This is also unlikely to work because Congress members don't do particularly well on trading. It's very hard to trade successfully, even with insider information its not entirely obvious what a stock price will do. It seems obvious because news media often reports ad-hoc analysis on a stock price movement. For instance, they'll say "Apple up 5% based on surprising App store revenue growth", but if it were to drop you may read a headline saying "Apple down 5% based on surprising drop in Mac sales". Sometimes I'll see an article touting the growth and only see it go back down by the time I get around to reading it.

I've analyzed the trades of US Senators during the early pandemic [0] and I was not convinced they performed abnormally. And the trade amounts were relatively small. I think they'd have an easier time trading real-estate due to the connections they have with various regulatory bodies and local governments.

[0] https://mleverything.substack.com/p/analyzing-us-senators-st...

Ehh, Nancy Pelosi beats most hedge fund managers consistently year over year.

https://unusualwhales.com/i_am_the_senate/pelosi

* Nancy Pelosi's husband, Paul

Not saying she didn't give him info, but she didn't do the actual trades. He's an investment manager.

> Paul Pelosi, investment manager and the husband of House Speaker Nancy Pelosi, purchased up to $11 million worth of mega-cap tech stocks in May and June, according to a financial disclosure form filed last week.

https://markets.businessinsider.com/news/stocks/nancy-pelosi...

He has magical superpowers and just happens to be the husband of a policy maker that drives trillions in government spending.

Maybe. Or maybe by nature of his relationship he gets approached more for interesting opportunities?

Is Dr Dre an amazing talent scout, or was he out and about and by nature of his own fame approached by artists such that he could pick the obvious good opportunitie? Or maybe both apply?

Perhaps having money, power or fame is an attractor of opportunities all on its own.

It doesn't have to be that, but "better than average consistently" doesn't mean much to me when the person is already not average in a few other aspects.

He would also be approached more often with poor investing opportunities.

That only really matters if you think he can't see good from bad at all. Even if he just ignored most and only acted on things that looked phenomenal, he might see more of those than the average person.

Much more, in fact, considering the level of scam spam any retail investor receives.

Roughly 9 out of 10 hedge funds fail to beat the market or simple passive strategies indexed to it. I'm no fan of Pelosi personally, but observing her husbands performance isn't smoking gun evidence, it's just banal.

Also, consider that a lot of what hedge funds offer is bespoke risk profiles to high net wealth individuals that are overexposed to particular market sectors.

I think this has probably been one of the worst times to compared hedge fund performance to other strategies. Let's see if the corrections happen for real and then calculate those returns. After all market was or is at all time high.

We have already seen it. In 2020, you saw macro funds (the ones often targeted for "underperforming") that were running max drawdowns of 5% make 20%, 30%, 40% in a few months.

The issue, as you imply, is that in a bull market people lose almost all ability to exercise reason and view the opportunity cost of capital as the S&P.

But a lot of hedge funds aren't running high levels of beta, and investors in their funds don't demand that (unf for some hedge funds, who demanded low vol and then went into index funds when beta did well).

And, ofc, most equity hedge funds have had very strong performance. All the Tiger group hedge funds have private companies, everyone owns tech companies, you are even seeing value hedge funds in FAANG stocks...it is quite something.

I don’t think anyone ever claimed a smoking gun here. As the article says they were investigated but not charged.

This is wrong on all levels. Banality and evidence don’t sit across a spectrum. Hedge funds largely don’t offer sector exposure for balancing purposes in the general, and neither in this specific case. Paul Pelosi runs a diversified investment portfolio, not a hedge fund.

Paul Pelosi helped launch his wife's political career.

Not the other way around.

Just look at timelines of careers. Paul was already very successful before her career, not since.

Nancy could do unpaid work in the Democratic party because of Paul's success ( 70-80's), which helped her career a lot.

Yeah every time someone comes defending this despicable human being who had got filthy rich in last 40yrs saying it is her husband, I just shake my head and ask when are these people going to retire? How much is enough for these people?

No defense was given. I was simply correcting an incorrect statement the way it was written to make it factually accurate.

I also predicated it with

> Not saying she didn't give him info

Ah yes. The classic mega insider trading of... buying Apple stock. Yes, only the most non-obvious and insiderest trading ever imagine. Next you're going to accuse me of "insider trading" for moving all of my assets into the ARKG when it became clear COVID-19 was going to be declared a pandemic.

