Trade the Congressional Effect: How To Profit from Congress's Impact on the Stock Market

Summary

Ken Fisher once referred to the stock market as “the Great Humiliator.” All honest market participants have been humbled many times by the stock market, and have had their expectations crushed, along with their portfolios. It is the nature of investing that it is difficult to be consistently smarter than the stock market, which represents the second-by-second collective calculation of billions of people with vast distributed and expert knowledge. However, once you understand the nature of the incentives that each politician has that collectively result in Congress's relentlessly working against your portfolio, you will be more easily able to recognize when to use their efforts to your advantage. After all, in the February 2012 Gallup survey mentioned earlier, Congress ranks dead last in respect among all 16 institutions, including the public schools, banks, big business, organized labor, and health maintenance organizations (HMOs).

If you've ever looked at any of these institutions and thought you could do a better job on something, there is no reason to think that you can't do a better job on your own life savings by avoiding some of the mistakes created by Congress. It turns out that once you see the stock market from their perspective, you will have a better idea of what to expect and how to reduce the casual, relentless damage they inflict on your portfolio every day. As the size of the government has expanded relative to the overall economy, a great deal of damage ...