In this case was there any "insider information", that could have actually helped her decide in late December that Nvidia call options were a good bet?
I don't think anything changed in regulation, it was just the rise and boom of AI
There is a large govt program / collaboration announced with MS, Nvidia, and others it is very likely these talks started late last year. That info that it was in the pipe is enough to trade on.
This is not an anomaly. Pelosi and many others in congress have consistently out performed even the best professional traders over a long period of time. Its not just bc of the AI boom.
To think that members of congress do not trade on insider info is naive.
Totally agree with all of this. I just feel that this is a bad example which is likely not related to insider trading so it weakens the case made in the article.
"Insider trading" refers to trading on confidential information that was entrusted to employees of a company ("insiders"). Pelosi has access to $10B spy satellite images, which is very different.
> Can you share specific claims that seem relevant?
I'll admit I'm conflicted here. On one hand, yes, I can and I'd encourage you to just start with looking at the figures since figures say a lot. There's actually not much text and most of the page is figures. But on the other hand, I think there's enough nuance to what's going on that oversimplification can result in a inappropriate dismissal of any claims. Not being a domain expert will only exacerbate any failures to communicate. Certainly the devil is in the details here. FWIW, they do have a tldr.
> If 33% beat the SPY, then twice as many congress members underperformed.
This being a perfect example. The former does not imply the latter. Nor would the latter imply that there wasn't foul play.
First off, there is a third option: matching the SPY.
Second, beating the SPY is a proxy metric which is typically used to help identify those that have performed suspiciously well, not those who performed average. It is actually difficult to beat the market, and more so to do it consistently[0]. So I must insist that you use the metric as a guide, not a filter or target.
Third: There are many ways to under-perform compared to the market, including not investing. I mention that specific mechanism as one thing the report shows is that there are far fewer filings by Republicans so this is necessary context to properly evaluate some fact like "Democrats beat their Republican colleagues by a massive margin." (Dems ~= 2x Reps in transactions) We must also consider that democrats have fewer members and that >50% of each party's transactions originate from a single member of that party (Ro Khanna (D) and Michael McCaul (R)). There are also multiple vehicles for wealth generation so while stocks should be of interest, it shouldn't be used as the only evidence of manipulation and/or foul play.
Fourth: consider what information is marginalized by the metrics. Pareto distribution should be expected, and it is even observed. You must therefore be considerate of aggregates as variance is high (difference between mean and median is large).
But I will give you some TLDRs. The report goes into nuance because the claim of insider trading is reliant upon details:
- Top 10 returns, in order are: Brian Higgins (D-NY: 239%), Mark Green (R-TN: 122%), Garret Graves (R-LA: 108%), David Rouzer (R-NC: 106%), Seth Moullton (D-MA: 80%), Ron Wyden (D-OR: 79%), John Rutherford (R-FL: 69%), Richard Blumenthal (D-CT: 68%), Nancy Pelosi (D-CA: 66%), Peter Sessions (R-TX: 63%). SPY returns ~=25%. 32 members beat SPY (50/50 split by party) (Note: Higgins holds $100k in NVDA, purchase was from 2021, no sales have been recorded)
- 19 congressional members had negative returns, 13 being Republicans.
- Kevin Hern (R-OK) stands the most to gain via stocks that correlate with war. 4 of the top 5 most incentivized are Republicans, the other is Pelosi in 4th. Follows power law distribution.
- They have a breakdown by transactions that align with members that serve on relevant committees (this is where detail matters and stronger evidence of foul play is drawn from).
I would suggest reading or at least giving a quick read rather than relying on me to accurately summarize it for you. Especially if you think there is a bias. I'm sure you can carve out 15-30 minutes if this is actually a topic you care about. If not, I might suggest ensuring your confidence in your existing model appropriately aligns with your domain expertise and time dedicated to becoming informed on the subject.
> This being a perfect example. The former does not imply the latter. Nor would the latter imply that there wasn't foul play.
It would imply literally nothing of interest and is an absurd claim to lead with. Congress beat the market absolutely doesn’t follow from 1/3 of them beating the market. It would be strange if that number were considerably lower.
> First off, there is a third option: matching the SPY.
realistically only possible if there’s a healthy margin to be qualified as “beating” it. Is that considered here? Idk. I’m guessing not.
> Second, beating the SPY is a proxy metric which is typically used to help identify those that have performed suspiciously well, not those who performed average. It is actually difficult to beat the market, and more so to do it consistently[0]. So I must insist that you use the metric as a guide, not a filter or target.
No, that’s a stupid claim. It’s incredibly easy to beat the market in a single year by chance. Again for unqualified definitions of “beating it”. It is extremely likely that a sizeable proportion of any investing group will beat the market in a given year. You are correct about multiple successive years.
> Third: There are many ways to under-perform compared to the market, including not investing. I mention that specific mechanism as one thing the report shows is that there are far fewer filings by Republicans so this is necessary context to properly evaluate some fact like "Democrats beat their Republican colleagues by a massive margin." (Dems ~= 2x Reps in transactions) We must also consider that democrats have fewer members and that >50% of each party's transactions originate from a single member of that party (Ro Khanna (D) and Michael McCaul (R)). There are also multiple vehicles for wealth generation so while stocks should be of interest, it shouldn't be used as the only evidence of manipulation and/or foul play.
