TikTokers Are Trading Stocks by Copying What Members of Congress Do | Hacker News Reader

TikTokers Are Trading Stocks by Copying What Members of Congress Do

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441 pointsmooreds182 comments

This is unlikely to work because of the timing delay. Suppose a member of Congress has access to inside information and trades on it. They have 45 days to disclose the trade. By the time the trade is disclosed, the market has already moved: if Pelosi or McConnell or whoever bought low so they could sell high, a month later the increase is probably already baked in.

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.

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.

https://www.cnbc.com/id/218.html

This reminds me of a study which showed that even if you bought the same stocks a month after Buffett and his holding company Berkshire Hathaway disclosed their own purchases, you'd still be way ahead of the game.

"The market ... appears to under-react to the news of a Berkshire stock investment since a hypothetical portfolio that mimics Berkshire's investments created the month after they are publicly disclosed earns positive abnormal returns of 14.26% per year."

But Buffett is a long term investor. I am not sure how long the Pelosis hold their stocks...

But yes, insider trades :(

There's a community on Reddit that studies Berkshire's purchases (investments made by Buffett/Weschler/Combs) and tries to follow, purchasing only below what Berkshire paid:

https://old.reddit.com/r/brkb/

For example, in 2020 and early 2021 Berkshire paid $59 for Verizon, buying $9 billion worth (a huge Buffett/Weschler telecom investment). Verizon now trades at about $54, so this community is buying.

Wouldn’t this bias towards the “losers”?

Short-term stock price changes are noise.

Berkshire's investments are based on a deep understanding of the business and are intended to produce good long-term results. Factors like economic moat, trends in consumption, conservative valuation, etc.

For example, Berkshire purchased Apple (AAPL) between 2016 and 2018, at an average price of $35 per share (P/E ratio of 12 or 13), and it was years before that paid off. The Redditors buy during those years, before the payoff.

Berkshire doesn't have to be right about every stock pick as long as the average is good. But if you buy 100% of the Berkshire picks that go down and less than 100% of the picks that go up (because some never drop below the level they bought them for), there is a real risk that you could do substantially worse

Buffett makes huge new investments very, very rarely. Three in the last 5 years.

Apple: buying began in 2016.

The 5 major Japanese trading houses (the sogo sosha -- Itochu, etc.): buying began in early 2019.

Verizon: buying began in late 2020.

They all trade at or near Berkshire's price, if not far below, and you get one new idea every few years.

There are other new purchases (Chevron, Kroger, AbbVie, Aon, RH, etc.), but these are small, lower-confidence positions that are often sold as soon as the price rises far enough. Probably Weschler and Combs, not Buffett.

At this point why are you not just buying BRK-B?

We do that, too. For example, one of those Redditors owns 22,612 BRK.B shares and has been buying since late 2002.

Berkshire spent $25 billion in 2020 (all of its operating earnings) on buybacks at an average price of $205 per BRK.B share. That buying continued at almost the same pace in 2021 and the average price paid is $220 per BRK.B share.

We can't buy at that buyback price today, but many of us would gladly pay, say, $250 per share for BRK.B.

Yeah, but what kind of fool would sell BRK.B at $220 in 2021, when you can sell it for more on the stock market?

Cool - didn't know about that!

But, yes Shameless Cloning Can Lead to Financial Success :)

I actually wrote about it here: https://playingfordoubles.substack.com/p/shameless-cloning-c...

It's a little hard to take you seriously when you seem to dedicate the first 4 paragraphs to dunking on Microsoft. Windows is no more of a Mac clone than MacOS is a Xerox PARC clone. Word is just a rich text editor, same as Excel is database software and Bing is a search engine. Call it whatever you like, but people all-too-soon forget that the root of all software development is "I wonder if I could do this better?"

dunking on them? seriously?

I literally had one line where I made a joking comment and then applauded their ability to clone and adapt.

you may assuming cloning is a bad thing.

Username checks out.

This is a bit like a popular hedge fund strategy known as alpha capture. In the alpha capture strategy, funds look at the buy/sell recommendations made by analysts (for example those at the major banks). Applying a systematic approach means that they can measure the accuracy of each individual analyst and choose whether or not to follow along by trading the advice from that person. The best analysts eventually get hired into funds for their picks to be exclusive.

