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

How Was the Congressional Effect Discovered?

For me, late Friday afternoon is the business equivalent of being in the shower: The pressure of the week is spent and it's OK to let your mind wander. I get lots of my ideas then. At these times, I am almost always tired from working my butt off, and the only people you can reach are your old friends and acquaintances, who don't mind having a little downtime to see the latest stuff you are mixed up in.

I remember the particular Friday afternoon in January 1992 that I discovered the Congressional Effect. The weather was freezing in New York City, in the 20s and windy. The sky was that clear, cold blue you get when the sun is bright and the day is short. I was head of investment banking at a scrappy, growing Wall Street research firm, but in those days we were quite small and could only afford offices in Manhattan's Garment District. (For those of you who know Manhattan, this is a little incongruous. It was almost the investment-banking equivalent of the set of Zero Mostel's version of The Producers.) My tiny office was about 50 square feet, the size of a cubicle, but in fact was a built-out room with 12-foot ceilings. Gary Glaser, perhaps the best analyst ever of the auto companies, had an office next to mine. In those days, Gary smoked four packs of cigarettes a day. If you ran your finger along the walls of his office, you could pick up the tar and nicotine. Things were grimy.

We didn't have much of a brand name in those days. We had ...