Incorrect. The metric being discussed only included trading members.
> Fourth: consider what information is marginalized by the metrics. Pareto distribution should be expected, and it is even observed. You must therefore be considerate of aggregates as variance is high (difference between mean and median is large).
I don’t care man. If less than a third are doing better than the market then there’s not a lot of evidence to suggest they’re using info to beat the market. Because they’re not beating the market on average. The total return was within a few tenths of a percent of the SPY index.
It’s a dumb claim. Is there insider trading? Maybe. Idk.
But regardless. Do they on average beat the market? That is definitely not supported by the data. Fee free to run a t test.
> Congress beat the market absolutely doesn’t follow from 1/3 of them beating the market. It would be strange if that number were considerably lower.
This is why I stressed considering what is marginalized out. I'll use an extreme example. Let A = [1,1,1,1,50000] and B = [100,100,100,100,100]. Is A > B? Mean(A) = 10k, Mean(B) = 100. Median(A) = 1, Median(B) = 100. Similarly Congress can, on average, beat the market while 2/3rds of them do not. I hope we see that the math even allows for us to approach 0% of members beating the market while an average value can.
I am guessing the reason you disagree is likely one of two false assumptions: you've confused mean and median, or you've assumed performance is reasonably homogeneous (i.e. low variance).
> No, that’s a stupid claim. It’s incredibly easy to beat the market in a single year by chance.
I am certain you know that "difficulty" is about intentional skill and not a reference to an act of god. You have removed any doubt that a conversation can happen in good faith.
> I don’t care man.
Clearly you do. But I actually don't. I don't wrestle with pigs.
> This is why I stressed considering what is marginalized out. I'll use an extreme example. Let A = [1,1,1,1,50000] and B = [100,100,100,100,100]. Is A > B? Mean(A) = 10k, Mean(B) = 100. Median(A) = 1, Median(B) = 100. Similarly Congress can, on average, beat the market while 2/3rds of them do not. I hope we see that the math even allows for us to approach 0% of members beating the market while an average value can.
That’s a wildly different claim though.
If you’re saying one person beat the market by a suspicious amount, you should say that. You should not say that a large group of people beat the market. The large group of people on average did not. Using the mean to describe a group dynamic when your mean is dominated by a single outlier is lying with statistics. I am a data scientist fwiw.
> I am certain you know that "difficulty" is about intentional skill and not a reference to an act of god. You have removed any doubt that a conversation can happen in good faith.
I don’t care about your semantic argument. It is very easy to beat the sp500 on a given year by random chance. I have done it for the last six years by a negligible amount. Do I have any particular insight? No. I’m 95% dumped in SPY and my 5% did a bit better.
It is only beating it repeatedly and by a meaningful amount and net of any fees related to funds or investment managers that are hard. SPY is not a magic, difficult to beat goal. It’s simply a solid, average performing strat that takes zero effort. The reason most funds underperform it is because they do zany high risk stuff. If your portfolio is comprised of largely normal investments in common companies you’ll on average match the SPY with about half of your years beating it.
> Clearly you do. But I actually don't. I don't wrestle with pigs.
I really don’t. I don’t actually think politicians should be allowed to trade stocks at all for appearances alone. I just don’t like bad stats.
> Recent news reports and a Department of Justice investigation highlight the potential for insider informed trading by U.S. Senators and Members of the House of Representatives, an activity which the STOCK Act of 2012 was intended to deter. We use a new and comprehensive data set of these officials’ trades of public equities from January 2012-December 2020. We find no evidence of superior investment performance whether we look in aggregate or at Senators specifically accused of informed trading. Over a six-month horizon, stocks bought by House Members underperform on average by 26 basis points, while stocks sold underperform by 11 basis points. Even at the 95th and 99th percentiles of ex-post stock returns, House and Senator stock returns are consistent with random stock picking. Our methods cannot rule out the existence of some insider trades that are masked by the means, masked by poor ex-post performance or that took place in earlier years.
Unusual Whales is a very famous site that tracks politicians
Or do you need a citation that members of congress trading based on knowledge they have is not legally defined as insider trading? Because that's also easy to Google fwiw
I think there's a context gap here. They are referring to congress on average. But the median congress member does not beat SPY. The distribution is highly heterogeneous. Even just looking at number of transactions, half of each party's transactions are performed by a single member of that party.
So to translate:
> Congress consistently outperforms professional traders
to
> The average performance of members of congress is higher than that of professional traders.
This does not mean a specific member outperforms a specific trader. Though there are specific members who consistently have a performance level that is higher than top traders. Which should beg the question of why these people have such high "skill" levels. This also does not mean there aren't congressional members who lost money in the market (there were 19 actually).
Her husband runs an investment firm so the information here was probably simply detailed analysis, down to the estimated orders per customer and the details of supply chain costs and margins. So not at all unexpected and no need for inside information.
That's one thing that people don't seem to get when they look at stocks at a superficial level. Nvidia's rise was entirely expected. A quote among many - "We’re shocked by Nvidia’s pricing power on AI chips that we see driving earnings upside, higher valuation" - Apr 2023 when the price was less than half it is now and that statement was 100% correct yet the thread i'll link has a tone of conspiracy theories that it's a lie. https://old.reddit.com/r/stocks/comments/12rbhs8/nvidia_stoc...
