Market Investing Made Simple
Many people probably suspect that Congress causes more harm than good and now we have the proof. Forbes Magazine has uncovered what appears to be a foolproof method for timing stock purchases based on the Congressional work schedule. The method is simple to use and relies on the elegance of intuitive reasoning.
Eric Singer, a 56-year-old fund manager with past stints at Smith Barney and PaineWebber, has something he calls the Congressional Effect Fund. The $2 million mutual fund invests in Treasury bills when Congress is in session and in the S&P 500 the rest of the time.
How does this theory work over the longer term? Singer whips out a study he did of stock performance in the 44 years ended last December. Over the course of the 7,244 days that Congress was in session the S&P was up an average annual 0.3%, dividends excluded. Over the 3,821 days that legislators were home, stocks averaged 16.1% in annual returns.
Give Congress A Bonus And A Long Vacation
The variance in stock returns for Congress in session/out of session time periods is too extreme to ascribe to random chance. Since Congress has had their chance and things have only gotten worse, why not give every member of Congress a large bonus if they promise to go fishing for the next six years? At a 16% annual return, six years is about what’s needed for the market to recoup its 50% drop since early 2008.
This experiment certainly couldn’t make matters any worse than they are now. My guess is that with Congress out of the way, the markets and the economy would recover in a lot less than 6 years.