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

Reducing Global Security Risk

One remaining fund worth mentioning in conjunction with the Congressional Effect has its own unique approach that can be used to either reduce risk attributable to governments or attacks on government. The Patriot Fund (TRFAX), managed by Mark Langerman and Paul Wigdor, has a strategy aimed at reducing global security risk. They identify 33 companies out of the S&P 500 Index, plus hundreds of additional publicly traded companies that do business with nations and institutions that are on the U.S. State Department's list of “State Sponsors of Terror.” Beyond just a moral and patriotic stance against funding terror, they believe investing in these corporations makes a portfolio unnecessarily vulnerable to instability and political changes abroad. This undoubtedly increases risk and unpredictability in the world market, potentially damaging your portfolio's value. Just like many public entities have ceased the funding of those who support terrorist organizations, this fund offers a means for the individual to divest his portfolio of terror-supporting agencies.

One corollary of the Congressional Effect approach is that risk is increased for an investor when a company invests in a business plan that is unsustainable in the absence of government support and that, at some point, the government support will be reduced. The example given for this was the ethanol industry, where the stocks associated with this business ran up hard and ran down quicker. In the ...