I built something (DueDilly) that works in a similar way by monitoring the performance of Reddit user's stock recommendation and tracking how each idea performs and which users do well. You can choose to trade alongside them based on their track records.

My site: https://duedilly.io/

Previous Discussion in my Show HN: https://news.ycombinator.com/item?id=28244744

There are various academic papers that also discuss it like: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3873884

I think the most interesting question is how you can tell if someone is actually good vs fluctuations due to luck. I'd think it takes a long time to get statistical significance. Or, during a bull run the optimistic traders all look great for a while, but this later proves illusory.

Truly. There's some standard approaches like beta-adjusting that can be done to put things on equal footing in different market regimes but it's only one part of what determines a stock's performance.

Testing for the significance of someone's average returns for example often can be rules of thumb. For example, given a return stream of a trading strategy, the Sharpe ratio (mean return/vol) is directly related to the t-stat of the mean return being different than 0 (mean ret / (vol/sqrt(n)). Several simplifying assumptions must be made about the distributions of returns that don't line up with reality to do the above but it's mostly a heuristic that will let you say "ah, the Sharpe is X over the last 5 years? That's significantly different enough than 0 for it to be tradeable."

You just summarized the main problem of quantitative finance: you need points to assert statistical significance. And thus why data providers with long history are paid so much.

I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others to capitalize on it, would even out the unfairness of the privileged position in some roundabout way, wouldn't it?

Obviously scaled by the number of people actually doing this, and with how much money

Or- would it have the opposite effect? Would it actually give even more money to the congresspeople?

At the very least it should raise awareness of the problem by amplifying its impact on the market

It would have the opposite effect. If everyone buys stock after you do, you make money because the stock price goes up. I would love it if everyone followed my stock purchases after the fact.

Yeah, it's even big market. "Successful" traders start paid newletters with stock alerts so people can follow their trades.

Thats just a "legal scam" and you know because if they would actually be successful trading they would not bother selling newsletters.

It is a scam and the same scam happens with sports betting, but it's a bit more nuanced than that.

Trader A buys a 50,000 person email list.

Sends 25,000 an alert that XYZ is going through the roof

Sends 25,000 an alert that XYZ is going through the floor

If XYZ stays flat, he repeats the process a bit later.

Whichever side loses is eliminated.

He repeats the process with 12,500 on each side of the position (more because presumably more people will sign up for his "picks") and you keep going from there.

Perhaps this made sense when you had to physically mail this.

With each round he loses half. Wouldn't it be better to just send all 50,000? Some of the 25,000 who were sent the wrong pick might have misunderstood, did not read it the first time around, would purchase because of brand awareness. With the cost of delivery the same you would be foolish to overlook this.

Usually the scam is just a pure pump & dump with no sophistication: Trader A sends 50,000 an alert that small-cap XYZ is going through the roof, then XYZ really does go through the roof because a large subset of 50,000 people buy it at the same time.

Also similar to how the "pump and dump" strategy works.

Well, every hedge fund/market maker has already been aware of this and they're managing far more money than the TikTokers so they move markets a lot more than TikTok.

So yeah, I don't think this really changes anything and all this information should already be priced in by the time the majority of TikTokers are trading on it.

I really wish there was some data on the type of returns Robinhood traders are getting (people who trade actively).

I'd definitely wager they're not beating the S&P 500 and they're getting even more screwed by short term capital gains tax rates (since their holding period is probably less than a year).

> I'm not a market expert, but... my gut tells me this would have some kind of corrective effect, wouldn't it? Amplifying the inside information, allowing others to capitalize on it, would even out the unfairness of the privileged position in some roundabout way, wouldn't it?

Wouldn't it just help the Congressmen's portfolios? A bunch of people buying after they do would help drive up the price of their investments.