After skimming the link, what is the conflict of interest here?

He benefits if Apple and Amazon go up. So does everybody who owns an S&P 500 fund.

Does this mean that Pelosi has an incentive not to be too harsh in regulating the tech giants? Is that a big problem?

Or was the timing based on an insider's knowledge of when there would be publicity about regulations and when it would die down?

Stocks confer ownership. Is she spending government money at a company that she is a partial owner of?

Would that be an issue if it was owned through an S&P 500 fund?

I would agree that options look suspicious, even if they are not "short dated out of the money" types.

But mega cap stocks are lot harder to manipulate than some tiny obscure company.

I think I read that Barack Obama put all his savings into government bonds while he was in office, which is admirable and maybe it would be good to mandate high level people all do that.

But if we don't have such a law, it doesn't seem too far out if they own the same big companies that almost everyone who invests in the stock market does.

Before accusing Mr. Pelosi, at a minimum, I think it would be relevant to check how much different his investment returns were from an index of the entire stock market.

I think there have been Republicans that were overzealously accused of insider trading during the beginning of the pandemic too. I forget who, but there was a fuss made about several of them and Matthew Levine dissected some of the claims in his column and didn't think there was much there.

The returns don't matter. The conflict of interest matters. If you commit insider trading but wind up losing money you are just a sucky criminal.

Blind trust is the only acceptable option. It's been tradition for Presidents through most of my lifetime. Trump didn't do it and it was rightfully a big shit storm.

I'm not seeing the connection with the President or insider trading.

Is there some specific knowledge that Pelosi allegedly traded on, that didn't belong to him?

Government officials should not be allowed to spend government funds at or write regulations for companies they own.

Pelosi and indeed all of Congress has non-public information about laws, government contracts, etc. Right now they can and do trade with this "insider" information. Legally this is not considered insider trading. Congress wrote the legal definition of insider trading in such a way that excluded their insider knowledge. There is no value in arguing the semantics of this so I won't address it further.

The traditional solution for this glaring conflict of interest that is used for Presidents is a blind trust. Most Presidents put their wealth in a blind trust to avoid even the potential of a conflict of interest between their actions as President and their personal wealth. Trump did not do this and it was a shit storm. He even tried to get the government to rent out his resort for some UN thing. Presidents and Congress should all be required to put their wealth into a blind trust to avoid conflict of interest.

> Paul Pelosi, investment manager and the husband of House Speaker Nancy Pelosi, purchased up to $11 million worth of mega-cap tech stocks in May and June, according to a financial disclosure form filed last week.

Doesn't every diversified fund in the world own "mega-cap tech stocks"? And most probably bought during May and June because their increased value meant they took a larger proportion of indexes, and index-following is a pretty widely used strategy.

As a non-American, how is this legal? I was under the impression that financial trading is highly regulated in the US.

I mean the possibility of her not giving insider info to her husband is very slim to none imo.

In the US, when you have a lot of money you are above the law.

I get that, but in this case it seems like the opposite. If you have the law then you have a lot of money.

Rhetorical question to be sure. Guess who controls what's "legal".

You don’t even need to know insider information about companies to make smart decisions if you a family member of Congress especially the leader of the entire Democratic Party, which currently controls the house, senate, and presidency. You only need to know what laws are likely to get passed in advance and consider how that will effect companies. Helps to have the person who leads and publicly threatens other democrats for their vote on items.

Yeah, but take the random trades of 435 people and a normal distribution is still going to have a top (and bottom!) outlier. It's certainly reasonable to assume an investment manager (her husband, who is making most of the trades) might be part of the reason to be such an outlier.

And even discounting that and looking for shenanigans, well..."she timed buying NFLX almost perfectly" with a purchase a month before it was announced they were going into the video game space; why the heck would she have known that? That isn't related to legislation, that isn't something they would have gone to the government for; that would be a purely business decision by Netflix. How the heck would she know about it?

how about people in these positions shouldn't be trading... if i was in power i would think people would assume i am corrupt if i did trade.

I mean, I'd be all for politicians having to put any investment money into blind trusts, sure. But that's different than saying they're insider trading.

They have insiders knowledge and they are trading on that. It is legal insider trading.

Why is it legal?

It isn't since 2012.

https://en.wikipedia.org/wiki/STOCK_Act

Proving you've done it can be hard, though.

