It is with great emotion that I remember those that have given the ultimate sacrifice in order that the United States is a free and democratic republic and that tyranny will know that it has a constant foe.
Please remember the fallen soldiers on this day.
There will be no post of a stock analysis today due to the markets being closed.
As the United States breaks for a long weekend to commemorate our fallen soldiers in the variety of wars that we have engaged in over time, I thought it would be interesting to understand the investment philosophy of our elected leaders.
It didn’t take too long to be a little amazed. It seems that many of them do quite better than the average investor or the market at large. There have been a couple of studies on this. While there is always the fear that this is due to insider knowledge or voting in ways to influence their portfolio, I am not sure those conclusions are valid.
In general, our elected officials tend to be a bit more educated than the average investor. Also, since they deal with corporations and massive budget items on a regular basis, they are more attuned to the market and the economy in general. Therefore, as an above average educated investor, it is not surprising that they beat the market.
Now I just wish that the elected officials performed as well at managing the public coffers that we elect them to manage! Maybe we should give them a bonus if they do a good job. How about they get to split 1% of any budget surplus – how fast do you think they would balance the budget then?
Check out this Huffington Post article on this subject:
Members of the House of Representatives considerably outperform the stock market in their personal investments, according to a new academic study.
Four university researchers examined 16,000 common stock transactions made by approximately 300 House representatives from 1985 to 2001, and found what they call "significant positive abnormal returns," with portfolios based on congressional trades beating the market by about 6 percent annually.
What’s their secret? The report speculates, but does not conclude, it could have something to do with the ability members of Congress have to trade on non-public information or to vote their own pocketbooks — or both.
A study of senators by the same team of researchers five years ago found members of the higher chamber even better at beating the market — outperforming it by about 10 percent, an amount the academics said was "both economically large and statistically significant."
"Being one of 435, as opposed to one of 100, is likely to result in a significant dilution of power relative to members of the Senate," the researchers wrote.
The researchers, Alan J. Ziobrowski of Georgia State University, James W. Boyd of Lindenwood University, Ping Cheng of Florida Atlantic University and Brigitte J. Ziobrowski of Augusta State University, noted that the circumstances are ripe for abuse.
"In the course of performing their normal duties, members of Congress have access to non-public information that could have a substantial impact on certain businesses, industries or the economy as a whole. If used as the basis for common stock transactions, such information could yield significant personal trading profits," they wrote.
At the same time, House rules don’t require them to divest themselves of common stocks when they assume office, don’t prevent them from trading freely while in office — and don’t require them to recuse themselves from votes that could affect their own interests.
The House ethics manual clearly states that "all Members, officers, and employees are prohibited from improperly using their official positions for personal gain" and members must disclose their holdings annually.
But the House’s official position is that demanding that members either divest themselves of potential conflicts or recuse themselves when there is a conflict is "impractical or unreasonable" because it "could result in the disenfranchisement of a Member’s entire constituency on particular issues."
Ever since 2006, a small coterie of Democrats has been trying to officially prohibit members of Congress and their staffs from using non-public information to enrich their personal portfolios.
The Stop Trading on Congressional Knowledge (STOCK) Act was most recently re-introduced in March by Reps. Louise Slaughter (N.Y.) and Tim Walz (Minn.). It has not been heard from since.
The study found some significant difference based on party membership and seniority, with the Democratic sample beating the market by nearly 9% annually, versus only about 2% annually for the Republican sample.
And representatives with the least seniority considerably outperformed those with more seniority.
Why would that be? The researchers suspect need had something to do with it. "The financial condition of a freshman Congressman is far more precarious" than a senior member’s, they wrote. "House Members with the least seniority may have fewer opportunities to trade on privileged information, but they may be the most highly motivated to do so when the opportunities arise."
The report does not make any firm conclusions on causality, although the researchers explain that their kind of "event analysis" has become a common "method for analyzing whether actors have profited from confidential information in their possession."
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Dan Froomkin is senior Washington correspondent for The Huffington Post. You can send him an email, bookmark his page; subscribe to his RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get email alerts when he writes.
Over the last several weeks, we have been re-exploring the companies that are on the Watch List. As of yesterday, this has been concluded. We will now focus on looking for new companies that are worthy of our investment dollars.
We will review our Watch List again sometime later this year.
If you still were invested in UAM as of today, you saw the price drop the $14 per share that you received in cash due to their transaction with CVS.
As a basic rule of thumb, whenever a company adds 10% or sells 10% of their business you should probably sit back and not hold that company for a quarter or two. Major changes to the corporate structure are often followed by a lower than average performance. Often, too many employees are worried about how to structure the resulting company and are not spending enough time growing revenue and profitability. It is safer to let the company find its way as you invest your hard earned cash elsewhere.
I will look at UAM again in the future.
I read a large number of investor blogs. It is one of the ways that I find companies to analyze to see if they fit my performance criteria. One of my favorites is Michael K. Dawson. His blog, The Trend Rida, is very well done and it is an enjoyable read. He gives advice, admits mistakes, and shows enough emotion in his writing that the articles are always interesting even when I disagree with his comments.
One of the key tenants that he and I agree on is that when the ride is over, be ready to get off. While Dawson tries to find the hottest stocks on the market he usually understands when that stock is no longer hot and it is time to move on. This is very important as I know too many investors that subscribe to the theory of “Buy and Hold – forever” and end up paying for that devotion. Never stay with an investment too long – when the market starts to move against you then move on.
Here is a short excerpt from one of his latest columns. The column was regarding cloud computing companies and there are a few companies that he discusses that I have reviewed here. You can check out the column to learn a bit more about the movers and shakers in that industry but the point that I really liked is the opening:
In the mid-90s, I worked for a company that sold software to many of the companies in the midst of the desktop internet revolution. As I would leave the sales calls, I would call my broker to buy stock in those very same companies. Unbeknownst to me at the time I was laying the groundwork for my investment premise today.
- Identify emerging trends as soon as possible: The build-out of the internet was a long term trend that would impact millions.
- Buy leading stocks in trend: As investment dollars poured into the internet, the leading companies’ stock exploded as they reaped the majority of the profits.
- Ride it as long as possible: Ride ‘em as long as they are printing money.
- Jump off: When the trend stops going up move on. Much easier said than done.
Never be afraid of not investing or as Dawson says: “Jump off”. You will not go broke by putting your money into a money market account that is very liquid. Hang back until you have identified a company that is worthy of your ownership and then only buy that company when it appears relatively certain that the stock price is going up.
If you have the time to read another investor blog, check out Trend Rida.
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