Yeah, you're right. Though I still wonder if it could have an effect of raising awareness (and ire from certain parties) about this problem

Company A is about to be impacted by some legislation, congressperson B makes some "small" trades accordingly, then a bunch of people pick up on those trades and do the same thing, causing that company's price to spike or plummet in a way that's very clearly artificial and unfair either to the company or its competitors (or just traders who are upset about volatility)

Seems like a decent way to force the wealthy to care about this kind of insider-trading as a political issue

It could act like a Schelling point .

Think about this problem: a bunch of tiktokers want to do like Reddit with GameStop. But what stock to gang up on? Who proposes the stock? Having a neutral source for stock names can fix this synchronization power. Congressman traded stocks are a pretty good source, since you can't assume that your average tiktocker has any influence on that.

Yes, but it's also a form of "crowd sourced insider trading" around a person who won't be indicted, as they aren't part of the scheme... so far as I can tell. It's a loophole because no law has been written about it, as of yet.

Right, but if it gets enough awareness and has enough direct negative impact on people (particularly people with money and influence), it could become enough of a hot-button issue that lawmakers are pressured to write that law

Lawmakers are not going to write a law whose sole purpose is indicting lawmakers.

It certainly seems to be raising awareness of the problem. In terms of making insider trading fair, I think that is inherently impossible.

Yes, that’s what’s known as the efficient market.

Honestly people need to step back and ask if they're out-performing the market, and if so what risks they're taking to do so. Most portfolios are up over a 52 week period right now. I keep track of three numbers: what my risk-adjusted portfolio is doing, what my "fun money" portfolio is doing, and what the S&P 500 is doing. The numbers, correcting for holding periods, are 10.96%, 16.28%, 15.78%.

IOW the place I keep most of my money is underperforming $SPY and the hyper risky bets are barely out-performing $SPY.

I'd be fascinated to know what the Pelosi Portfolio is making YTD.

> Honestly people need to step back and ask if they're out-performing the market, and if so what risks they're taking to do so.

There is a further problem about this even if you are out-performing (for now): the feedback loop delay on if you are (or not) can be a long-time, especially if this is for long-term projects (e.g., retirement).

Nick Maggiulli:

> But, what about stock picking? How long would it take to determine if someone is a good stock picker?

> An hour? A week? A year?

> Try multiple years, and even then you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes immediately after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.

> And the payoff you do eventually get has to be compared to the payoff of buying an index fund like the S&P 500. So, even if you make money on absolute terms, you can still lose money on relative terms.

* https://ofdollarsanddata.com/why-you-shouldnt-pick-individua...

I think the idea is that since up until 2012, congress was simply allowed to trade on inside information, and it certainly feels like some didn't stop. In that mindset the risk is ameliorated by indirect access to additional information. Then why isn't the whole market doing it to the point that it doesn't make sense to follow? There's a lot of capital tied up in positions that look for extremely stable stores of wealth with as low risk as possible rather than something that would accept the idea of "we're fundamentally following illegal positions".

Surprised somebody doesn't start a fund that does this. Like an S&P Fund, call it the DC 435 fund that mirrors representative trades.

And another called the Donations 50 Fund that invests in the companies that are the biggest donors to senators.

> A Pelosi spokesperson said that she does not personally own any stocks and that the transactions are made by her husband. "The Speaker has no prior knowledge or subsequent involvement in any transactions," said the spokesperson."

This is so flimsy it's almost comical.

She doesn't need to know what her stock trading husband is doing. He needs to know what's happening in government before it's public. She knows this information, and they are a couple. Thus, unless she promises that she doesn't talk anything about her work to him, it is assumed that he will learn of things before the general public will.

Even if she doesn't talk to her husband specifically about her work, she probably spends a good amount of time talking on the phone or to aides where he can overhear.

Everybody made huge stock gains in the last year, it was hard work to fuck up in that market. It's not a hint for inside knowledge if you ask me and not a guarantee for future gains to follow another ones portfolio.

You must not remember those Congress people who traded in stocks after COVID-19 briefings. Wonder if you find that ok.

https://en.m.wikipedia.org/wiki/2020_congressional_insider_t...

I know. It's not ok. I'm not saying that having insights like that not giving an unfair advantage. Actually in my oppinion it's inside trading and and I cannot understand why there have been no consequences.

But I was only referring to the last year (12 month).