“It’s a big club and you ain’t in it” - George Carlin

https://www.youtube.com/watch?v=Nyvxt1svxso

> why the heck would she have known that? That isn't related to legislation

Who knows, maybe insider info they can trade on is a form of bribery and getting a congressman's ear.

This looks to me to be just for 2020. Is there more analysis somewhere showing it’s consistent?

Returns alone mean nothing to evaluate an investment strategy against an other. At the _very_ least you would need to compare with the same level of volatility.

Paul Pelosi acted on insider info back in 07. I’ve wonder what his position in the market was when Henry Paulson was on his knees begging her to TARP.

https://www.reuters.com/article/us-usa-congress-insidertradi...

https://money.usnews.com/money/blogs/the-inside-job/2008/09/...

That Reuters article you referenced does not say that he traded on insider information. It says that Paul Pelosi may have gotten access to an IPO based on Nancy's position (although that is disputed by Pelosi who says that access was applied for in the standard manner through his broker). That's very different from insider trading.

Yeah, most hedge fund managers are also absolute trash though.

It could also very possibly be that your distribution isn’t one population but two.

Embed a small over performing population within a larger normally performing /underperforming population.

You don’t j ow who’s cheating, you don’t know when they are cheating, and if they were cheating I can’t imagine they would do it in their public funds.

A simplistic analysis of self-reported data is not strong evfidence to me in this case.

Drug approvals, legal settlements, and getting acquired usually send a stock higher. Buying a company usually sends it lowers.

With earnings, even if you know it in advance, you're trading against what the street thinks, not even what analysts estimate, and the wrong few off-the-cuff words in the earnings call can derail your trade completely.

Congress is buying options not actual stocks. They bet on where it might go and they know where it might go if they have inside information. The only time they will get a big loss is if they are too greedy.

When stocks only go up, every trading strategy appears to work. Let's see what happens during the next sustained bear market.

That is why you have to judge it against an active baseline: for example, a buy and hold strategy.

What would be a good strategy for the upcoming bear market?

Not to put your wealth in it. Own something else.

If you expect everything to fall vs. the national currency, buy the national currency.

Don't invest in losers.

Do they have to disclose when they bought it, regardless of when they publish it in those 45 days? Because that would make for an incredibly interesting backwards-calculated index fund. Probably someone has already done this but I wouldn't know what to search for.

This has basically been done, and is why people are interested in tracking trades. See https://www.researchgate.net/publication/227378283_Abnormal_...

In fact, the idea of creating an ETF that tracks congressional trades in real time has also been floated: https://www.cnbc.com/2011/11/14/a-congressional-insider-trad...

The idea's a little half baked, of course.

Still probably would have helped with buying pandemic stocks after that secret briefing congress got where they said everything would be alright and then bought stocks in zoom and whatnot.

And that's why you want to own a brokerage that members of Congress use for trading. Could probably recruit them with paid speaking gigs or jobs after they are no longer in office, or something like that. Maybe campaign contributions even. Maybe politicians shouldn't be able to own or trade stocks? Maybe they shouldn't be allowed to work in the private sector for a period of time after their service? They get a pension right?

But if you're the first to learn of it, trade, and then tell others about it so they trade, you still have the timing benefit. That's the thing of current-day amateur trading; some people get the first scoop, then hype it up on e.g. reddit for the masses to follow along. This was also a thing in crypto trading, where there are groups of amateur traders that plan internally to cause the stock market to change. They start the change, hype it up on social media, then sell off again before the hype hits its peak.

This is called pump and dump. It is illegal to do on the stock market.

It's nothing traditionally groundbreaking, either. Most of them are buying blue-chip tech stocks. Anyone mildly paying attention has known how well FANGs have done in the past decade. There isn't much to learn from these trades.

This is all that needs to be said. Just like you can’t trade on the holdings of hedge funds declared in their 13F because of the time delay, attempting to trade on a congressperson’s trade declaration is nearly useless.

Yes this is the catch. You are trading on old data. Maybe someone could backtest to see if it still works.

The including of the 45-day threshold in that law is tantamount to admission of corruption. Why else would it be there? Because we don't have the technology to automatically disclose their every trade in less time?

(I know we are not talking about automatic disclosure, but if we were, the time scales could be seconds, not weeks.)

It does work for now because so many people trade the day the information comes out.

Ive done it a few times, I get push notifications.

If large holders want to sell into expected liquidity and remove any edge, then that’s the expected result, it is not happening right now.

This is unlikely to work because now everyone knows about it.