"The ultimate insiders"

[S2S]

Seems like BRK and the U.S. Congress have a common issue: lack of a compliance officer  ;D

The Holy Grail of investing has been found: get elected to the U.S. Congress.

 

According to an academic study published Wednesday in the journal "Business and Politics," members of the House of Representatives outperform the average stock-market investor by 55 basis points a month, or 0.55 percentage points, according to the Washington Times, which brought it to my attention. Extrapolated over a full year, that figures to an extra 6.8% per annum after compounding -- better than hedge-fund superstars.

 

To add just 68 basis points, let alone 680 basis points, consistently makes you the equivalent of a lifetime .300 hitter in the Big Leagues. Most money managers trail the market, especially after expenses are deducted. After all Wall Street is not Lake Wobegone; not all managers can be above average.

 

To give an indication of what House members' outperformance is worth, investing at the stock market's long-term total return of 10% would mean $10,000 would grow to $25,937 in 10 years. But with their special investment acumen, their 16.8% annual returns would leave them with $47,253 in 10 years.

 

The authors of the study -- Alan J. Ziobrowski of Georgia State University, James W. Boyd of Lindenwood University, Ping Cheng of Florida Atlantic University and Brigitte J. Ziobrowski of August State University -- found that House members generated those excess returns in the stock market during 1985 to 2001, great bull market years, and not by accident.

 

"We find strong evidence that Members of the House have some type of non-public information which they use for personal gain," the authors concluded.

 

But, they add, House members' excess equity returns trail those of Senators during the same time period, according to their previous study of investment return of the upper house -- some 85 basis points a month. Annualized, that figures to 10.7% per year after compounding.

...

http://online.barrons.com/article/SB50001424053111904433604576346981994360302.html?mod=BOL_hps_highlight_bottom

 

[Liberty]

Seems like BRK and the U.S. Congress have a common issue: lack of a compliance officer  ;D

 

I know you're kidding, but it reminded me of what Munger said (iirc): "You know who had a huge compliance department? Lehman Brothers."

 

(or did he say Enron? not 100% sure on the exact quote..)

[ERICOPOLY]

It is legal for congressman to trade on government inside information.  So for example if they are about to investigate the banks, they can legally sell their bank holdings before the public is aware of the investigation.

 

Several times legislation has been proposed to make such trading illegal, but it keeps getting voted down by the congressman.  Go figure!