In fact in superficial analysis land (aka retail investors making trades on past history and PE alone) there were posts on reddit that Nvidia at half the current price was a great shorting opportunity as their PE was high. https://www.reddit.com/r/stocks/comments/12c6sbx/nvidia_nvda...
I still can't believe just how bad the retail investor community is. They don't go into any detail on companies. No view of the incoming orders and costs. They don't look at the long standing declines in userbase (there's non stop "Paypal is undervalued" threads on Reddit right now despite the constant user decline), they do superficial analysis and make poor decisions and when they see someone do well on investing through diligence they scream conspiracy.
So Nancy Pelosi, and more specifically her investment banker husband did well on this trade? No shit. They probably did some level of homework.
As Speaker of the House and 2nd in line to the presidency, she had access to more classified information than almost anyone on the planet. These sorts of officials should only be invested in blind trusts or diversified index funds, as indeed the president and vice president usually are.
I'm not sure that solves the issue so much as funnels the direction of manipulation. Supposing a bad actor is trying to generate wealth but under such constraints, all they need to do is write policy in favor of the companies that already dominate. Such as favoring Apple, Microsoft, Google, and even Nvidia. Could even be done if one flattens the distribution of funds one would typically find in an index fund. See VOO for example, and play the imaginary game where you are a bad actor who wants to maximize your wealth but all your investments are locked up in VOO. It's important to play this game (run that simulation).
I recognize that (actually made a longer comment in main thread), and I'm not convinced that's strictly in the public's interest.
You are essentially placing a filter of "you must be this rich to bribe politicians." This could "counterintuitively" empower the already powerful even further, as you decrease their competition.
To perform market capture they must capture a critical mass of politicians (we'll say mass varies by each politician's power). While there's already an implicit filter for those high mass politicians (fat cats ;) -- since you accumulate mass quickly -- the system's robustness is through the distribution of power among politicians. The whole political structure is designed to make it difficult to capture enough mass, and this is identical to the argument against authoritarian systems. So the constraining effectively reduces competition and can actually make mass accumulation cheaper and easier for companies that have the highest potential (and incentives) for abuse.
So unless you got a counter argument that can convince me that this is of no concern, then I'm sticking to my original position.
I do not believe your comment is in good faith and thus is violating community standards.
But yes, people that are good at evading the police are in fact able to "freely" commit murder. I'm not sure why you thought this would be be a convincing retort considering it is true by definition.[0] You do in fact have to be captured by police and subsequently prosecuted. I am glad that you do understand the most basic operating principle of the judicial system: you cannot imprison those who are not in your custody. (A bit tautological, don't you think?)
[0] Assuming "freely" means "able to commit crime without judicial repercussions". I assume you don't mean "freely" in reference to having capacity as such a definition wouldn't be conditioned on legality.
If you weren't aware, murder already is illegal. If you also weren't aware, some people get away with murder.
Serial killers do exist. There are, in fact, serial killers who have never been caught. Several even famous to California.
Do you not know who OJ Simpson is?
Do we seriously have to drop examples of people who got away with crimes because they were good at not getting caught? Isn't that why Frank Abagnale is famous? You seriously think we've caught everyone? And instantaneously?
Of course she did, she's a genius investor! I know a number of hedge funds that would hire her in a heartbeat. What other explanation could there be for her consistently beating the market, year after year?
Nvdia is the wrong example to use against Pelosi. Nvdia rise is purely due to the AI moment. No Congress people had any "inside information" about Nvdia that helped to make this bet. In fact, the inside information about banning Nvdia chips to China would have encouraged them to make the opposite bet
There are two reasons to oppose congress people trading
a) They may have insider information (This is highly over-rated). Congress typically don't have any specific insider information that is not available to sophisticated traders. The laws that they pass are signaled months or weeks ahead.
b) Conflict of interest. This is the more serious one and the reason why it should be banned. Congress people obviously won't vote for laws that would hurt their individual stock portfolio
Is it though? I mean consider their pension, their health benefits, the fact that they probably spend very little of that salary on their daily needs. Most things for them are paid for, so that's nearly all take home money.
It is honestly low for the role. It's actually a worldwide problem that we don't pay politicians enough and as such we discourage people going into politics for reasons other than pure narcissism.
Senior engineers, senior managers and above all make that sort of money but without the horrible lifestyle of politics. Would you trade a Bay Area engineering career for that? I wouldn't. Yet whenever it's even suggested to raise politician wages for the sake of those politicians who aren't already billionaires there's uproar.
Let me be blunt. You don't get talent without paying for it. The USA's mix of political backgrounds has become a monoculture of wealthy lawyers and investment bankers. We don't have enough representation from other careers in politics and it'll ruin us if we don't fix it, namely by increasing the salary of a highly stressful career to ensure we encourage the best and brightest to sign up for it.
> I always want to say to people who want to be rich and famous: 'try being rich first'. See if that doesn't cover most of it. There's not much downside to being rich, other than paying taxes and having your relatives ask you for money. But when you become famous, you end up with a 24-hour job.
