The truth will make you sick.
Congress is rich -- unbelievably rich. According to the Center for
Responsive Politics, 249 of the 535 congressmen are millionaires.
That's 47%. By comparison, about 5% of U.S. households are worth
more than $1 million.
And until recently,insider trading laws didn't apply to congress.
They could buy or sell investments based on non-public information
they learned from their privileged positions.
As you would expect, that's led to some great returns for Congress'
investments. In a study cited by Barron's, members of the U.S.
House of Representatives beat investors like you and me by 55 basis
points a month. That comes out to an extra 6.8% per year.
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.
I even wrote about this problem back in July 2011, after doing
research into how congressmen invest.
Then, in late 2011,
-- one of the most-respected investigative journalism programs on
TV -- dedicated a segment to the issue. 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 Chairman Ben 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 Representative 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 of what was happening on both
sides of the aisle.
The report from
led to a frenzy. And a few months after the story aired, the Stop
Trading On Congressional Knowledge (STOCK) Act, which curbed
insider trading by Congress, was signed into law.
Of course, for many years, the rules required all members of
Congress (along with some of their higher-paid aides) to publicly
disclose information on their finances each year -- including stock
Thankfully, the STOCK Act strengthened this requirement. Not only
did it eliminate insider trading, but Congress must now disclose
their trades within 45 days after they happen.
That means we have an opportunity to see exactly what our
"representatives" are buying.
But what may surprise you is that the most popular stocks owned by
Congress aren't exclusive investments only being bought by the
Take a look...
The table above shows the most widely held stocks owned by
Congress in 2010 (2011 data hasn't been published yet). Keep in
mind this was before Congress passed the STOCK Act...
As you can see, each stock on the list is a majorcorporation . So
how is it that Congress can earn higher returns owning some of the
most well-known companies on the planet?
As I've shown you, it's very likely Congress has helped themselves
for years by trading on non-public information. But I think there
is likely another reason why Congress is outperforming regular
You see, some of the best returns for politicians, based on their
own financial disclosures, come from owning well-known, profitable
businesses for the long haul.
Take Representative Lloyd Doggett (D-TX), for example. According to
financial disclosure statements, he's owned a stake in
Procter & Gamble (
since May 2000. And he still owned a stake as of his most recent
disclosure filed in 2011. In that time, the United States
experienced two recessions, two wars, and high unemployment. Yet,
Procter & Gamble's total return during that period was over
140%. For comparison, the S&P 500 gained less than 10% during
And it's a similar story for Representative Jon Kyl (R-AZ), who
Wells Fargo (
in May 2001. He still holds a stake in the company today. Over that
span, Wells Fargo has returned about 75% -- despite the problems in
the banking sector. That's more than triple the S&P's return of
There is no definitive answer as to how long the average
congressman holds a stock. But in my research, holding for the
long-term seems to be the rule for Congress, not the exception.
And the simple fact is, the longer you hold an investment, the more
likely you are to make money.
A recent study by investment firm Oppenheimer showed that the
S&P 500 has never suffered a loss in a 20-year period (measured
in rolling monthly periods). Their study went all the way back to
And each of the six stocks listed above has a positive 20-year
return. Cisco returned more than 2,500% during that period. And
General Electric -- despite being more than 100 years old -- has
still delivered a 480% return during the past two decades.
Action to Take -->
That's not to say every stock will automatically go up because you
hold for a long time. But owning great businesses -- and letting
their returns grow year after year -- looks to be the best way to
make money in the market... even if you're a member of
-- Paul Tracy
[Note: While most of Congress earns above-average returns
investing in public markets, Mitt Romney and many other rich
investors are making even MORE money somewhere else. These elite
investors are buying into an entirely separate "underground" stock
market. For years, this market has been off-limits to retail
investors like you and me. But thanks to StreetAuthority's latest
research, we've found a way you invest in this underground market.
To learn more, click here now.]
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC owns shares of PG,
CSCO, MSFT in one or more if its "real money" portfolios.
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