Leave Nancy Pelosi alone. Or at the very least, leave Pelosi alone to trade stocks. To muzzle her apparent skill when it comes to picking stocks is to blind the rest of us to crucial information.
No doubt a few heads have already exploded. Doesn’t this guy know that Pelosi isn’t really an investor? As opposed to picking stocks based on a keen sense of what’s ahead, Pelosi is using her high perch in Congress to inform her trades. Since what Congress does in a spending, taxing and regulatory sense can have such a huge impact on what happens in the economy, Pelosi knows in advance what businesses will and will not profit from what happens in Congress.
Translated, critics of Pelosi’s impressive wealth claim it’s an effect of “insider trading,” not all-too-rare investing skills. Put her in jail they say, or ban stock trading for all congressmen. No! Don’t do either. Once again leave Pelosi alone while encouraging other members of Congress to trade as actively as Pelosi allegedly does based on insider’s knowledge.
Notable about the argument being made here is that it has nothing to do with affinity for Pelosi, and everything to do with a desire that equity markets be informed. The more they reflect reality, including the reality vis-à-vis Congress that Pelosi is said to glean from the actions of legislators, the more fully priced markets will be.
Which is important when it’s remembered that economic growth is always and everywhere an effect of investment. Since it is, it’s best that markets are informed so that precious investment is directed to its highest use based on equity prices mirroring reality as much as possible. Surely more heads are exploding? Unknown is why.
No doubt some will say that so-called “insider trading” is illegal, but as the University of Chicago’s Daniel Fischel long ago made plain in Payback, there’s really no way to define what is illegal. Seriously, can they jail you for the trades you don’t make based on privileged information, or how about trades made with privileged information that were big losers? Tick tock, tick tock…
Sure, but what about the winning trades made based on privileged information? See above. Much more than most would admit, trading is hard even when you know things simply because it’s difficult to know how markets processing endless amounts of public and private information will respond to new knowledge. In other words, big gains are not a fait accompli when investors commit capital based on what they uniquely know.
Back to Pelosi, rather than jail her or ban her trading, we’re much better off if she’s trading. Precisely because her bunny has a good nose (look it up), we can make more informed decisions as investors if Pelosi isn’t required to blind the markets by hiding what she knows. Quoting one of Pelosi’s fellow California Democrats, “not every human problem deserves a law.” Jerry Brown said the latter, and Republicans would be wise to abide Brown’s restraint right now.
Pelosi’s critics are yelling at symptoms of a government that’s way too large, and subsequently acting like Democrats by clamoring for “a law” meant to treat what is merely a symptom. If Republicans really want Pelosi and others to trade less, they should shrink the very government that allegedly makes congressional trading so profitable in the first place.
