The truthwill make you sick. Technically it's public
knowledge, but I can tell you -- it's Congress' dirty little
Congress is rich. Unbelievably rich. And until just
recently,insider trading laws didn't apply to Congress.
I don't know which is worse: The fact that insider trading was
legal for some of our nation's wealthiest politicians... or that
Congress refused to do anything about it for decades.
"A few lawmakers proposed a bill that would prevent members
and employees of Congress from trading securities based on
nonpublic information they obtain. The legislation has languished
since 2006," according to TheWall Street Journal .
That was, the legislation languished until "60 Minutes" -- one
of the most respected investigative journalism programs on
television -- dedicated a segment to theissue . Here's a portion
of what they had to say...
"In mid-September 2008, with the Dow Jones Industrial
Average still above 10,000, Treasury Secretary Hank Paulson and
Federal Reserve ChairmanBen Bernanke were holding closed-door
briefings with congressional leaders and privately warning them
that a global financial meltdown could occur within a few days.
One of those attending was Alabama Rep. Spencer Bachus, then
the ranking Republican member on the House Financial Services
Committee and now its chairman.
"While Congressman Bachus was publicly trying to keep
theeconomy from cratering, he was privately betting that it
would, buyingoption funds that would go up in value if
themarket went down. He would make a variety of trades and
profited at a time when most Americans were losing their
And that was just one example. Also dug up by "60
House Minority Leader Nancy Pelosi, D-Calif., and her husband
have participated inmultiple exclusive IPOs -- including that of
. According to one report, Pelosi purchased 5,000shares of Visa
at theIPO price of $44. Just a couple of days later, when
thestock was trading to theinvesting public, it traded at $64 per
House Majority Leader John Boehner, R-Ohio, boughtstocks in
health care companies days before the so-calledpublic option was
pulled from the legislation. The removal of the public option
proved to be a boon for private health insurers, making a
significant sum for Boehner'sinvestments .
The report from "60 Minutes" led to a frenzy. And a few months
after the story aired, the STOCK Act, which curbed insider
trading by Congress, was signed into law.
But why was it delayed for so long?
Apparently Congress was making too muchmoney off the lax rules
to do anything about it.
According to data from the Center for Responsive Politics, 249
of the 535 members of Congress are millionaires. That's 47%. For
comparison, about 5% of American households are worth more than
So much for representation "by the people." And why on earth
would Congress change rules that have obviously helped its
members for decades?
Thankfully, the STOCK Act strengthened financial reporting
requirements for members of Congress (along with some of their
higher-paid aides). Not only did it eliminate insider trading,
but Congress must now disclose their trades within 45 days after
That means we have an opportunity to see exactly what our
"representatives" are buying. And we need to know...
In a study cited by Barron's, members of the House of
Representatives beat investors like you and me by 55basis points
a month. That comes out to an extra 6.8% peryear . I think
Barron's said it best...
"To give an indication of what House members'
outperformance is worth, investing at the stock market's
long-term total return of 10% wouldmean $10,000 would grow to
$25,937 in 10 years. But with their specialinvestment acumen,
their 16.8% annual returns would leave them with $47,253 in 10
With that in mind, I decided to dive in and see just exactly
what the most popular investments are with Congress...
The 10 Most Popular Stocks In Congress
I'll be honest -- the most popular stocks held by Congress aren't
some super-secret investments. They aren't exclusive investments
owned only by those in Congress with some inside knowledge of a
Instead, they're large multinational corporations that make up
the bulk of many average investors' portfolios.
I won't keep you in suspense...
1. General Electric (
-- 83 members
2. Proctor & Gamble (
-- 68 members
3. Microsoft (Nasdaq: MSFT)
-- 64 members
3. Bank of America (NYSE: BOA)
-- 64 members
5. Exxon Mobil (
-- 56 members
6. JPMorgan Chase (
-- 53 members
7. Cisco Systems (Nasdaq: CSCO)
-- 52 members
7. AT&T (T)
-- 52 members
9. Intel (Nasdaq: INTC)
-- 51 members
9. Pfizer (PFE)
-- 51 members
This data is provided by the Center for Responsive Politics.
The most recent year available was 2011,
the STOCK Act passed.
As I said, Barron's cited a study that suggests members of
Congress post returns much better than average investors.
If their most popular holdings are similar to what many
investors own, how is it that members of Congress can earn such
No one can say for sure, but my research is turning up a few
If you check out the 10 most popular stocks owned by members
of Congress five years ago, eight of them are on the list today.
And the two not on the list are in the top 25 today. So is it
that members of Congress are just holding on to stocks
That's what I think, but let me explain why...
In 1940, the averageholding period for an investment was seven
years, according to William Hutchings of the Financial News. By
2007, that period had shrunk to just
But you don't have to trade every day... or every week... or
even every year to beat the market. In fact, your success
actually increases the fewer trades you make and the longer you
A recent study by mega-investment firm Oppenheimer showed that
the S&P 500index has NEVER suffered a loss in a 20-year
period (measured in rolling monthly periods), dating all the way
back to 1950.
Of course, we all know you can't say the same for holding
stocks for a year or two. When you hold stocks for a short period
of time, your odds of losing money are much, much higher.
And you can lose a boatload of money in a hurry...
In fact, in its worst one-year period, the S&P 500 dropped
44.8%. No wonderWarren Buffett has always said his favorite
holding period is "forever."
I think these shorter holding periods for average investors
are hurting their returns.
So yes, it appears members of Congress are buying many of the
same well-known stocks as everyday investors, who are now holding
for shorter periods than ever and hurting returns.