In Pelosi’s case, that job includes the possibility of a lunatic attacking your husband with a hammer. You would have to pay me very well indeed to put up with that kind of risk, esp. if you need to hire private security…
>But what if politics wasn’t a career? What if there was no profit motive? What type of people would it attract?
The only kind of people I can think of willing to put up with the negatives of high political office (which include a non-zero chance of conspiracies to assassinate you) for no or little pay would be zealots and ideologues, likely already independently wealthy.
One person’s zealot or ideologue is another’s heroic activist. Rather than making politics a career what if people were only involved long enough to make the specific change they wanted to see?
Having every politician only able to execute specific short term goals would make long-term planning and complex policy goals impossible to achieve. Most politicians would simply undo their predecessor's policies in favor of their own, or else accomplish nothing due to gridlock. It would wind up being the political version of Twitch Plays Pokemon.
That sounds reasonable and you might even be right. But I’m not certain.
The tech sector is famously productive, arguably even too productive. But average time in a specific job is similar to congressional terms. If people with specific expertise and goals in mind are in congress they could compromise to achieve those goals just like we do in the private sector.
I really doubt that she's actively involved anymore. Her family's overall portfolio is worth 100s of millions, so she likely has her money parked in some family office managing her money for her. NVDA is one of the hottest stocks over the last few years. No doubt they're going to be making some bets here. Making 500k is nothing. What's scary is the amount she managed to make during her overall career.
Private equity groups have been bodyslammed by the SEC into regulations that require "governance" oversights for all personal, active investments to ensure they're not in conflict with their investors
So EG - making a private investment or specific stock investment - has to be precleared by a compliance officer for conflicts
And these are backed up by SEC "teeth" if compliance officer doesn't enforce that policy rigorously
It adds beaurocracy, but it's straightforward enough that it's not a major impediment
Like "Oh hey you're on a committee that is going to determine AI policy? Seems like probably that's a conflict."
Nancy could still make the trade by investing in a non-controlled investment, or tech-heavy index fund.
But probably not just write a check into NVIDIA.
While private industry is full of shenanigans I remain perplexed that gov't insiders - who don't just profit from these trades - but can actually influence policy - have virtually no hoops other than "after the fact" reporting
(edit - actually I'm not perplexed at all, I'm just depressed about the reality of gov't accountability)
Pelosi is famous for her trading activity, but I always wonder why there isn't _more_ of this. Is congress constrained by their own sense of propriety, or have they reached the theoretical maximum alpha from their insider knowledge?
> Congress beat the market, once again. Of 100 trading members, 33% beat SPY with their portfolios.
So 2/3 of congressional traders underperform SPY.
This also means the image in the tweet only shows top performers.
From later in the analysis:
> Note that there are a total of 535 Members of Congress, with 100 in the Senate and 435 in the House.
If congress has such useful information for trading why is only 1/5th of congress trading? This 20% is roughly on par with the 15% of the American public directly owning stock.
Maybe they don’t have actionable information. Based on what I have seen here there’s no evidence of insider trading in congress. Of course absence of evidence is not evidence of absence.
Congress looks a lot like the general population by these numbers. About 20% are active in the market and of that 20% most of them don’t beat it.
I’m less concerned with them having non-public information and more concerned with conflicts of interest. If they own Chevron will they still be inclined to pass that EV subsidy?
I mean to be clear, didn't everyone who owns a S&P 500 portfolio basically make the same on a percentage of portfolio terms? (Pelosi has family wealth in the $100M range, so scale accordingly)
Honestly, simply paying attention to what is happening in the AI space should have been all the info needed to see where things are going. This info was generally available when Nancy made her transactions. AI is about to shock the world, is news that anyone paying attention has known for a while. Who sells the hardware all this AI runs on? Invest in the company selling the shovels for the AI gold rush. Just common sense investing.
Considering that Nvidia stock is up so much, and so many people are making so much on the its growth ... the fact she only made $500k tells me someone wasn't trying doing their job correctly.
I can't believe people in this thread seem to be unironically defending / denying that Pelosi and her husband are front running trades based on her insider information.
Particularly during the pandemic it was just painfully obvious that she was trading based on information that was not available to the public.
Her and particularly her husbands returns are just straight improbable without some explainable edge, and the only logical explanation I have seen is her political position.
I like there being a lot of scrutiny on trades made by Congresspeople. Unless there's some specific reason to call this one into question, I'm not sure how this is news. It didn't require insider information to know that NVIDIA, the maker of the hardware everybody needs for everything in the world right now, would be going up.
These types of things always make me think about solutions, as I'm sure many of you do, but I'm not sure I know an adequate one.
Common to suggest to just bar trading, which would make political jobs a major disadvantage. So others suggest only allowing for a third party managed fund that would be index focused. This sounds good at surface value, but when you go look at indices like VOO (S&P 500 based) you find, unsurprisingly, that Apple, Microsoft, Amazon, Nvidia, Google, Meta, Tesla, B&H, JPMC dominate. Any index fund will tend to be like this, unless we created some very special fund to track the whole economy (I think there could be something to this one fwiw, but construction would need to be done with extreme care). The reason this can be problematic is that they could still grow their wealth by targeting policies at the top companies. All you'd need is to know what the index composition is. I mean should be obvious since Nvidia is in VOO.