My personal portfolio had about 40% drawdown March and April 2020. It's back up 110%+ of pre corvid since then. And I have no insight knowledge at all, just a few tech stock picks (thank you Tesla and Google) and a foundation of MSCI World ESG ETF... crazy times.

Fun fact, I even managed to loose some Money with GameStop and AMC, so I'm really bad at it.

This is also a more succinct explanation for a lot of policy 'decisions' based on 'science' which are better explained by grift. "Professional association of embezzlers and frauds makes rules to maximize their loot... news at 5."

> it was hard work to fuck up in that market

It was actually pretty easy. Just sell after it dropped 15% and then wait for it to drop another 10%.

I sold AMZN at 2400 and didn't look at it for a while...

dman that sucks. the #1 rule of amazon stock is to never sell.

Sadly the gap between trades and reporting may eliminate the gain from this otherwise smart strategy.

Politicians, even with insider knowledge seem to be wrong pretty often too though. So I'm not sure it's necessarily a smart move.

Look at Rand Paul's purchase of Gilead, the makers of Remdesivir (anti-viral used to treat covid) all the way back in early Feb 2020. Despite purchasing it based on his early briefings for covid on the health and human services committee, before a pandemic was declared and only 1 day before Gilead started clinical trials for Remdesivir for covid, he is still underwater in that stock.

Even spending the last year and a half trying to convince the public that shutdowns are unnecessary and masks and mask mandates are useless and even fear mongering about the vaccine, he still hasn't changed the tide for that stock.

Not that you could have copied his trade anyway. He conveniently forgot to submit the report within the 45 day window and didn't report it until last month, 16 months later.

Pelosi or her husband bought a bunch of Tesla call options when TSLA was at $900 or so. Those are way underwater.

The significance of this is greatly exaggerated imo. If anything the fact that tic tockers are following these things speaks more to the overall speculative mania that’s been going on for the past couple of years in the stock market than anything.

First, if you look at Pelosi’s husbands trades over the past few years they haven’t been in some small cap companies where he’s front running obvious price-moving news like an FDA approval or an acquisition. He’s basically been using leap call options on mega cap technology stocks that are extremely liquid and owned by pretty much anyone with a 401k. I have yet to see a single one that smacked of obvious insider knowledge that would obviously move the price higher. I’d wager that if the average person were privy to the same info they’d probably still lose money for the simple fact that even if you know the news ahead of time it is very difficult to predict short term market reactions to it.

It seems pretty obvious that this is an example of correlation where you have a member of Congress who could be privy to inside info, a massive bull market, and some leveraged exposure to it that in reality anyone could have replicated. But the inside trading angle makes for a good story so people are quick to attribute any gains to cheating, when in reality a good portion of it is probably just luck.

Front-running is nothing new, this is simply a game of follow-the-leader where copying a group's investment strategy is done until larger players learn to frontrun or adversarially trade against the aforementioned frontrunners entering in. For example, a scanner may pick up an SEC filing published at 4:01 PM saying that the CEO, CFO, and CIO all purchased shares in their company, and traders would buy shares aftermarket before most institutions/derivative traders would see the report tomorrow morning. I'd guess that today's active investing crowd is a lot more interested in seeing outsize short-term returns based on information asymmetry than members of congress who more likely to hold in order to get long term capital gains tax applied.

If you want to label it, it's more 'pump and dump' than front-running isn't it? I understand the latter to be broker (or whoever) trading with knowledge of, ahead of in time, in front of, other orders? I.e. exactly the opposite of 'follow-the-leader'

It's certainly not frontrunning. Any time securities trading comes up on this site, there's at least one person trying to claim that X thing is frontrunning when it isn't even close to being able to be called that.

In practice, they want to be the first people to experience the price movement on newly public information, so you're right it wouldn't be front-running, my (incorrect) interpretation was that they would 'get in front of the trade made by C*O of fictional company before anyone else notices'. It's also not considered tailgating since they have no financial relationship with any of the executives, and acting on these fully disclosed positions would be completely legal.

https://www.quiverquant.com/sources/senatetrading

https://senatestockwatcher.com/

I'm of the opinion that elected officials should be required to disclosed transactions before they make them. A 45 day post-transaction window is plenty of time to make use of insider information.

