Digest

The Planet Money team explores the controversial practice of members of Congress trading individual stocks. They invest in two exchange-traded funds, one based on Democratic lawmakers' trades (Nance) and the other on Republican lawmakers' trades (Cruz). The Nance ETF, which tracks companies held by Democratic members of Congress, has outperformed the market in the past, while the Cruz ETF, tracking Republican members' holdings, has lagged behind. This raises questions about whether politicians are using insider information to profit from the stock market. While some argue that members of Congress should be banned from trading individual stocks, others point out that their trading performance is not significantly different from random stock picks. A study involving reindeer at a Christmas theme park even found that the reindeer outperformed Congress members in stock selection. Ultimately, the Planet Money team will track their investments in the Nance and Cruz ETFs to see how they perform over time.

Outlines

00:00:00

Introduction

This Chapter introduces the topic of the podcast episode, which is the practice of members of Congress trading individual stocks. It also introduces the two exchange-traded funds (ETFs) that the Planet Money team will be investing in, one modeled after Democratic lawmakers' trades and the other after Republican lawmakers' trades.

00:00:13

Investing in Congressional Trades

This Chapter delves into the details of the two ETFs, Nance and Cruz, which are modeled after the trading activities of Democratic and Republican lawmakers, respectively. The hosts explain how these ETFs are constructed and the rationale behind their creation. They also discuss the potential ethical implications of politicians trading individual stocks.

00:00:30

The Ethics of Congressional Stock Trading

This Chapter explores the debate surrounding whether politicians should be allowed to trade individual stocks. It features the perspective of Josh Graham-Lynn, CEO of Represent Us, an anti-corruption advocacy group, who argues for a ban on such trading. The chapter also presents research by Bruce Cessadote, a professor of economics at Dartmouth College, who found that congressional trading performance is not significantly different from random stock picks, even outperforming by reindeer.

00:09:08

Conclusion

This Chapter concludes the episode by summarizing the key points discussed and highlighting the Planet Money team's investment in the Nance and Cruz ETFs. They will track the performance of these investments and report back on their findings in a future episode.

Keywords

Q&A

• What are the two exchange-traded funds (ETFs) that the Planet Money team is investing in?

  The Planet Money team is investing in two ETFs: Nance, which tracks the trading activities of Democratic members of Congress, and Cruz, which tracks the trading activities of Republican members of Congress.

• What is the main argument for banning members of Congress from trading individual stocks?

  The main argument for banning members of Congress from trading individual stocks is that it creates conflicts of interest and undermines public trust in government. Critics argue that politicians may use insider information to profit from the stock market, giving them an unfair advantage over ordinary investors.

• What did Bruce Cessadote's research find about the trading performance of members of Congress?

  Bruce Cessadote's research found that the trading performance of members of Congress is not significantly different from random stock picks. In fact, his study even found that reindeer outperformed Congress members in stock selection.

• What is the significance of the reindeer study in the context of the podcast?

  The reindeer study is significant because it highlights the fact that even random stock selection can outperform the trading performance of members of Congress. This suggests that there is no evidence of systemic insider trading by politicians, but it also raises questions about the effectiveness of their investment strategies.

• What is the Planet Money team's goal in investing in the Nance and Cruz ETFs?

  The Planet Money team's goal in investing in the Nance and Cruz ETFs is to see how these ETFs perform over time and whether they outperform the market. They are also interested in tracking the performance of these ETFs in relation to the overall stock market and the trading performance of members of Congress.

Show Notes