When Lawmakers Become Moneymakers, Part I
Reflecting on the Titans of Investment: Who Do You Envision?
Perhaps Warren Buffett comes to mind, or John Paulson, or even Michael Burry, famed for his role in 'The Big Short.' However, there's an unexpected addition to this list, one that arguably doesn't belong, yet consistently appears: the U.S. Congress.
Indeed, 2023 was a prosperous year for the markets, with the S&P 500, a barometer for U.S. equities, climbing by 24.8%. Yet, this impressive performance pales in comparison to the financial achievements of certain Congressional members.
Remarkably, about one-third of Congress outperformed the market, with some members witnessing their portfolio values surge by over 50%, and a few achieving even more remarkable gains. (Specific examples will follow shortly.)
The topic of prohibiting Congress members from engaging in stock trading and ownership has garnered attention and bipartisan support in recent years.
The challenge, however, lies in convincing politicians to relinquish their stock trading privileges while serving in Congress.
I'm not overly optimistic about seeing this change anytime soon. My focus, instead, is on tracing the flow of this considerable wealth.
Thus, in the upcoming series of essays, we'll explore the investment tendencies of Congress members – examining their profits, preferred sectors, and chosen companies from the last year.
I'll guide you on how to navigate the market with the acumen of a seasoned politician.
Congress Crushed the Market in 2023
Since the inception of Teeka Tiwari’s Daily in 2021, I've dedicated myself to monitoring the investment activities of Congress members as featured in our segments. The premise is straightforward: by understanding the investment choices of America's elite, you too can align your portfolio to potentially share in their financial successes.
We're now set to peel back the layers on the investment strategies of Congress for this year's analysis. To kick things off, we've compiled a roster of the Top 10 Congressional members whose investments outshone the market's performance in 2023, showcasing their individual gains.
Below is a chart detailing our findings...
The chart prominently features the most successful investors on its right side, where you'll notice Representative Brian Higgins leading the pack among Congress members with an astonishing 239% return on his investments. Following him, Representative Mark Green, who chairs the Homeland Security Committee, secured a 122% return. Representative Garret Graves, known for his close ties with former House Speaker Kevin McCarthy, also made a notable mark with a 108% return.
A well-recognized figure, former House Speaker Nancy Pelosi, has once again secured her position within the Top 10 this year. In past analyses, we've highlighted how Pelosi, via her husband Paul, emerged as Congress's most proficient trader, outshining the market in both 2020 and 2021. Her investment acumen in 2021 arguably positioned her among the most successful Washington insider investors of all time.
However, Pelosi's reign saw a setback in 2022 when her portfolio's value plummeted by nearly 20%, causing her to miss the Top 10. Yet, the tide turned favorably for her in the last year, with her investments yielding a 66% return, significantly outperforming the S&P 500's advancement.
A significant contributor to Pelosi's impressive performance last year was the stock market sensation, Nvidia (NVDA). Securities filings revealed that the Pelosis invested in $2 million worth of Nvidia call options in late 2023, a strategic move that substantially boosted her annual financial gains. However, Nvidia wasn't her only lucrative tech investment; she also benefited from substantial holdings in Microsoft and Apple, each of which appreciated by approximately 55% over the year.
Pelosi's district's proximity to Silicon Valley is no mere coincidence with her investment success, especially as tech stocks experienced a surge, fueled by the artificial intelligence revolution and the Federal Reserve's decision to halt interest rate hikes. Yet, this scenario unveils a concerning issue...
When Lawmakers Become Moneymakers
The prowess of Congress members extends beyond mere trading and securing hefty profits; they exhibit a remarkable knack for dodging financial downturns as well. The year 2023 provided ample evidence, particularly during the banking crisis, showcasing their acumen.
Numerous transactions, executed with impeccable timing by members who serve on committees with oversight of the financial sector, came to light. For instance, Representative Lois Frankel executed a sale of bank stocks just before their most significant declines. Notably, she offloaded her First Republic Bank shares on March 16, narrowly escaping the subsequent 80% plunge as the bank faced liquidation.
In another strategic move, Representative Nicole Malliotakis acquired shares of New York Community Bancorp (NYCB) on March 17. Shortly after, NYCB revealed its acquisition of Signature Bank, propelling its stock value up by 30%.
Such instances highlight a concerning issue: the potential conflict of interest when lawmakers engage in trading within industries directly affected by their legislative roles. This situation underscores a fundamental flaw in our governance system, echoing a sentiment I've shared repeatedly. While the stock market is open to all, not everyone has a hand in crafting legislation, engaging with corporate lobbyists, or allocating taxpayer funds.
Fortunately, there's a silver lining. Observers need not remain passive as these events unfold. By tracking the investment trends of these political figures, individuals outside the political sphere can identify lucrative opportunities.
In our Part II segment, we'll delve deeper into the specific sectors and companies that have caught the attention of Congress in their investment strategies. I'll guide you through the process of trading with the same strategic insight as a seasoned politician.
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