Trade the Congressional Effect – How to Profit from Congress′s Impact on the Stock Market

<p>Acknowledgments xi</p>
<p>Introduction 1</p>
<p>Our Damaged Economy 2</p>
<p>Congress s Role in Wealth Destruction 8</p>
<p>Summary 9</p>
<p>Notes 10</p>
<p>CHAPTER 1 What Is the Congressional Effect? 13</p>
<p>How Was the Congressional Effect Discovered? 14</p>
<p>Early Returns Showing the Congressional Effect 19</p>
<p>The Smoot–Hawley Act: The Mother of All Congressional Effects 23</p>
<p>The Congressional Effect Data and Launching a Mutual Fund 24</p>
<p>Summary 26</p>
<p>Notes 26</p>
<p>CHAPTER 2 The Congressional Effect and the Limits of Modern Portfolio Theory 27</p>
<p>How MPT Has Been Used by Financial Advisers 30</p>
<p>Formulas Distort Valuation if Inputs Are Not Free Market Inputs 33</p>
<p>What Caused the Crash of 1987? 36</p>
<p>The Magnitude of the Crash of 1987 Refutes MPT 38</p>
<p>MPT Assumes All Daily Pricing Is Random, but the Congressional Effect Shows It Is Not 39</p>
<p>Summary 41</p>
<p>Notes 42</p>
<p>CHAPTER 3 Congressmen as Issues Entrepreneurs 43</p>
<p>The Time–Money–Vote Continuum: Congress as a Business 44</p>
<p>Congressmen as Traders and Real Estate Entrepreneurs: Making Money Outside Their Day Gig 54</p>
<p>Summary 57</p>
<p>Notes 58</p>
<p>CHAPTER 4 Behavioral Finance, the Stock Market, and Congressional Dysfunction 59</p>
<p>Overview of Behavioral Finance Concepts 60</p>
<p>Survey of Behavioral Finance Concepts 61</p>
<p>Congress s Approach to Behavioral Finance 67</p>
<p>Summary 78</p>
<p>Notes 78</p>
<p>CHAPTER 5 If Congress Is Malfunction Junction, What s Its Function? 81</p>
<p>Economic Lifeblood: Investment Capital Formation, the Stock Market, and Congress 81</p>
<p>Dodd–Frank Overview 90</p>
<p>Health Care Reform 95</p>
<p>Burning Coal and Other Energy Investors 103</p>
<p>Summary 110</p>
<p>Notes 110</p>
<p>CHAPTER 6 Where Will Washington Strike Next? 113</p>
<p>Where You Can Find Information 114</p>
<p>How to Leverage This Glut of Information 123</p>
<p>Summary 124</p>
<p>Notes 125</p>
<p>CHAPTER 7 Sidestepping Congress s Wealth Destruction with a Macro Approach 127</p>
<p>11,832 Data Points Support the Congressional Effect Theory 128</p>
<p>Congress and the Tragedy of the Commons 130</p>
<p>Adam Smith, Call Your Office! 131</p>
<p>Summary 136</p>
<p>Notes 136</p>
<p>CHAPTER 8 Are Democrats or Republicans Better for Your Portfolio? 139</p>
<p>Who Gets the Credit for the Bull Market in 1980? 140</p>
<p>Unified Government Favors Nominal Returns 142</p>
<p>Split Government Favors Real Returns 145</p>
<p>Republican Congress vs. Democratic Congress 146</p>
<p>Filibuster–Proof Majorities Hurt Returns 147</p>
<p>Summary 148</p>
<p>Notes 149</p>
<p>CHAPTER 9 Leverging the Election Cycle 151</p>
<p>The Presidential Cycle and Real Returns 152</p>
<p>The 2012 Election and Beyond 156</p>
<p>Notes 157</p>
<p>CHAPTER 10 Are Lame Ducks, Impeachments, Resignations, Vetoes, and Litigated Elections</p>
<p>Good for the Market? 159</p>
<p>President Bill Clinton 161</p>
<p>President Andrew Johnson 165</p>
<p>Resignations 167</p>
<p>Lame Duck Sessions 167</p>
<p>Litigated Elections 168</p>
<p>Vetoes 170</p>
<p>Summary 171</p>
<p>Notes 171</p>
<p>CHAPTER 11 More Ways to Dodge Congress s Stray Bullets 173</p>
<p>Value Funds: Longer Time Horizons than Congress or the Somali Pirates 174</p>
<p>Gold Funds: Avoiding Congressional Debasement 177</p>
<p>Beyond Congress: International Funds 179</p>
<p>Reducing Global Security Risk 181</p>
<p>Summary 182</p>
<p>Notes 183</p>
<p>CHAPTER 12 That Government Is Best that Governs Least 185</p>
<p>Prognosis: Increasingly Partisan Politics Is Not Good for the Market 185</p>
<p>Conflicting Government Mandates Promote Market Instability 189</p>
<p>The Cumulative Effect of Unintended Consequences Is Congressional Wealth Destruction 191</p>
<p>Congress s Dysfunctionality and the 2012 Election 193</p>
<p>What Happens When Congress Does Not Know the Price? 195</p>
<p>Congress Needs to Attract the Best Talent 197</p>
<p>In Conclusion 198</p>
<p>Notes 199</p>
<p>About the Author 201</p>
<p>Index 203</p>