have nailed so many Wall Street traders, most recently in The Galleon Insider Trading Case.

Just think how much potential for abnormal profits resides in knowing what bills and appropriations will pass and those that won't. If, for example, a huge contract is awarded to one of our defense companies in a non-public appropriations bill, a member of either house could legally buy the stock ahead of time and even tip off friends, family and possibly their largest campaign contributors.

It may also explain how certain big financial institutions, over the last few years, seem to know exactly how bad or good the country's economic data will be prior to public release. That data has been capable of moving markets substantially either up or down over short periods of time.

Given the U.S. government’s massive intervention in the financial system since 2008, the ability to make piles of money from government actions is immense. Is it any wonder that politicians have adroitly avoided changing the rules that govern their own actions, until now?

A bill introduced by Reps. Louise Slaughter, D-N.Y., and Tim Walz, D-Minn., called the STOCK (Stop Trading on Congressional Knowledge) act was reintroduced in March of this year. It was first introduced in 2006 and predictably went nowhere. The act would "prohibit Members of Congress and federal employees from profiting from nonpublic information they obtain via their official positions, and require greater oversight of the growing 'political intelligence' industry."

"As it stands today, neither members of Congress nor their staff can be held legally accountable for making personal investment decisions based on non-public information," explains Congresswomen Slaughter, "Even more troubling is that unregistered firms might be using Congressional non-public information to make financial transactions at the expense of the average investor. The bill places those individuals under insider trading rules and enhanced disclosure rules."

The act would prevent government employees from disclosing non-public information to anyone if they believe it will be used to buy or sell stocks, bonds or commodities futures. It would also require members of Congress and employees to report the purchase, sale or exchange of securities in excess of $1,000 within 30 days.

"This is a matter of equality under the law," said Congressman Walz, "The same standards we have established for Wall Street should apply to Congress. The potential for abuse is obvious and troubling and there is simply no good reason Congress should get to play by a separate set of rules in the stock market."

Readers may agree that there is something hypocritical about politicians and regulators probing hedge funds for suspicious trading while the very same government officials are able to trade on nonpublic information on current and upcoming congressional activity and give it to their friends as well as hedge funds if they choose.

While I applaud the efforts of Walz and Slaughter, I suspect the chances of STOCK's passage is about as remote as my growing hair again.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.



0 Comments
Tags: Congress, SEC, trading      
News Headlines
Adams Lions Spreading Word on Activities, Vision Care
Bopp, Alibozek Lead Team to Narrow Win
Local Author Publishes Book On Northern Berkshire Trains
Clarksburg Cemetery Stones Being Repaired
Brewing Boomed In Pre-Prohibition Pittsfield
Local Lawmakers Push To Override Baker's Budget Vetoes
LaFesta Baseball Exchange Marks 25 Years
Potential Disruption of Mount Greylock Renovation Raises Concerns
Renovated Pittsfield Common In High Demand
North Adams VFW Welcomes Warrior Hike Veterans

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (175)
Independent Investor (237)
Archives:
July 2015 (5)
June 2015 (8)
May 2015 (6)
April 2015 (8)
March 2015 (6)
February 2015 (7)
January 2015 (9)
December 2014 (7)
November 2014 (4)
October 2014 (9)
September 2014 (5)
August 2014 (7)
Tags:
Federal Reserve Retirement Debt Euro Oil Currency Fiscal Cliff Stocks Europe Economy Stimulus Interest Rates Crisis Deficit Greece Metals Fed Taxes Commodities Stock Market Pullback Recession Debt Ceiling Europe Election Rally Congress Japan Housing Jobs Selloff Energy Markets Banks Bailout
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
The Independent Investor: Are You Ready for El Niņo
@theMarket: O Ye of Little Faith
The Independent Investor: When 'No' Means 'Yes'
@theMarket: Global Markets Weather a Wild Week
The Independent Investor: Same-Sex Marriage Good for Business
@the Market: Second Quarter Earnings on Deck
The Independent Investor: Tiny Houses Gain Appeal
@theMarket: From Russia With love
The Independent Investor: Robo-Advisers Have Landed
@theMarket: Don't Try to Trade This Market


Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
Gather-In Festival 2015
The annual Gather-In, a celebration of Pittsfield's...
'Romeo & Juliet' @ Pittsfield...
Free performances of 'Romeo & Juliet' run through Aug. 2 at...
LaFesta Baseball 2015
The LaFesta Baseball Exchange marked its 25th anniversary...
Bulldogs Win Cal Ripken State...
The Lanesborough Bulldogs used a big base-running play to...
Spark @ Naumkeag
Berkshire Creative held its July Spark mixer at the...
LL: Pittsfield vs Longmeadow
The 10- and 11-year-old Pittsfield National Little League...
Pittsfield Polish Picnic
St. Joseph's Church in Pittsfield hosted the annual Polish...
Pittsfield Babe Ruth WMass...
The Pittsfield Babe Ruth 15-year-old All-Stars beat Holden...
Shire City Sessions July 2015
The inaugural Shire City Sessions drew a crowd to hear US...
3rd Thursday June 2015
Pittsfield's 3rd Thursday monthly street fair featured...
Cheshire Block Party
Cheshire's first Block Party featured live music, food,...
Berkshire Museum Science...
The Berkshire Museum in Pittsfield hosted a free evening of...
Pittsfield Rally Against...
Residents gathered at Linden Street to call for community...
Eagle Street Beach Party 2015
A few shots from the annual beach party Friday night in...
Live On The Lake Concert
Burbank Park on Onota Lake in Pittsfield. The band Who Are...
Park Street Fair (Hi-Jinks...
Park St. was closed off to traffic Monday night for the...
Gather-In Festival 2015
The annual Gather-In, a celebration of Pittsfield's...
'Romeo & Juliet' @ Pittsfield...
Free performances of 'Romeo & Juliet' run through Aug. 2 at...
LaFesta Baseball 2015
The LaFesta Baseball Exchange marked its 25th anniversary...
Bulldogs Win Cal Ripken State...
The Lanesborough Bulldogs used a big base-running play to...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings |
Advertise | Recommend This Page | Help Contact Us
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2012 Boxcar Media LLC - All rights reserved

Privacy Policy| User Agreement