The other common suggestions are salary based.
Some say to move it up to disincentivize them. Can make sense, as most people do not care much when their earnings reach a certain point. I'm sure that includes many here, especially given that the a large part of the idea behind Google/Big Tech perks is because increasing salary is less attractive for people making $150k+ cash (prior to equity). But politics naturally attracts people who are power seeking, and well... we still see Elon giving a shit about how wealthy he is when reality is there's very little his net worth (~$200bn, current #2 richest) gets him that Peter Thiel can't also get (~$6bn, rank #451) (nuance needed about liquidity and other aspects as money doesn't work like it does for normal people in this wealth range, but claim is generally true). I mean Elon could create multiple CERNs that could run indefinitely through returns on investments. So there's good reason to believe that the wealth incentive model that works on the average person doesn't work well on politicians.
So there's also the argument to decrease salaries, do disincentivize power seekers from looking to politics as a way to obtain power and wealth. Idea here is to only attract people who are passionate about the job, like teachers (before teachers get burnout). But the nature of the job will always include power and Goodhart's Law is always in effect, so it'll be unsurprising that people can exploit the rulesets (or in this case, they make their own) and can channel money (to combine with their power) through third parties, which sets the stage for market capture.
So others suggest term limits. There's also pros and cons to each decision here. Some people also suggest changing the number of politicians: fewer to centralize power, which can streamline many processes but that makes us vulnerable to autocratic takeover as takeover is dependent on the collection of keys to power; others say to increase the number, in an effort to further decentralize the system and make it difficult to capture enough keys, but this can lead to very slow moving and ineffective governments as well as reduce dependence on experts as the point of representative powers is to act as smoothing functions to wisdom of the crowds. Incidentally the highly distributed case doesn't prevent capture, but rather towards Plutocratic settings instead of Autocratic as it is unlikely that a single individual can more or less perform a 51% attack (to put it in less politic, more tech nerd speak). So one can argue that it is easier to replace a few keys when things go wrong, in favor of centralization, or increased robustness, in favor of distribution.
There's plenty more suggestions and I still find a lot of them lacking. Most of this is even independent of such things like Capitalism and Socialism that people often conflate as solutions. The matter of the fact is that this is an incredibly complex solution space and I feel pretty confident saying that there is no global optima. And if we...
75 comments
[ 4.6 ms ] story [ 122 ms ] threadI don't think anything changed in regulation, it was just the rise and boom of AI
To think that members of congress do not trade on insider info is naive.
> Congress beat the market, once again. Of 100 trading members, 33% beat SPY with their portfolios.
This does not inspire a lot of confidence in their findings. If 33% beat the SPY, then twice as many congress members underperformed.
Can you share specific claims that seem relevant?
I'll admit I'm conflicted here. On one hand, yes, I can and I'd encourage you to just start with looking at the figures since figures say a lot. There's actually not much text and most of the page is figures. But on the other hand, I think there's enough nuance to what's going on that oversimplification can result in a inappropriate dismissal of any claims. Not being a domain expert will only exacerbate any failures to communicate. Certainly the devil is in the details here. FWIW, they do have a tldr.
> If 33% beat the SPY, then twice as many congress members underperformed.
This being a perfect example. The former does not imply the latter. Nor would the latter imply that there wasn't foul play.
First off, there is a third option: matching the SPY.
Second, beating the SPY is a proxy metric which is typically used to help identify those that have performed suspiciously well, not those who performed average. It is actually difficult to beat the market, and more so to do it consistently[0]. So I must insist that you use the metric as a guide, not a filter or target.
Third: There are many ways to under-perform compared to the market, including not investing. I mention that specific mechanism as one thing the report shows is that there are far fewer filings by Republicans so this is necessary context to properly evaluate some fact like "Democrats beat their Republican colleagues by a massive margin." (Dems ~= 2x Reps in transactions) We must also consider that democrats have fewer members and that >50% of each party's transactions originate from a single member of that party (Ro Khanna (D) and Michael McCaul (R)). There are also multiple vehicles for wealth generation so while stocks should be of interest, it shouldn't be used as the only evidence of manipulation and/or foul play.
Fourth: consider what information is marginalized by the metrics. Pareto distribution should be expected, and it is even observed. You must therefore be considerate of aggregates as variance is high (difference between mean and median is large).
But I will give you some TLDRs. The report goes into nuance because the claim of insider trading is reliant upon details:
- Top 10 returns, in order are: Brian Higgins (D-NY: 239%), Mark Green (R-TN: 122%), Garret Graves (R-LA: 108%), David Rouzer (R-NC: 106%), Seth Moullton (D-MA: 80%), Ron Wyden (D-OR: 79%), John Rutherford (R-FL: 69%), Richard Blumenthal (D-CT: 68%), Nancy Pelosi (D-CA: 66%), Peter Sessions (R-TX: 63%). SPY returns ~=25%. 32 members beat SPY (50/50 split by party) (Note: Higgins holds $100k in NVDA, purchase was from 2021, no sales have been recorded)
- 19 congressional members had negative returns, 13 being Republicans.
- Kevin Hern (R-OK) stands the most to gain via stocks that correlate with war. 4 of the top 5 most incentivized are Republicans, the other is Pelosi in 4th. Follows power law distribution.