I love that this links to text.npr.org. Another text-only news site is lite.cnn.com.

It's an underappreciated genre:

News Aggregators

http://68k.news - The best I've found. I don't know why it's not better known, but I found it by luck and don't know who is doing it.

https://f6oclock.com - seems to load stories in Outline.com. Serious real news, but I don't know how they are chosen or who is doing it.

---

Publications

https://nytimes.com/timeswire - chronological feed

https://guardian.gyford.com - Phil Gyford's interesting project; has the Guardian. Navigate to next/previous article by swiping, using arrow keys, h/l, a/d.

https://www.csmonitor.com/layout/set/text/textedition - Christian Science Monitor (an excellent publication), though they could use an easier-to-type-and-remember URL

Both of those websites detail who runs them:

68k.news - simplified html of google news from a guy who uses retro computers - https://youtube.com/ActionRetro

F6oclock - is a frontend for stories “rising” on /r/politics - https://github.com/j3parker/f6oclock

Sorry for the crappy formatting. I’m on mobile.

> "I'm at the point where if you can't beat them, join them," Josephs told NPR

I simultaneously love and hate that statement.

“Corruption for everybody!”

https://spectatorworld.com/topic/corruption-for-everybody-sl...

So they are... helping members of congress make money?

> "We don't want this to ... be a left vs. right thing. We don't really care. We just want to make money," he said.

You know what? That's a great idea. I love it.

Also didn't know husbands and wives in Congress had to disclose which stocks they bought because of the Stock Act. Very cool.

> We don't really care. We just want to make money

Very BobDobbsian.

We don't care about corruption? How modern. /s

If I trade stocks with insider information I am criminal, if congress and the Fed does this, this is just normal behavior. Since nothing will change, I hope these TikTok kids make money with this strategy.

There doesn’t seem to be much evidence that members of congress outperform the market [0], let alone the sector that investments are made in. Aside from a few suspiciously timed trades (eg short sells just before the Pandemic), is there any strong evidence in favor of Congress outperforming the market?

[0]: https://www.nber.org/papers/w26975?utm_campaign=ntwh&utm_med...

I imagine tracking this with lag creates possibilities for a lawmaker to take advantage of the expected "disclosure bump" in various ways. Wonder if any of them do.

Members of congress should not own or trade stock, full stop.

I am so surprised that this is even legal, it gives an extremely unfair advantage to congress as they have inside info on military contracts, lawsuits and if govt. agencies initiate investigations into companies. You want to end corruption in politics(well make it less corrupt) then barring congress from owning and trading stocks and other related securities is a good start.

FTA, you will be happy to know (and I agree):

> Congressman Raja Krishnamoorthi, a Democrat from Illinois, is part of a bipartisan group of House and Senate members who have introduced legislation banning lawmakers from owning individual stocks.

I don't understand how this would work. Owning stock is not some kind of investment only the elite have access to.

What about people who worked at a company that gave them a few thousand dollars in equity compensation? Would they forced to sell their stock?

Does this apply to an S&P 500 ETF, if so, why?

>Would they forced to sell their stock?

No, the proposed legislation does not affect your existing holdings you had before you become a Member of Congress, as long as you don't touch those holdings during your term of office.

"Members would also have the option of retaining their existing investments while in office, so long as they do not trade them while in office, or transferring their holdings into a blind trust. [0]"

>Does this apply to an S&P 500 ETF, if so, why?

No, since the S&P 500 is not an individual stock. All broad-based investments are exempt.

[0] https://krishnamoorthi.house.gov/media/press-releases/congre...

Presumably 'individual stock' is an inaccurate description, and the point is exactly not to apply to ('normal'/basket) ETFs. (But it's not trivial to define, since presumably you would want to ban 'Acme 3x Levered TSLA ETF' or short fund or whatever.)

So something you might find interesting there is a website out there https://senatestockwatcher.com/ that reports on the trades made by congress people and one of the things that was discovered is that many congress people have below or only slightly above returns on stock market trading.

