Elected Officials Use Inside Information — So Can You
In February 2020 on the eve of the pandemic, then-Senator Kelly Loeffler and then-Senator Richard Burr, former chairman of the Senate Intelligence Committee, were secretly briefed on the impending COVID-19 crisis.
Then, they did exactly what you’d expect any American lawmaker to do with privileged information: They sold millions of dollars worth of stock in travel, lodging and entertainment companies before the market showed any signs of March 2020’s crash.
In total, the two senators netted around $21.7 million dollars before their shares of companies including Wyndham Hotels and Extended Stay America plummeted.
Loeffler, whose husband is the chairman of the NYSE and the founder, CEO and chairman of Intercontinental Exchange, was cleared of any wrongdoing by the U.S. Ethics Committee in June 2020. And in January 2023, the SEC ended its insider trading investigation of Burr without taking action.
A Pattern
As much as we wish this was a one-off, it’s part of a disturbing pattern. For a more recent development, let’s turn to the airline industry. In case you’ve been living under a rock, Boeing (BA) has been dealing with some terrible PR lately.
From their haphazardly assembled planes having windows blowing out and wings falling apart to a whistleblower — who told his friends that if he winds up dead, it’s not suicide — turning up dead from a self-inflicted gunshot wound on the day of his deposition … it’s been a rocky Q1 for the aerospace company.
On Feb. 28, Representative William Keating sold around $15,000 worth of Boeing shares. One day later on Feb. 29, the Department of Justice announced it was opening an investigation into the company. Shares are down -13% since that announcement, a loss Keating fortuitously avoided.
And while politicians have their pockets lined by lobbyists and use insider information to continuously grow their wealth, the American plebeian class is not-so-shockingly left behind.
However, that doesn’t have to be the case.
Trade Like a Crooked Legislator
Thanks to the STOCK Act, lawmakers are required to file disclosures when they make financial transactions. There are a number of websites that track this information, but our favorite is Quiver Quantitative.
One of the website’s features is the Congress Trading Dashboard, which details recent trades, key metrics and the most active traders.
Take, for example, college-football-coach-turned-Senator Tommy Tuberville, who sits on the Senate Agriculture Committee.
On Feb. 27, he purchased as much as $100,000 worth of stock in Golden Ocean Group (GOGL), one of the largest dry bulk shipping companies in the world that transports grains and fertilizers.
Since that date, shares are up over 8.28% vs. the S&P’s gain of just 1.51%.
Quiver Quantitative allows you to drill down into politicians’ trade histories and portfolios. Continuing the Tuberville example, since taking office, he’s:
- Made 1,132 trades.
- Totaling $31.58 million in volume.
- Mostly in two sectors (tech and materials).
- With as much as $1 million of stock in United States Steel (X) purchased in August 2023 … a position that was up 114% by the end of last year.
Politicians get a bad rap for a reason. But so long as they’re taking advantage of the system, there’s no reason average investors can’t benefit from their privileged information.