DeepSummary
The episode explores new exchange-traded funds (ETFs) created by a trader called Unusual Whales that mimic the stock investments made by Democratic and Republican members of Congress. The funds, called Nance (after Nancy Pelosi) and Cruz (after Ted Cruz), allow everyday investors to track the investment strategies of the two parties.
The hosts, Waylon Wong and Darian Woods, invest $77.35 from the Planet Money jar into one share of each ETF to analyze their performance. They find that the Nance ETF is up 20% year-to-date, outperforming the S&P 500, while Cruz is up 9%, underperforming the market.
The episode delves into the ethics of congressional stock trading and whether lawmakers may be using inside information. An expert argues that while corruption could occur, research shows lawmakers as a group do not systematically beat the market. One study even found reindeer outperforming lawmakers in picking stocks.
Key Episodes Takeaways
- New ETFs called Nance and Cruz allow investors to mimic the stock trades of Democratic and Republican members of Congress, respectively.
- The Nance ETF outperformed the market year-to-date, while Cruz underperformed.
- There is ongoing debate around whether lawmakers should be allowed to trade individual stocks due to potential conflicts of interest and insider trading perceptions.
- Research suggests members of Congress do not systematically beat the market as a group, though instances of profiting from inside information cannot be ruled out.
- A study found that reindeer randomly picking stocks outperformed lawmakers' trades over certain time periods.
- Banning congressional stock trading could help restore public trust in the political system and mitigate perceived conflicts of interest.
- There are arguments for allowing lawmakers to invest in broad-based funds rather than individual stocks to avoid ethical concerns while still building retirement savings.
- The episode uses a lighthearted investment experiment to explore the serious issue of congressional stock trading ethics and regulations.
Top Episodes Quotes
- “Members of Congress who are serving the american people simply shouldn't be in a position to trade individual stocks.“ by Josh Graham Lin
- “The reindeer outperform the congresspeople and the senators on average, especially in a finite time horizon. And a couple of good picks dominate everything.“ by Bruce Sacerdote
- “If you had an NBA player who was bad at rigging the rules in favor of their team, would you still let them rig the rules in favor of their team? Of course not.“ by Josh Graham Lin
- “I dont think anybody wants to limit members of Congress from making investments and having a positive retirement ahead of them. It's when there's a perception of conflict of interest or perception of insider trading, that's what's really damaging to both Congress's credibility and the american people's trust in our political system.“ by Josh Graham Lin
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Episode Information
The Indicator from Planet Money
NPR
6/18/24
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
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