I know a fellow named Eric Singer who runs a mutual fund called the Congressional Effect Fund. His management strategy is simple and direct: buy stocks when Congress recesses and sell when it comes back in session. Why is that? Simple. His market studies show that strategy makes money.
How does it work?
When Congress is in session and Members are jumping in front of cameras talking of regulation, of tax increases, and of other government interference in the economy, they enhance uncertainty and make some investors nervously run for cash, driving down equity prices, for which the only return is future income made unsure by all the Congressional hot air. When they're in recess, home pressing the flesh and milking the contributors, they're not making disturbing news and optimism returns.
So how can a Senator or Congressional committee chairman use this to get rich while doing nothing productive?
The answer is simple. They divest themselves of, or invest in whole market sectors -- not individual stocks -- as those sectors are about to be harangued or left alone by their colleagues in the bully pulpit. Those voices alone drive modest or large changes in the market value of sectors they hold or don't hold, and even modest changes over time can add lots of value to a shifting portfolio. Only they, their bill co-sponsors, and their staffs know when they are about to propose new laws that will change the expectations of profit and loss in whole industries.
Read about how financially well the below-the-radar-slimeballs Jeff and Anne Bingaman did during his so-far twenty-nine year term in office here.
Is that insider trading? No. Not as Congress has defined it!
Is it unethical? No. Not as Congress has defined it!
Why would they define it as criminal or unethical? They don't even think of it as shady....
Until we get the Federal Government out of the economy -- hah! like that's going to happen -- we'll have money raining down on politicians. Could it be that the Federal Government meddles in the economy precisely because politicians like to go about in that perpetual rain? Gosh, ya think?
What the Bingamans did is not like their broker was placing two bets each morning, one for and one against cattle futures going up, and then putting the winning bet in their account and the losing bet in the account of a willing loser at the close of that day's business. That was the Clintons who benefited from that!