That being said as far as I know it is only trades they make so there may be ways around it but just an interesting point of data.

> many congress people have below or only slightly above returns on stock market trading

This is an assumption unsupported by the data or this website.

We do not have accurate position details, nor exact dates and times for the trades, to understand their earnings. Further, Congress members only provide ranges of values for the trades they make, with a significant reporting delay.

Is it legal for Members of Congress to pass tips on, to friends and relatives?

Technically, insider trading is defined by anyone trading on or passing non-public knowledge to an "outsider".

So, yes.. if a Congress member passed along material information to someone that they traded on, both should get prosecuted. I'm not sure I've seen it happen to politicians in my lifetime, but totally should.

The 2012 stock act supposedly stopped this https://www.congressionalinstitute.org/2018/08/16/can-member...

Nancy Pelosi's (net worth $112m) recent financial activities with Emhoff make me very dubious about this.

https://fortune.com/2021/07/08/house-speaker-nancy-pelosi-hu...

etc etc

> Nancy Pelosi's (net worth $112m)

Significant portions of that are due to her being married to a venture capitalist and real estate investor.

They make a great team.

Separately I mixed up Paul Pelosi with Emhoff, Kamala Harris's current husband.

not legal but not easily detectable either

The article has a quote from Nancy's team that says she does not personally own any stocks and that the transactions are made by her husband.

Barring congress from owning or trading stock would do nothing in this case. Barring congress and their direct family members from owning or trading stock would just mean that Nancy's cousin or good friend suddenly becomes a genius investor.

Insider trading is already illegal. It's just not being enforced here, or it's too difficult to prove. (Or maybe her husband really is just psychic!)

While we're dreaming… serving officials (and anyone they can't be compelled to testify against) should have to, before taking office:

  1. Disclose their income and assets, and keep doing so each year while in office
  2a. Put all their liquid assets* into a blind trust, or better yet
  2b. Put all their liquid assets* into an index that tracks our economy (not just The Market)

* Minus reasonable living expenses—we wouldn't want them to go hungry, now would we?

It really doesn't matter. They're puppets anyhow and this, along with the sweetheart sinecures at banks, drug companies, etc, are just compensation for being figureheads.

Think about it, people that are signing off on trillion dollar checks are only getting million dollar kickbacks. They're not in charge. It's literally an order 1/10^6 cut.

I can't imagine how we could prevent a duly elected representative of a congressional district from being sworn in if they refuse to sell their stock portfolio. It would amount to disenfranchisement.

It's more complicated than that. If you prohibit stock ownership, they will cheat with every other asset class. (Real estate deals are easy too). If you prohibit all asset classes, it means only poor people can run for office - so they give inside tips instead to their brother, son, or campaign donors while maintaining a laughable illusion of poverty.

It's a tougher problem than it appears to be.

How do other countries contend with these issues? America is not the be-all, end-all, and your comment seems to imply that this problem has never been wrestled with except hypothetically.

That's a good question. I know my comment sounds defeatist. Another commenter suggested requiring trades be announced in advance. Sometimes blind-trusts are used, but there's not much to show they make a difference. Opening up hearings and Congressional communications helps. Honestly it's a tough problem.

I don't think there's any country that has truly solved these issues; at best, they mitigated them. Politicians everywhere are quite a bit richer than your average citizen.

The easy solution here is to just vote her out of office as she's (Pelosi) obviously corrupt, put the partisan nature of American politics makes that very difficult.

I wish we could easily pinpoint a handful of people who do this (or any kind of conflict of interest) and replace them. Unfortunately it is a systematic problem, and if you tell me x from congress does not do it I’d have a hard time believing it.

Do you think it's just one person?

and you think her replacement wouldnt take advantage of the free money? also, obviously, she's already far from the only one [0]

0: https://www.bloomberg.com/opinion/articles/2020-03-20/senato...

I'm curious how many times she doubled her money over her career.

Some people will turn themselves into a pretzel to deny the possibility of a conspiracy. Its quite amazing to watch.

Its the like the counter opposite of the person that believes every conspiracy theory.

They'll string implausible explanations like a christmas lights. Ignoring that probability is multiplicative not additive.

