Defensive Investing in Congress | Q1:2020 Excerpts

Defensive Investing in Congress

Congress’ defensive investing has been broader than suggested by recent reports on such investment activity in the United States Senate, most notably Sen. Burr (R-NC) and Sen. Loeffler (R-GA). We note that several other members of Congress beyond the headlines have been adopting a more defensive investment strategy throughout 2020 without comment on a relationship to the C-19 pandemic. In fact, one of the more aggressive series of trades we flagged began before C-19, but remains notable for how suddenly the strategy (shorting the S&P) was adopted. Our core thesis in producing this research is that it is more useful to track behavioral trends in a population of well-placed investors to inform other investors, than it is to argue whether or not any given set of trades constitutes action on privileged, or otherwise “insider”information.

While the full details of our analysis and dossiers will shortly be available to subscribers, the following excerpts offer some data to illustrate larger trends in recent defensive investment behavior that we have flagged in the first quarter of this year. We believe that it is worthwhile to study the investment trends among politicians and their staff within this broader context. Moreover, the general media has already provided exceptional, in-depth coverage of higher-profile transactions. Our mission is to study the investment trends of the body of elected official and their proxies as a whole.

There is no evidence that these legislators and their spouses used nonpublic information or failed to follow policies on disclosure in conducting these transactions. Additionally, as we have noted elsewhere, Congress’ possession of nonpublic information comes with the job. Isolating the “true cause” of an investment decision is beyond our ability. We can, however, note substantial shifts in apparent investment strategy and deviations from median behavior and other central tendencies. Below we list four excerpts from our dossiers and database that illustrate this shift toward more defensive portfolio holdings.

1) Alan Lowenthal (D-CA-47) has taken a sizable short position against the S&P500.

2) Tom Rice (R-SC-7) liquidated a meaningful portion of his stock holdings in February.

3) Vern Buchanan (R-FL-16) liquidated a meaningful portion of his high-yield bond portfolio in January.

4) Mike Gallagher (R-WI-8) liquidated the majority, if not the entirety, of his stock positions in January.

While each individual set of transactions will likely hold up to scrutiny under the strict lens of provable insider trading allegations, these transactions taken together with others (including those of the Senators covered recently in the general press) do indicate an aggregate shift in Congressional investment sentiment in Q1 2020. It is FinePrint’s mission to document and analyze such aggregate political investment sentiment for our subscribers.

We thank you for joining us.


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