DiscoverThe Indicator from Planet MoneyInvest like a Congress member
Invest like a Congress member

Invest like a Congress member

Update: 2024-06-182
Share

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

Nance ETF
An exchange-traded fund (ETF) that tracks the trading activities of Democratic members of Congress. It is named after former Speaker of the House Nancy Pelosi. The ETF's portfolio includes companies held by Democratic lawmakers and their families.

Cruz ETF
An exchange-traded fund (ETF) that tracks the trading activities of Republican members of Congress. It is named after Republican Senator Ted Cruz from Texas. The ETF's portfolio includes companies held by Republican lawmakers and their families.

Insider Trading
The illegal practice of using non-public information to make a profit in the stock market. Insider trading can involve using confidential information about a company's financial performance, upcoming mergers, or other material events to buy or sell stocks before the information is publicly available.

Exchange-Traded Fund (ETF)
A type of investment fund that tracks a specific index, sector, or commodity. ETFs are traded on stock exchanges like individual stocks, offering investors a way to diversify their portfolios and gain exposure to a particular market segment.

S&P 500
A stock market index that tracks the performance of 500 large-cap U.S. companies. It is widely considered a benchmark for the overall U.S. stock market and is often used as a proxy for the performance of the broader economy.

Represent Us
An anti-corruption advocacy group that advocates for reforms to the political system, including a ban on members of Congress trading individual stocks. The group believes that such trading creates conflicts of interest and undermines public trust in government.

Bruce Cessadote
A professor of economics at Dartmouth College who conducted research on the trading performance of members of Congress. His study found that congressional trading performance is not significantly different from random stock picks, even outperforming by reindeer.

Reindeer
A type of deer native to Arctic regions. In the context of the podcast, reindeer were used in a study to test the performance of random stock selection. The reindeer were allowed to pick stocks by walking on pages of the Wall Street Journal, with their hooves determining the chosen stock.

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

There are some new funds that track stock trading by members of Congress and their family. So we thought, why don't we get in on that? Today on the show, we crack open the Planet Money Investment Jar to learn more about how our political leaders play the market, investing in funds tracking Democratic and Republican stock trades.

Whether Congressional stock trading should be limited is a hotly debated matter. So to test whether lawmakers are beating the market, Dartmouth College economist Bruce Sacerdote and his co-authors pitted lawmakers' stock picks against reindeer at a Christmas-styled theme park.

Trust us for this ride! It'll all make sense with some intriguing results.

Related listening:
Stock traders are trying to beat the market — by copying lawmakers
WTF is a Bitcoin ETF? (Apple / Spotify)
Planet Money's Toxic Asset
Planet Money Summer School: Investing

For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org.

Music by
Drop Electric. Find us: TikTok, Instagram, Facebook, Newsletter.

Learn more about sponsor message choices: podcastchoices.com/adchoices

NPR Privacy Policy
Comments 
loading
00:00
00:00
1.0x

0.5x

0.8x

1.0x

1.25x

1.5x

2.0x

3.0x

Sleep Timer

Off

End of Episode

5 Minutes

10 Minutes

15 Minutes

30 Minutes

45 Minutes

60 Minutes

120 Minutes

Invest like a Congress member

Invest like a Congress member