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Trade Like a Politician 💹
Owen
September 12, 2024
In partnership with
Welcome to Alternate Universe!
In today’s edition:
Trade like a Politician 💹
Job opportunities at recently funded European startups 👇
Goldman Sachs’ ChatGPT blunder 😅
Learn from investing legends.
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The Crux 🔴
Hey there!
I recently stumbled on a new YouTube channel owned by Morning Brew, called Good Work. The channel offers a funny yet insightful investigation into sports betting and ballooning CEO paychecks among other topics.
One of their videos - Wait why can politicians trade stocks? - caught my eye.
You already know what time it is.
🐰🕳️⌚
What? 🧐
When people think of legendary investors, names like Warren Buffett, George Soros, Peter Lynch, and Ray Dalio often come to mind. However, one figure who might surpass them all is Nancy Pelosi.
As the U.S. Representative for California's 11th Congressional District, Pelosi has had a long and storied career. While she stepped down from her role as Speaker of the House, her influence remains strong as she continues her legislative work in Congress.
At 84, Pelosi shows no signs of slowing down. She recently announced her bid for re-election in 2024, signaling her intention to remain active in both politics and public service.
Beyond her political accomplishments, Pelosi has also made headlines in the financial world. In March, she purchased over a million dollars’ worth of options in Palo Alto Networks. Her investment was followed by a nearly 20% surge in the company’s stock price over the subsequent days.
An option purchase in Forge Global, a private securities marketplace, triggered a similar reaction.
Impressive, Nancy. Impressive.
But it’s not just Nancy who’s making waves in the market.
Several members of Congress have been actively trading. Leading the pack in 2023 are Ro Khanna and Michael McCaul, both of whom made a significant number of trades—yet interestingly, they’ve underperformed the market.
Others, however, have outpaced it. Thanks to NVIDIA's remarkable surge, Brian Higgins and David Rouzer saw impressive returns. Meanwhile, Seth Moulton raised eyebrows when he sold $250,000 worth of Activision Blizzard stock just one day after the Federal Trade Commission filed to block the company’s merger with Microsoft.
Suspicious? Perhaps. 🐟
Moulton claimed the merger information was public at the time of his trade.
How? 🛠️
Since 2012, U.S. congressional members have been prohibited from engaging in insider trading. The Stop Trading on Congressional Knowledge (STOCK) Act also requires them to disclose securities trades within 45 days. However, many have either delayed these disclosures or failed to file them altogether.
While the act mandates transparency, critics argue that politicians, who may have access to privileged information, should be banned from trading stocks entirely.
In response, U.S. Senator Jon Ossoff of Georgia recently introduced a bill requiring all members of Congress, along with their spouses and dependent children, to either place their stocks in a blind trust or sell their holdings. This measure aims to prevent them from using insider information for personal financial gain.
Investment Implications 🤑
Let’s look at the options available to the retail investor.
Enter, Quiver Quantitative, a fantastic tool that lets you track US Congress trading activity, among other interesting datasets.
Investors can monitor politicians' activities and trades manually based on their actions.
If you’re too lazy to do that, there are 2 other options.
Two namesake ETFs - NANC and KRUZ - launched last year by Subersive Capital, reflect Democratic and Republican trades respectively. NANC has so far outperformed KRUZ both in returns (43% vs 19%) and AUM.
Exposure to political influence can also be obtained indirectly.
Political capital, companies’ investments in lobbying, is an intangible asset often undervalued by the market. A report by Sparkline Capital investigates whether excess investment returns can be earned by picking stocks with higher political influence.
Previous studies showed a positive return on political influence estimated between 20-200x. This implies political spending has a considerably greater payout than other intangible investments, such as R&D or advertising.
By running a backtest on donation yield, it was shown that firms associated with greater political donations relative to their stock price, beat the Russell 1000 by 2.2% per year.
Dig Deeper ⛏️
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Headhunted 🦅
Recently funded private companies need talent! Scout jobs at recently funded European startups, ahead of your competition. 💪
Calxyia 🇫🇷 - Microencapsulation company has raised $35m in a Series B round. (link)
Reonic 🇩🇪 - The German SaaS company has closed a €13m Series A to grow its OS for renewable installers (link)
Ucaneo 🇩🇪 - Direct air capture startup wraps up a €6.75m seed round. Multiple engineering roles (link)
Retraced 🇩🇪 - The compliance startup closed a €15m Series A. Hiring product marketing managers in Germany, Spain, Italy (link)
Interestingness📔
📚 New to investing? Grab a PDF copy of my ebook here.
As always, the financial disclaimer!
This is not investment advice. I am not a financial advisor. Make sure to conduct your thorough research before purchasing or selling financial products.