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

Adam Smith, Call Your Office!

In The Wealth of Nations, Adam Smith described the beauty of a mostly laissez-faire capitalist society where each party, possessing their own property, bargained for their own self-interest and freely transacted because they were better off from advantageous trading. The result was a widespread market for every good, and an understanding that self-interest properly channeled could truly benefit society as a whole. It is one thing for a merchant to bargain for his self-interest. He is committing his own property, so he will do his best to get value for it. It is quite another for a congressman to spend trillions of dollars of other people's money to perpetuate his role in an office with nominal public pay. The temptations and opportunities for corruption and just plain poor policy are legion when you are not spending your own money and when there is, as a practical matter, no accountability because you are from a gerrymandered district.

In this context, it is worth taking just a moment here to make an aside regarding the budget, the budget deficit, the fate of the dollar, and the Tragedy of the Commons. When each congressman is an issues entrepreneur, think of each issue as one more cow being introduced to the town commons. No one issue feels like it is too much, but here we are strangling in a tax code with a million words and thousands upon thousands of special favors. Similarly, the United States budget has relentless bloat, and there are now thousands ...