- They have a breakdown by transactions that align with members that serve on relevant committees (this is where detail matters and stronger evidence of foul play is drawn from).
I would suggest reading or at least giving a quick read rather than relying on me to accurately summarize it for you. Especially if you think there is a bias. I'm sure you can carve out 15-30 minutes if this is actually a topic you care about. If not, I might suggest ensuring your confidence in your existing model appropriately aligns with your domain expertise and time dedicated to becoming informed on the subject.
[0] https://www.nytimes.com/2023/04/14/business/stock-market-202...
It would imply literally nothing of interest and is an absurd claim to lead with. Congress beat the market absolutely doesn’t follow from 1/3 of them beating the market. It would be strange if that number were considerably lower.
> First off, there is a third option: matching the SPY.
realistically only possible if there’s a healthy margin to be qualified as “beating” it. Is that considered here? Idk. I’m guessing not.
> Second, beating the SPY is a proxy metric which is typically used to help identify those that have performed suspiciously well, not those who performed average. It is actually difficult to beat the market, and more so to do it consistently[0]. So I must insist that you use the metric as a guide, not a filter or target.
No, that’s a stupid claim. It’s incredibly easy to beat the market in a single year by chance. Again for unqualified definitions of “beating it”. It is extremely likely that a sizeable proportion of any investing group will beat the market in a given year. You are correct about multiple successive years.
> Third: There are many ways to under-perform compared to the market, including not investing. I mention that specific mechanism as one thing the report shows is that there are far fewer filings by Republicans so this is necessary context to properly evaluate some fact like "Democrats beat their Republican colleagues by a massive margin." (Dems ~= 2x Reps in transactions) We must also consider that democrats have fewer members and that >50% of each party's transactions originate from a single member of that party (Ro Khanna (D) and Michael McCaul (R)). There are also multiple vehicles for wealth generation so while stocks should be of interest, it shouldn't be used as the only evidence of manipulation and/or foul play.
Incorrect. The metric being discussed only included trading members.
> Fourth: consider what information is marginalized by the metrics. Pareto distribution should be expected, and it is even observed. You must therefore be considerate of aggregates as variance is high (difference between mean and median is large).
I don’t care man. If less than a third are doing better than the market then there’s not a lot of evidence to suggest they’re using info to beat the market. Because they’re not beating the market on average. The total return was within a few tenths of a percent of the SPY index.
It’s a dumb claim. Is there insider trading? Maybe. Idk.
But regardless. Do they on average beat the market? That is definitely not supported by the data. Fee free to run a t test.
This is why I stressed considering what is marginalized out. I'll use an extreme example. Let A = [1,1,1,1,50000] and B = [100,100,100,100,100]. Is A > B? Mean(A) = 10k, Mean(B) = 100. Median(A) = 1, Median(B) = 100. Similarly Congress can, on average, beat the market while 2/3rds of them do not. I hope we see that the math even allows for us to approach 0% of members beating the market while an average value can.
I am guessing the reason you disagree is likely one of two false assumptions: you've confused mean and median, or you've assumed performance is reasonably homogeneous (i.e. low variance).
> No, that’s a stupid claim. It’s incredibly easy to beat the market in a single year by chance.
I am certain you know that "difficulty" is about intentional skill and not a reference to an act of god. You have removed any doubt that a conversation can happen in good faith.
> I don’t care man.
Clearly you do. But I actually don't. I don't wrestle with pigs.
That’s a wildly different claim though.
If you’re saying one person beat the market by a suspicious amount, you should say that. You should not say that a large group of people beat the market. The large group of people on average did not. Using the mean to describe a group dynamic when your mean is dominated by a single outlier is lying with statistics. I am a data scientist fwiw.
> I am certain you know that "difficulty" is about intentional skill and not a reference to an act of god. You have removed any doubt that a conversation can happen in good faith.
I don’t care about your semantic argument. It is very easy to beat the sp500 on a given year by random chance. I have done it for the last six years by a negligible amount. Do I have any particular insight? No. I’m 95% dumped in SPY and my 5% did a bit better.
It is only beating it repeatedly and by a meaningful amount and net of any fees related to funds or investment managers that are hard. SPY is not a magic, difficult to beat goal. It’s simply a solid, average performing strat that takes zero effort. The reason most funds underperform it is because they do zany high risk stuff. If your portfolio is comprised of largely normal investments in common companies you’ll on average match the SPY with about half of your years beating it.
> Clearly you do. But I actually don't. I don't wrestle with pigs.
I really don’t. I don’t actually think politicians should be allowed to trade stocks at all for appearances alone. I just don’t like bad stats.
https://www.sciencedirect.com/science/article/pii/S004727272...
Or do you need a citation that members of congress trading based on knowledge they have is not legally defined as insider trading? Because that's also easy to Google fwiw
https://unusualwhales.com/politics/article/congress-trading-...
So to translate:
> Congress consistently outperforms professional traders
to
> The average performance of members of congress is higher than that of professional traders.
This does not mean a specific member outperforms a specific trader. Though there are specific members who consistently have a performance level that is higher than top traders. Which should beg the question of why these people have such high "skill" levels. This also does not mean there aren't congressional members who lost money in the market (there were 19 actually).