Congressional reps of both houses have no business trading in securities. The potential for conflicts of interest is too high.

Humans are filthy creatures. So wherever they live, they attract rats. Rats who are seen as a filthy problem to the humans so they kill the rats.

Any bets how long until Congress makes it illegal to follow their stock moves because following them is "insider trading?"

It would funny to have ETF named after politician that are tethered with their portfolio.

I noticed there is a call to prevent members of Congress and whatnot to be prevented from holding stocks.

That won't happen. Ever.

What's more likely is that their transactions will be exempt from being made public... they make the laws afterall :)

There is fair bit of data available here about net worth of Congress members. While they all do way better than SP-500 in terms of higher net worth I believe only fraction of it comes from stock market. At any rate I will not waste my time tracking their investments.

https://ballotpedia.org/Changes_in_Net_Worth_of_U.S._Senator...

Well, to do the exact same trade, they would need to place the trades at the same time. What they are doing is coming late to the party. Like these altcoin telegram channels, by the time the operators say it's still pumping, they have already placed the sell orders.

But this could have another cascading effect, if the tiktokers followers do the same after them, the price might go up in the cryptocoin space, but not on the stock market.

Sounds ripe for a congress pump and dump scheme.

Why do we allow Congress to hold any assets?

When in doubt, do as the real crooks do.

Pelosi's Trades: https://housestockwatcher.com/summary_by_rep/Hon.%20Nancy%20...

everyone load up!

What percentage of total federal expenses should go towards the salaries of the people running the federal government?

How much is it now? There are 535 members of Congress and they each get about $200k. That means we are paying $107 million to run a government of ~$7.3 trillion.

In other words, about 1 thousandth of a percent of government costs goes to pay for the people doing the governing.

It just seems like maybe paying these people a lot more would reduce corruption and help them work better together as professionals.

In conjunction with eliminating their ability to trade, yes. Otherwise it will be like trickle-down economics-- they'll just use their higher salary to trade on even more inside information and make even more money.

A government is a lot bigger than elected officials. The US federal government has more than 1 million employed people, and a lot of them work in positions that are vulnerable to large scale or at least mid scale corruption attempts.

If I was using bribes and "lobbyist gifts" and similar to push an agenda, I wouldn't just go after the elected officials, I would concentrate on going after the people who work for them, to be honest.

>In Fiscal Year 2017 (FY 2017), the largest 24 federal agencies - known as CFO Act Agencies* - obligated a total of $115 billion in personnel compensation.

https://datalab.usaspending.gov/federal-employees/

It’s not the pay but the benefits they get and connections they make. IIRC, there was an article published few years ago analyzing how the net worth changed before, during and after being congressman. Pretty much everyone's networth increased significantly.

don't know why you're being downvoted. i agree with you. you want the best possible people wanting to do this job, without having to sacrifice their compensation relative to the private sector. i think this works well for singapore.

You can just trade on…momentum. Past ten years. One factor only.

If you want to get cute you could modify it to include market cap threshold.

Won't work if depending on delayed disclosures. If able to track account activities, then yes, it could work.

Someone is going to miss the sell-off by approximately 45 days /s

This is great for people that want to follow certain philosophies.

And guess what? This following of "smart money" is in fact a self-fulfilling prophecy: after let's say Pelosi/her husband bought some stocks some large group of retail traders jump in and pump the price higher.. It likely has a negligible effect on highly liquid names like AAPL or GOOGL but might cause a significant price move for a smaller/less liquid names

And by doing that, we're further enriching members of Congress. We should be taking a mass oath to sell any stock they buy. Then, of course, they'd only invest in potential opponents' corporations. It could turn into a real arms race.

We need to just pass a law already that forbids them from purchasing or owning individual stocks. After all, assuming they aren't trading on insider information, it would be to their own benefit anyway.

Then their cousins and very close friends will do the trading on their behalf.

Yes, that's a better but less funny suggestion, and would be more practical if they didn't pass the laws.

Aside from the trading/financial aspect of the story, why is it specifically about TikTok? I don't see anything specific about what's going there than to what's going on on Telegram trading groups, subreddits, or some Twitter accounts.

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