Move over Warren Buffett! There's a new investor in town, and her name is Nancy Pelosi.
The Miracle of Omaha has nothing on the great stock picker, Speaker of the House Nancy Pelosi. With an estimated net worth of $100 million, Nancy is one of the richest politicians in Washington. With a $200K salary, much of her wealth has been derived from her investments. Recently, news has been circulating with allegations that she and her venture capitalist husband Paul Pelosi have engaged in insider trading. Frankly, I am dumbfounded and appalled by such unfounded allegations and ridiculous attacks on her moral character. She has done nothing wrong.
A reporter asked, “Over the course of your career, has your husband ever made a stock purchase or sale based on info he received from you?” To which, she replied, “No, absolutely not!” before pushing away the microphone and making a swift exit. When asked if members of congress and their spouses should be allowed to trade individual stocks, Speaker Pelosi argued that it’s a free market economy, and everyone should be able to participate. I couldn’t agree more! Lawmakers should be able to trade stocks as much as they want. How else will they be able to supplement their meager six-figure salaries? As policy makers, the Washington elite may be privy to material, nonpublic information, but they would never use this knowledge to trade and amass a personal fortune. They may pass rules and regulations that influence the very companies that they invest in, but that’s just a coincidence. Speaker Pelosi and members of Congress have been ordained by God himself to righteously rule over us dissolute plebeians. We can trust them completely. That’s why they were elected to high office in the first place, right? Because they are better than us. They are paragons of virtue and moral excellence. All their financial dealings are fair and ethical and shouldn’t arouse suspicion of any sort.
Here are a few instances of some perfectly timed trades by investor savant Paul Pelosi that have raised some eyebrows.
He bought between $1M-$5M of Nvidia stock a month before the announcement of the Senate passing the CHIPS-Plus bill, which includes $52 billion dollars in funding to boost US semiconductor manufacturing via subsidies.
He invested millions in Apple, Amazon, and Alphabet (Google’s parent company) one week before the House Judiciary Committee pushed antitrust legislation against big tech. This legislation hasn’t become law and has fizzled out over the summer.
He made a big purchase of Microsoft stock in March of last year before two big announcements in March and April: $22 billion contract with the US Army to purchase augmented reality headsets and the $19 billion acquisition of Nuance Communications, a company making speech recognition technology.
He invested in $1 million worth of stock options in electric car maker Tesla several weeks before President Biden announced that they would replace the federal government’s fleet with electric cars.
Back in 2008 he participated in an IPO for Visa, allowing him to buy 5000 shares only available to a limited number of investors. Nancy Pelosi was later accused of dragging her feet on legislation that would prevent credit card companies like Visa from charging swipe fees to vendors. The legislation passed two years later.
All these examples are nothing more than random occurrences and do not expose any corruption or wrongdoing. In fact, Paul sold millions of dollars of Nvidia stock at a loss of $341,365 a day before the passing of the CHIPS-Plus bill mentioned above. What a guy, selling for a loss just to prove that he wouldn’t take advantage of upcoming legislation that could move the market.
Historically, there haven’t been many restrictions on stock trading from members of Congress. The insider trading laws that exist for chief executives like CEOs and CFOs haven’t really applied to those on Capitol Hill. And they don’t need them, because they would never do that. In 2012 congress passed the STOCK Act, a piece of legislation designed to do three things: 1) prevent members of Congress from trading stocks based on inside information, 2) stop conflicts of interest, and 3) increase transparency. This law was enacted in response to politicians trading and profiting during the 2008 Global Financial Crisis and the legislative debate of the Affordable Care Act (Obamacare) in 2009-10. It requires lawmakers to disclose any stock trade over $1K within 45 days. Despite the law, many lawmakers fail to report their stock trades in a timely manner with excuses like ignorance of the law, clerical errors, and mistakes made by an accountant. Business Insider details instances of 66 members of Congress who have violated the STOCK Act. What’s the penalty for failure to comply with these rules? A hefty $200 fine! That’s a lot of money in today’s inflationary environment. However, the more likely punishment for this crime is…nothing.
Congress loves to trade. Looking at data compiled by Unusual Whales, Congress bought and sold $290 million worth of stock, $140 million in options contracts, $124 million in other securities like private equity funds, and $500K in cryptocurrencies. By sector, tech stocks and industrials (oil and gas) were the preferred choice. These tech companies include the likes of Microsoft, Paypal, Alphabet, and Facebook, while the industrials include Antero Midstream, Shell Midstream Partners, USA compression Partners, and Energy Transfer.
As it turns out, politicians make for pretty good investors. Comparing the return of the SPY (S&P 500 index ETF) over the same period, they on average beat the stock market. House Democrats and Senators yielded returns of +14.7%, Senate Democrats yielded +15.4%, and Senate Republicans yielded under +13%. SPY returns yielded around +13.6% for the same period. The figure below shows all the members of Congress who beat the market in 2021. Again, this has nothing to do with inside information; their intelligence and investing acumen just exceed ours. They were smart enough to be elected to high office after all.
Pelosi’s actions have led to her colleagues, on both sides of the political aisle, introducing legislation barring members of Congress and their spouses from trading individual stocks. Under legislation introduced by Republican Senator Josh Hawley, Congress would have to sell their stocks or place their portfolios in a blind trust. All stock trading would be banned, and all trading profits would be redistributed to the American people. They could still invest in diversified mutual funds and ETFs. Democratic Senator Jon Ossoff alongside Senator Mark Kelly introduced similar legislation effectively banning Congress and their families from playing the stock market. “Members of Congress should not be playing the stock market while we make federal policy and have extraordinary access to confidential information," Senator Ossoff said.
You can follow the stock trades of the Queen of Investing on platforms like TikTok, Reddit, and other social media apps for those who seek a similar fortune. Remember though, their success is due to a combination of luck, skill, and definitely not inside information.