This investment was made on November 22nd 2023. ChatGPT had been around for a while before then, it was not introduced 8 days later.
https://en.wikipedia.org/wiki/ChatGPT
That's one thing that people don't seem to get when they look at stocks at a superficial level. Nvidia's rise was entirely expected. A quote among many - "We’re shocked by Nvidia’s pricing power on AI chips that we see driving earnings upside, higher valuation" - Apr 2023 when the price was less than half it is now and that statement was 100% correct yet the thread i'll link has a tone of conspiracy theories that it's a lie. https://old.reddit.com/r/stocks/comments/12rbhs8/nvidia_stoc...
In fact in superficial analysis land (aka retail investors making trades on past history and PE alone) there were posts on reddit that Nvidia at half the current price was a great shorting opportunity as their PE was high. https://www.reddit.com/r/stocks/comments/12c6sbx/nvidia_nvda...
I still can't believe just how bad the retail investor community is. They don't go into any detail on companies. No view of the incoming orders and costs. They don't look at the long standing declines in userbase (there's non stop "Paypal is undervalued" threads on Reddit right now despite the constant user decline), they do superficial analysis and make poor decisions and when they see someone do well on investing through diligence they scream conspiracy.
So Nancy Pelosi, and more specifically her investment banker husband did well on this trade? No shit. They probably did some level of homework.
You are essentially placing a filter of "you must be this rich to bribe politicians." This could "counterintuitively" empower the already powerful even further, as you decrease their competition.
To perform market capture they must capture a critical mass of politicians (we'll say mass varies by each politician's power). While there's already an implicit filter for those high mass politicians (fat cats ;) -- since you accumulate mass quickly -- the system's robustness is through the distribution of power among politicians. The whole political structure is designed to make it difficult to capture enough mass, and this is identical to the argument against authoritarian systems. So the constraining effectively reduces competition and can actually make mass accumulation cheaper and easier for companies that have the highest potential (and incentives) for abuse.
So unless you got a counter argument that can convince me that this is of no concern, then I'm sticking to my original position.
But yes, people that are good at evading the police are in fact able to "freely" commit murder. I'm not sure why you thought this would be be a convincing retort considering it is true by definition.[0] You do in fact have to be captured by police and subsequently prosecuted. I am glad that you do understand the most basic operating principle of the judicial system: you cannot imprison those who are not in your custody. (A bit tautological, don't you think?)
[0] Assuming "freely" means "able to commit crime without judicial repercussions". I assume you don't mean "freely" in reference to having capacity as such a definition wouldn't be conditioned on legality.
Serial killers do exist. There are, in fact, serial killers who have never been caught. Several even famous to California.
Do you not know who OJ Simpson is?
Do we seriously have to drop examples of people who got away with crimes because they were good at not getting caught? Isn't that why Frank Abagnale is famous? You seriously think we've caught everyone? And instantaneously?
Imagine if this clarity of thought was not wasted in Washington: https://youtu.be/fwqWzbk_LeY
Nvdia is the wrong example to use against Pelosi. Nvdia rise is purely due to the AI moment. No Congress people had any "inside information" about Nvdia that helped to make this bet. In fact, the inside information about banning Nvdia chips to China would have encouraged them to make the opposite bet
There are two reasons to oppose congress people trading
a) They may have insider information (This is highly over-rated). Congress typically don't have any specific insider information that is not available to sophisticated traders. The laws that they pass are signaled months or weeks ahead.
b) Conflict of interest. This is the more serious one and the reason why it should be banned. Congress people obviously won't vote for laws that would hurt their individual stock portfolio
For what it's worth, I was surprised that the Speaker of the House earn 250k. That seems too low.
Senior engineers, senior managers and above all make that sort of money but without the horrible lifestyle of politics. Would you trade a Bay Area engineering career for that? I wouldn't. Yet whenever it's even suggested to raise politician wages for the sake of those politicians who aren't already billionaires there's uproar.
Let me be blunt. You don't get talent without paying for it. The USA's mix of political backgrounds has become a monoculture of wealthy lawyers and investment bankers. We don't have enough representation from other careers in politics and it'll ruin us if we don't fix it, namely by increasing the salary of a highly stressful career to ensure we encourage the best and brightest to sign up for it.
> I always want to say to people who want to be rich and famous: 'try being rich first'. See if that doesn't cover most of it. There's not much downside to being rich, other than paying taxes and having your relatives ask you for money. But when you become famous, you end up with a 24-hour job.
In Pelosi’s case, that job includes the possibility of a lunatic attacking your husband with a hammer. You would have to pay me very well indeed to put up with that kind of risk, esp. if you need to hire private security…
Maybe! But what if politics wasn’t a career? What if there was no profit motive? What type of people would it attract?
The only kind of people I can think of willing to put up with the negatives of high political office (which include a non-zero chance of conspiracies to assassinate you) for no or little pay would be zealots and ideologues, likely already independently wealthy.
The tech sector is famously productive, arguably even too productive. But average time in a specific job is similar to congressional terms. If people with specific expertise and goals in mind are in congress they could compromise to achieve those goals just like we do in the private sector.
