Maintaining Optimism in the Face of Reality. Occasional observations on the state of the world, society, business and politics. Usually anchored by facts, always augmented by opinion.

New Meaning of 'Senatorial Privilege'  | e-mail post

In late October, Professor Bainbridge brought attention to a WSJ article, "U.S. Senators' Stock Picks Outperform the Pros'"citing a study (got that?) showing the significant excess investment returns members of the U.S. senate enjoy. How significant, the beat the market by 12% over 1993-1998, about double corporate insiders (who were up by 6%) and trouncing the people they represent; average households underperformed the market by 1.4% over that time period. Or, as the Philadelphia Inquirer said, "Put another way, a typical investor who matched the S&P's performance in those years collected about $220 in profit for each $100 invested. The average senator, by contrast, collected $460 on a $100 investment."

The Inquirer article was pointed to by Bainbridge in a post today, and was more broadly in reference to the SEC declining to investigate potential insider trading by members of the Senate, presumably for lack of evidence. From the sounds of the study, one would think they could sort this out, particularly given the apparently prescient timing of the trades suggested by the report. Of course, given that the head of the SEC faces Senate confirmation, and the whole issue of their budget, I can understand why they might decline.

For those who are curious, the trading seems to be a bipartisan problem. As the first WSJ article reported:
Not all of the senators actively are buying and selling stock. Just over a third of the senators bought or sold individual stocks in any one year in the study, and the vast majority of stock transactions were less than $15,000. But a small group of senators appeared to be quite active in the stock market. In fact, a handful of senators -- Clairborne Pell (D., R.I.), John Warner (R., Va.), John Danforth (R., Mo.) and Barbara Boxer (D., Calif.) -- accounted for nearly half of the stock trades analyzed. (Only Sens. Boxer and Warner are still in the Senate. A spokeswoman for Sen. Boxer says her assets are now in a blind trust, and a spokesman for Sen. Warner declined to comment.) To eliminate the possibility that the heavy trades of a few senators may have skewed the results, the authors also looked at each senator's trades as individual transactions and found that both big traders and small ones shared similar outsized returns.
The good news, such as it is, is that from just a quick check of a handful of the personal finance disclosures at OpenSecrets.org indicate that many (most that I checked) senators seem to keep their money in fairly diversified mutual funds; or, in Mark Dayton's case, are a highly-diversified mutual fund. (Dayton's disclosure ran 37 pages andwas the only one I stumbled across that actually had to attach spreadsheets for all the transactions and holdings. Had it used the standard forms, it would have easily run to 200 pages. [PDF])

Of course, they don't have any disclosure records of their spouses' trading accounts.

e-mail post | Link Cosmos | [Permalink]  |  | Thursday, November 11, 2004
I can't get past:

John McCain
Keating Five
Presumed SEC violations in the Senate

I can't get past it.
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