So last year earlier this year when this issue was getting a lot of attention, this chart produced by unusualwhales.com was spread around:
Looks kind of bad, right? SPY is being used for comparison, and it’s near the bottom of that chart. Look at all those congress critters playing the market and winning! They must be corrupt.
Except that this is a small fraction of the total membership of the US Congress. Out of 435 Representatives and 100 Senators, the 32 members shown here represent 6% of congress, and they have been specifically selected as the top performers. There’s nothing exactly wrong with showing them in a chart this way, but it’s very important to understand that this means 94% of congress members did not beat SPY. If you have the idea that congress members in general are substantially profiteering from stock trading, that is directly contradicted by the evidence.
OK, so what about these top performers? Are they individually corrupt? How could we know?
If certain members of congress were regularly using their legislative access to earn profit on the stock market, well that should show up in long-term statistics. If they do this a lot, they should be beating SPY consistently, right?
So we can look at the larger chart from the 2023 report:
And then we can compare it with the one from 2022:
And so do we see any correlations? Well, no not really. The names at the top of 2023 are completely different from 2022. Nancy Pelosi actually lost about 20% of her portfololio value in 2022. There are a couple names that appear on both lists but their performance varies wildly from one year to the next.
Obviously 2 years isn’t enough data to identify real trends, but at least in this context we can see that you can’t really justify the idea that stock trading corruption is common in congress. Only a small fraction of congress members do better than SPY in either 2022 or 2023, and they aren’t the same people year to year.
The vast majority of congress members have lower returns than SPY, and that is the only actual trend supported by the data.
I get it but beating the market by whatever percentage is not the deciding factor in whether or not you’re making an insider trade. I expect lawmakers to follow the same laws as the rest of us.
Statistically, as a group, congress members are doing no better in the market than any average trader, and many of them are in fact doing worse. If you have some evidence that actually shows there is some broad corruption involved (not with one or two, but like with a statistically significant number of them, say >10%) I would be very interested to see it.
Otherwise, you’re just making vague implications based on assumptions.
I replied in a different thread but breaking it down YoY is deeply dishonest especially when we had a devastating market performance year. It’s also important to remember that stock trading is (mostly) a zero sum game where some cohort of traders having insider information means that everyone else has less potential to make money. It’s one of the reasons why insider trading is so illegal… an information cartel would be highly profitable while accelerating wealth inequality.
So
last yearearlier this year when this issue was getting a lot of attention, this chart produced by unusualwhales.com was spread around:Looks kind of bad, right? SPY is being used for comparison, and it’s near the bottom of that chart. Look at all those congress critters playing the market and winning! They must be corrupt.
Except that this is a small fraction of the total membership of the US Congress. Out of 435 Representatives and 100 Senators, the 32 members shown here represent 6% of congress, and they have been specifically selected as the top performers. There’s nothing exactly wrong with showing them in a chart this way, but it’s very important to understand that this means 94% of congress members did not beat SPY. If you have the idea that congress members in general are substantially profiteering from stock trading, that is directly contradicted by the evidence.
OK, so what about these top performers? Are they individually corrupt? How could we know?
If certain members of congress were regularly using their legislative access to earn profit on the stock market, well that should show up in long-term statistics. If they do this a lot, they should be beating SPY consistently, right?
So we can look at the larger chart from the 2023 report:
And then we can compare it with the one from 2022:
And so do we see any correlations? Well, no not really. The names at the top of 2023 are completely different from 2022. Nancy Pelosi actually lost about 20% of her portfololio value in 2022. There are a couple names that appear on both lists but their performance varies wildly from one year to the next.
Obviously 2 years isn’t enough data to identify real trends, but at least in this context we can see that you can’t really justify the idea that stock trading corruption is common in congress. Only a small fraction of congress members do better than SPY in either 2022 or 2023, and they aren’t the same people year to year.
The vast majority of congress members have lower returns than SPY, and that is the only actual trend supported by the data.
I greatly appreciate this data!
And appreciate being corrected on my overstatements.
I get it but beating the market by whatever percentage is not the deciding factor in whether or not you’re making an insider trade. I expect lawmakers to follow the same laws as the rest of us.
Statistically, as a group, congress members are doing no better in the market than any average trader, and many of them are in fact doing worse. If you have some evidence that actually shows there is some broad corruption involved (not with one or two, but like with a statistically significant number of them, say >10%) I would be very interested to see it.
Otherwise, you’re just making vague implications based on assumptions.
The number of people trading with insider information also isn’t a deciding factor in whether it’s illegal.
Here’s at least one case that’s pretty clear cut I feel, so it does happen - https://www.politico.com/news/2024/07/10/democrats-mike-garcia-boeing-stock-00167225
If they’re going to say this is a tough rule to follow they’re already too far gone and as you said most would do better just buying SPY anyway.
I replied in a different thread but breaking it down YoY is deeply dishonest especially when we had a devastating market performance year. It’s also important to remember that stock trading is (mostly) a zero sum game where some cohort of traders having insider information means that everyone else has less potential to make money. It’s one of the reasons why insider trading is so illegal… an information cartel would be highly profitable while accelerating wealth inequality.