So EG - making a private investment or specific stock investment - has to be precleared by a compliance officer for conflicts
And these are backed up by SEC "teeth" if compliance officer doesn't enforce that policy rigorously
It adds beaurocracy, but it's straightforward enough that it's not a major impediment
Like "Oh hey you're on a committee that is going to determine AI policy? Seems like probably that's a conflict."
Nancy could still make the trade by investing in a non-controlled investment, or tech-heavy index fund.
But probably not just write a check into NVIDIA.
While private industry is full of shenanigans I remain perplexed that gov't insiders - who don't just profit from these trades - but can actually influence policy - have virtually no hoops other than "after the fact" reporting
(edit - actually I'm not perplexed at all, I'm just depressed about the reality of gov't accountability)
I am not perplexed in the least that it occurs.
Just dumbfounded at the level of self-dealing that happens in full public view.
Is it abnormal for her peers?
Is the return exceptional?
Is there any evidence of wrongdoing?
Judge for yourself – the data is public.
Is outperforming SPY abnormal among non-congressional peers?
Here’s the actual report: https://unusualwhales.com/politics/article/congress-trading-...
From the tl;dr:
> Congress beat the market, once again. Of 100 trading members, 33% beat SPY with their portfolios.
So 2/3 of congressional traders underperform SPY.
This also means the image in the tweet only shows top performers.
From later in the analysis:
> Note that there are a total of 535 Members of Congress, with 100 in the Senate and 435 in the House.
If congress has such useful information for trading why is only 1/5th of congress trading? This 20% is roughly on par with the 15% of the American public directly owning stock.
Congress looks a lot like the general population by these numbers. About 20% are active in the market and of that 20% most of them don’t beat it.
I’m less concerned with them having non-public information and more concerned with conflicts of interest. If they own Chevron will they still be inclined to pass that EV subsidy?
$100mm in SP500 and NVDA is 4% of SP500 so purchase $4mm in NVDA stock at beginning of 2023.
Price increased 237% in 2023. $9.48mm gain.
I don't see how a 500k gain is considered at all noteworthy considering her asset size and considering NVDA's huge gain.
Particularly during the pandemic it was just painfully obvious that she was trading based on information that was not available to the public.
Her and particularly her husbands returns are just straight improbable without some explainable edge, and the only logical explanation I have seen is her political position.
Common to suggest to just bar trading, which would make political jobs a major disadvantage. So others suggest only allowing for a third party managed fund that would be index focused. This sounds good at surface value, but when you go look at indices like VOO (S&P 500 based) you find, unsurprisingly, that Apple, Microsoft, Amazon, Nvidia, Google, Meta, Tesla, B&H, JPMC dominate. Any index fund will tend to be like this, unless we created some very special fund to track the whole economy (I think there could be something to this one fwiw, but construction would need to be done with extreme care). The reason this can be problematic is that they could still grow their wealth by targeting policies at the top companies. All you'd need is to know what the index composition is. I mean should be obvious since Nvidia is in VOO.
The other common suggestions are salary based.
Some say to move it up to disincentivize them. Can make sense, as most people do not care much when their earnings reach a certain point. I'm sure that includes many here, especially given that the a large part of the idea behind Google/Big Tech perks is because increasing salary is less attractive for people making $150k+ cash (prior to equity). But politics naturally attracts people who are power seeking, and well... we still see Elon giving a shit about how wealthy he is when reality is there's very little his net worth (~$200bn, current #2 richest) gets him that Peter Thiel can't also get (~$6bn, rank #451) (nuance needed about liquidity and other aspects as money doesn't work like it does for normal people in this wealth range, but claim is generally true). I mean Elon could create multiple CERNs that could run indefinitely through returns on investments. So there's good reason to believe that the wealth incentive model that works on the average person doesn't work well on politicians.
So there's also the argument to decrease salaries, do disincentivize power seekers from looking to politics as a way to obtain power and wealth. Idea here is to only attract people who are passionate about the job, like teachers (before teachers get burnout). But the nature of the job will always include power and Goodhart's Law is always in effect, so it'll be unsurprising that people can exploit the rulesets (or in this case, they make their own) and can channel money (to combine with their power) through third parties, which sets the stage for market capture.
So others suggest term limits. There's also pros and cons to each decision here. Some people also suggest changing the number of politicians: fewer to centralize power, which can streamline many processes but that makes us vulnerable to autocratic takeover as takeover is dependent on the collection of keys to power; others say to increase the number, in an effort to further decentralize the system and make it difficult to capture enough keys, but this can lead to very slow moving and ineffective governments as well as reduce dependence on experts as the point of representative powers is to act as smoothing functions to wisdom of the crowds. Incidentally the highly distributed case doesn't prevent capture, but rather towards Plutocratic settings instead of Autocratic as it is unlikely that a single individual can more or less perform a 51% attack (to put it in less politic, more tech nerd speak). So one can argue that it is easier to replace a few keys when things go wrong, in favor of centralization, or increased robustness, in favor of distribution.
There's plenty more suggestions and I still find a lot of them lacking. Most of this is even independent of such things like Capitalism and Socialism that people often conflate as solutions. The matter of the fact is that this is an incredibly complex solution space and I feel pretty confident saying that there is no global optima. And if we...